ABA Health eSource
January 2011 Volume 7 Number 5

Addressing the Issues: The Effectivness of the Patient Protection and Affordable Care Act in Adopting Recommendations to Combat Medicare Fraud and Abuse

By Brian G. Santo, Esq., Duquesne University School of Law / Pittsburgh School of Public Health, Pittsburgh, PA


Healthcare fraud presents a persistent and costly drain on the United States healthcare system. Healthcare fraud entails intentional deception or misrepresentation made by an individual or organization for unauthorized benefit or profit to the individual, organization or another party. 1 Healthcare fraud differs from healthcare abuse in that fraud requires intentional or deliberate acts of deceit for personal gain, while abuse does not. 2

Healthcare fraud and abuse costs the nation billions of dollars annually. According to the National Health Care Anti-Fraud Association (NHCAA), although the actual amount of money lost is unknown, estimates range from as much as three percent of all healthcare expenditures to as much as 10 percent. 3 Assuming that current fraud and abuse loss and healthcare spending rates continue, the problem could reach $330 billion by 2013. 4

On March 23, 2010, the President signed into law the Patient Protection and Affordable Care Act (PPACA). 5 The new law institutes numerous statutory changes to the Medicare program. On March 30, 2010, the President also signed into law the Health Care and Education Reconciliation Act of 2010 (Reconciliation Act), which modifies several Medicare provisions in PPACA while adding numerous others. 6

In the wake of the now enacted national healthcare reform legislation, the NHCAA published a White Paper in June 2009 (“Fighting Health Care Fraud: An Integral Part of Health Care Reform”) addressing the problem of health care fraud and the need for it to be addressed via the then impending legislation. 7 The reform legislation included a number of provisions that will support government efforts in thwarting and prosecuting fraud and abuse, many of which directly relate to the ever-increasing dilemma of Medicare program exploitation. This article focuses on analyzing the prospective effectiveness of the recently enacted healthcare reform bills in addressing the Medicare fraud fighting recommendations expounded by the NHCAA.


The NHCAA serves as a leading national organization focused on combating healthcare fraud. 8 Its stated mission is to “protect and serve the public interest by increasing awareness and improving the detection, investigation, civil and criminal prosecution and prevention of health care fraud.” 9 The following sections address PPACA’s efficacy in addressing the four primary recommendations set forth in the aforementioned NHCAA report.


Information sharing in healthcare fraud cases often consists of a one-way street, with the private sector sharing vital information with the public sector without reciprocal information sharing to bolster the fraud fighting efforts of the private sector. The NHCAA recognizes that this inequity works counter to a coordinated fraud fighting effort because the private sector plays a central role in safeguarding our nation’s citizens against health care fraud through such avenues as medical insurance agency fraud and compliance programs. 10

Principles formed by the Department of Justice (DOJ) and the Department of Health and Human Services (HHS) for the operation of the Coordinated Health Care Fraud Program established by Health Insurance Portability and Accountability Act 11 (HIPAA) provide a strong basis for information sharing. 12 These guidelines recognize the significance of coordinating public and private sectors in the fight against health care fraud. 13 For example:

“The Department of Justice recognizes that fraudulent activity in the health care system can affect both public and private sector health plans, and that often cooperation between the public and private sectors can assist in the detection, investigation, prosecution and prevention of fraud.” 14

 The NHCAA recommended these principles be clarified in the new legislation along with provisions to enhance private-public sector information sharing to ensure that the goal of an effective and coordinated healthcare fraud program can be achieved. 15 PPACA provides little to address the recommendation that the government proactively share fraud investigation data to the private sector. The new legislation merely enhances the public arena’s ability to acquire data from private entities related to Medicare Part D data. 16

