False Claim Act - Healthcare Fraud Prevention And Penalties

The False Claim Act, sometimes referred to as Lincoln's Law was enacted to protect government agencies from wasteful spending and fraudulent claims. Learn how amendments made in 1986 helped the False Claim Act recover nearly $50 billion.

FirstQuote Health Staff
Published on
April 11, 2020
Last Updated on
May 16, 2023
False Claim Act - Healthcare Fraud Prevention And Penalties

If you’re familiar with the healthcare industry, then you’re aware of the countless moving pieces and players involved every step of the way. From patients to medical providers and health insurance agents to health insurers, it’s easy for claims or records to get lost along the way. However, since healthcare is a trillion dollar a year industry, any mistakes, or worse, instances of fraud, can end up costing billions. That’s why legislators drafted up the False Claims Act as an effort to minimize losses and thwart healthcare fraud and abuse.

What Is The False Claims Act In Healthcare?

The False Claim Act is a federal law that made it a crime to knowingly falsify any record or claim made through federal or state healthcare systems that provide health benefits. In this case, ‘knowingly falsify’ refers to having prior knowledge that the claim or record is not authentic, or “acting with reckless disregard” to whether or not a claim is fraudulent.

When And Why The False Claims Act Was Passed

The False Claim Act was originally passed in 1863 under President Abraham Lincoln, which is why it’s sometimes referred to as ‘Lincoln’s Law’. The original reason the federal law was passed was to avoid fraud against the government by suppliers during the Civil War. Since originally enacted, the False Claim Act has seen some modifications.

In 1986, amendments were made to the False Claim Act, making it one of the most successful methods of combating fraud committed against the US government, and reducing wasteful spending. In fact, between 1986 and 2015, the government was able to recover nearly $50 billion thanks to the False Claim Act.

What Is Considered A False Claim?

As mentioned before, healthcare has many moving parts, and it’s easy to take advantage of the system. When it comes to claims, there a few different categories that are considered false or fraudulent. Here’s an overview of false claims you can make that will get you in trouble with the law.

False Billing

False billing can be classified as billing for services or products that you didn’t receive or misrepresenting services or products you did receive, or duplicate billing. The False Claim Act doesn’t just target patients, medical providers can also lie about or misrepresent services they didn’t provide, or try and upcharge the services they did.

False Cost Reports

This category is directed at medical providers, specifically Medicare providers. Medicare is a federally run healthcare program, that offers discounted health coverage for anyone eligible, which is typically American seniors over 65 years old. A false cost report may refer to lying about costs related to patient care, attempting to get reimbursement for patient’s who aren’t enrolled in Medicare.

What’s The Penalty For False Claims?

The penalty for falsifying claims or records is pretty significant. Penalties are usually dependent on the claim amount and can end up costing someone three times the amount of the claim. There are also some hefty fines that come along with the penalty amount, which can total anywhere from $5,000 to $10,000 for each claim.

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