Although not specifically contained in PPACA, it should be noted that, on June 8, 2010, President Obama announced a nationwide series of activities to be run by the Health Care Fraud Prevention and Enforcement Action Team (HEAT), as part of a multi-faceted effort to crack down on healthcare fraud. In May 2009, Attorney General Eric Holder and Health and Human Services (HHS) Secretary Kathleen Sebelius announced the creation of HEAT. 17 HEAT’s members are committed to fighting health care fraud through several initiatives. Recent HEAT initiatives include a series of regional fraud prevention summits around the country and expanding the use of regional and local health care fraud task force meetings to improve the exchange of information with partners in the public and private sector. 18


Many of the problems with healthcare fraud arise from a key detail about the healthcare system in both the public and private programs: payment to providers is fundamentally built on the honor system, and various laws require both public programs and private health insurers to pay claims quickly or face penalties. 19

While data analysis systems are improving, most claims fail to be reviewed until after they are paid, if at all. Consequently, the NHCAA recognized that an essential means of improving the fight against fraud was to provide additional payment leeway to private and public programs in resolving suspected fraudulent claims. 20

PPACA addressed these concerns. First, the new legislation requires the Secretary of HHS to establish procedures for imposing periods of enhanced oversight, such as prepayment review on new providers and suppliers. 21 Secondly, the Reconciliation Act repealed important statutory limitations on prepayment review in Medicare. Previously, Medicare contractors may conduct prepayment review of a provider’s claims only under certain circumstances: (1) to develop a claims payment error rate and (2) when a likelihood of a sustained or high level of improper billing exists. 22 The Reconciliation Act repeals these statutory limitations.


The various fraud-fighting successes throughout the country demonstrate the importance of dedicating specific resources to the problem of healthcare fraud, and the NHCAA stated that increased resources are needed. The DOJ reports that since the inception of the Health Care Fraud and Abuse Control Program in 1997, the government’s health care fraud enforcement efforts “returned nearly $4.50 for every dollar spent on health care fraud enforcement.” 23 Focused efforts on the high fraud risk area of South Florida demonstrates how inspired, well-organized operations, relying on investigators and prosecutors with precise health care experience specifically dedicated to the operation, can make a significant difference in the fight against health care fraud. 24

PPACA increases the amount of resources dedicated to fighting fraud and abuse through both structural program changes and financial investment. PPACA includes a provision that increases the current recovery audit contractor (RAC) program to Medicaid and Medicare Parts C and D. 25 Among the requirements for Part C and D RACs are ensuring that each Medicare Advantage or Prescription Drug Plan have in place an anti-fraud plan. 26

PPACA also increases the effectiveness and responsibilities of another fraud-fighting resource, the Medicare Integrity Program (MIP). Under MIP, CMS contracts with private entities to conduct various activities designed to protect Medicare from fraud and abuse, including auditing providers, identifying and recovering improper payments, and educating providers about fraudulent providers. 27 The new provision of Section 6402 of the PPACA requires MIP contractors to provide the Secretary and the OIG with performance statistics, including the number and amount of overpayments recovered, the number of fraud and abuse referrals, and the return on investment for such activities as requested by the Secretary or the OIG. 28

Congress also provided increased funding to enact PPACA’s fraud and abuse provisions. As a starting point, the Omnibus Appropriations Act of 2009 provided a one-time additional $198 million for HHS healthcare fraud programs. 29 The President’s 2010 Budget provides an additional $311 million in two-year funding to further support anti-fraud and abuse efforts. 30


Unscrupulous providers access our nation’s health care system, often with little or no scrutiny. Providers may easily enter the system and begin submitting claims so long as they possess what appears to be a valid license and a tax ID number. 31 Moreover, the Healthcare Integrity and Protection Data Bank, designed to capture information regarding licensing actions, civil judgments, criminal convictions, and exclusions from federal and state health care programs, has been unsuccessful at ensuring that unscrupulous providers do not re-enter the system. 32 To lessen the ease with which convicted providers re-enter the healthcare system, NHCAA suggested that public programs consider implementing safeguards such as provisional participation and mandatory background checks. 33

PPACA provides many new initiatives addressing provider enrollment. The Secretary is required to establish procedures for enrolling providers and suppliers in the Medicare, Medicaid, and Children's Health Insurance Program programs. The enrollment process must now include provider screening, enhanced oversight measures, disclosure requirements, moratoriums on enrollment, and requirements for developing compliance programs. 34


The recommendations offered in the NHCAA report were intended to be logical solutions capable of being implemented and have a tangible effect on combating the problem of healthcare fraud. 35 Of the four recommendations offered by the organization, PPACA directly addressed three of them. Only increased public sector information sharing and collaboration with the private sector fraud-fighting entities appears to be insufficiently tackled.

Differing views exist among Americans on the effectiveness of the fraud and abuse provisions found in PPACA. While some may view the new fraud and abuse provisions as a menacing reminder of the regulated environment in which we work, others may choose to embrace the words of President Abraham Lincoln, who said, “[t]he pessimist sees the difficulty in every opportunity and the optimist sees the opportunity in every difficulty.” 36 If healthcare reform and the reduction of fraud, waste, and abuse in Medicare and other government programs are to succeed, one can only hope more Americans adopt the optimistic viewpoint of Honest Abe.

1 Stophealthcarefraud.com, Frequently Asked Questions, available at stophealthcarefraud.com, 2010.
2 Id.
3 The National Health Care Anti-Fraud Association (NHCAA) estimates that three percent of all healthcare spending—or $68 billion—is lost to healthcare fraud and abuse. The Problem of Health Care Fraud. Available on the NHCAA website at this link . The Federal Bureau of Investigation (FBI) estimates that as much as 10 percent of total health care expenditures could be lost to public and private sector healthcare fraud and abuse. Financial Crimes Report to the Public for Fiscal Year 2007. Available on the FBI website at http://www.fbi.gov/publications/financial/fcs_report2007/ financial_crime_2007.htm#health.
4 Id.
5 Patient Protection and Affordable Care Act (PPACA; P.L. 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (HCERA); P.L. 111-152).
6 Health Care and Education Reconciliation Act of 2010, Pub. L. 111-152.
7 National Health Care Anti-Fraud Association (NHCAA), Fighting Health Care Fraud: An Integral Part of Health Care Reform, June 2009.
8 Id at 2 .
9 Id.
10 Id. at 10.

See Public Law 104-191, Health Insurance Portability and Accountability Act of 1996 , available at http://aspe.hhs.gov/admnsimp/pl104191.htm.

12 NHCAA, supra note 7 at 11.
13 Id. at 16.
14 United States Attorneys’ Manual, Title 9, Criminal Division, Criminal Resource Manual 978, Health Care Fraud and Abuse Control Program and Guidelines, available at http://www.usdoj.gov/usao/eousa/foia_reading_room/usam/title9/crm00978.htm#intro.
15 Id.
16 Id.
17 HHS, HHS Secretary Sebelius, U.S. Attorney General Holder Kick-Off First Regional Health Care Fraud Prevention Summit in Miami, Florida, June 16, 2010, available at http://www.hhs.gov/news/press/2010pres/07/20100716a.html.
18 NHCAA, supra note 7 at 16.
19 Id. at 12.
20 Id.
21 Congressional Research Service (CRS), Patricia A. Davis, et al., Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA) 74, April 23, 2010.
22 Id.
23 See Fact Sheet: Department of Justice Efforts to Combat Health Care Fraud and Abuse (May 28, 2008), available at this link .
24 NHCAA, supra note 7 at 13.
25 American Association of Homes and Services for the Aging (AAHSA), Fraud and Abuse and Program Integrity Provisions in the Health Care Reform Law, 2010, available at this link.
26 CRS, supra note 18 at 82.
27 Id. at 83.
28 Id.
29 Id.
30 CRS, supra note 18 at 83.
31 NHCAA, supra note 7 at 14.
32 Id. at 15.
33 Id.
34 PPACA, supra note 5 at §6401.
35 Id.
36 Kirk Ogrosky & Daniel A. Kracov, The Impact of the Patient Protection and Affordable Care Act on Fraud Prevention and Enforcement, American Bar Association’s 20 th Annual National Institution on Health Care Fraud (2010).

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