Medicaid is unique among the major government health care benefit programs because it is jointly funded by each state and the federal government. States administer Medicaid locally according to federal requirements, which means that both state and federal laws govern Medicaid providers in all 50 states.
Medicaid fraud is a serious offense at both levels of the government. In broad terms, Medicaid fraud involves any method (either intentional or unintentional) of obtaining funds from Medicaid where the funds are either not properly owed, or the funds are used for an improper purpose (such as payment of referral fees). Medicaid fraud can be charged as a civil violation or as a crime, with potential penalties including program exclusion, fines, recoupments, incarceration, and more.
State and Federal Laws Impose Penalties for Medicaid Fraud
The False Claims Act, the Anti-Kickback Statute, and the Stark Law are the primary fraud laws that apply to Medicaid providers under the federal health care system. Most states have adopted analogous statutes as well, although specific prohibitions and penalties vary from state to state. Some states, such as Florida, have enacted numerous different statutes that apply to health care providers, with some that apply industry-wide and some that apply only to certain medical facilities and licensed practitioners.
If your medical practice or health care business is being targeted in a Medicaid fraud investigation, understanding what is at stake requires you to know:
(i) whether you are being investigated by state or federal authorities,
(ii) which statute(s) you are alleged to have violated, and
(iii) whether the investigation is civil or criminal in nature.
With this significant caveat, here is a brief introduction to some of the penalties that may apply.
Federal Penalties for Medicaid Fraud
Although the False Claims Act and the Anti-Kickback Statute contemplate both civil and criminal penalties, the Stark Law is exclusively civil in nature. The Anti-Kickback Statute and Stark Law include specific penal provisions, and in civil cases, they also allow for the imposition of liability under the False Claims Act.
False Claims Act (31 U.S.C. Sections 3729-3733)
The False Claims Act makes it a federal offense to submit any “false or fraudulent” claim to the government. This includes overbilling Medicaid. There are potential civil and criminal penalties under the False Claims Act.
Civil Penalties Under the False Claims Act
- Exclusion from Medicaid and other health care benefit programs
- Fines of roughly $21,500 per false claim (as of 2017)
- Potential licensing action
- Pre-payment review and non-payment of future claims
- Recoupment of overbilled amounts
Treble damages (three times the government’s actual losses)
Criminal Penalties Under the False Claims Act
- Potential licensing action
- Program exclusion
- Recoupments
- Up to $250,000 in fines
- Up to five years of federal incarceration per violation
Anti-Kickback Statute (42 U.S.C. Section 1320a-7b(b))
The federal Anti-Kickback Statute prohibits the offering, solicitation, payment, or receipt of any form of compensation in order to induce or reward referrals for services that Medicaid reimburses. Providers who are charged with violating the Anti-Kickback Statute can face both civil and criminal penalties.
Civil Penalties Under the Anti-Kickback Statute
- Civil monetary penalties (CMP)
- False Claims Act liability
- Program exclusion
- Recoupments
- Treble damages
Criminal Penalties Under the Anti-Kickback Statute
- Fines of up to nearly $75,000 per violation
- Up to five years of federal incarceration per violation
Stark Law (42 U.S.C. Section 1395nn)
The Stark Law prohibits physicians from making referrals to related entities for “designated health services” that are reimbursed through Medicaid. It also imposes penalties for the entities that receive prohibited referrals. Civil penalties under the Stark Law include:
- Additional CMP and program exclusion for “knowing” violations
- Civil monetary penalties
- False Claims Act liability
- Recoupments
- Treble damages
State Penalties for Medicaid Fraud
The penalties for Medicaid fraud under state law vary significantly from one jurisdiction to the next. At the state level, Medicaid fraud cases are investigated and prosecuted by Medicaid Fraud Control Units (MFCUs), Offices of the Attorney General, and various other authorities. Below are the potential penalties in some of the states with the heaviest focus on Medicaid fraud enforcement.
California: Medicaid Fraud Penalties
Prosecutors in California have many statutory tools for pursuing criminal charges for Medicaid (Medi-Cal) fraud. Providers that engage in Medi-Cal fraud and assist patients in defrauding Medi-Cal can face penalties including:
- Penal Code Section 550(a) (Preparing, Making or Submitting a False Claim): Misdemeanor penalties (for claims of $950 or less) of one year in jail and a $1,000 fine, or felony penalties (for claims greater than $950) of two to five years of incarceration plus the greater of $50,000 or double the amount of the fraud
- Welfare & Institutions Code Section 14014 (False Declaration of Eligibility): Felony or misdemeanor penalties (felony in cases involving over $400)
- Welfare & Institutions Code Section 14107 (Fraudulent Claims): Misdemeanor penalties of up to one year in jail and a $1,000 fine, or felony penalties of two to five years of incarceration plus treble damages
- Welfare & Institutions Code Section 14107.2 (Kickbacks, Bribes, or Rebates): Misdemeanor penalties of up to one year in jail and a $10,000 fine, felony penalties of imprisonment and a $10,000 fine for a second offense
Florida: Medicaid Fraud Penalties
Section 409.920 of the Florida Statutes imposes criminal penalties for all forms of Medicaid fraud, including overbilling Medicaid as well as paying and receiving kickbacks in connection with Medicaid-reimbursed services, equipment, and supplies. The criminal penalties for Medicaid fraud in Florida include:
- All cases: A fine “in an amount equal to five times the pecuniary gain unlawfully received or the loss incurred by the Medicaid program or managed care organization, whichever is greater.”
- First-degree felony ($50,000 or greater in value): $10,000 fine and 30 years of imprisonment
- Second-degree felony ($10,001 to $49,999 in value): $10,000 fine and 15 years of imprisonment
- Third-degree felony ($10,000 or less in value): $5,000 fine and five years of imprisonment
Louisiana: Medicaid Fraud Penalties
In Louisiana, Medicaid fraud can be charged as either a civil or criminal offense. Potential penalties include:
- All cases: Exclusion from Medicaid program eligibility
- Civil: CMP of $2,000 per false claim
- Criminal: Fines of up to $20,000 and five years of imprisonment
Michigan: Medicaid Fraud Penalties
Michigan, similar to California, has several laws that MFCUs and other authorities can use to prosecute cases of Medicaid fraud. Some of these laws include:
- Health Care False Claims Act (Michigan Compiled Laws Sections 752.1004-752.1004B): Fines up to $50,000 and four years of imprisonment per violation
- Medicaid False Claims Act (Michigan Compiled Laws Section 400.604): Fines up to $30,000 and four years of imprisonment per violation
- Physician Division of Fees (Michigan Compiled Laws Section 750.428): Misdemeanor fine of up to $750 and up to six months of imprisonment, loss of license for a second offense
New York: Medicaid Fraud Penalties
In New York, Medicaid fraud is charged under the state’s False Claims Act as well as the state’s health care fraud statute and various other criminal statutes. Potential penalties for Medicaid fraud under these statutes include:
- Health Care Fraud Statute (Penal Law Section 177): Criminal charges ranging from class A misdemeanor to class B felony
- New York False Claims Act (State Finance Law Sections 187-194): Thousands of dollars in fines, treble damages, costs of litigation
- Social Services Law (Sections 145 and 366-b): CMP of up to $10,000 per violation and treble damages in civil cases, misdemeanor penalties in criminal cases
Texas: Medicaid Fraud Penalties
In Texas, Medicaid fraud can be charged as a civil violation, a misdemeanor, or a felony offense depending upon the specific circumstances involved. In each type of case, potential penalties include:
- All cases: Exclusion from Medicaid program eligibility
- Civil: Civil monetary penalties
- Felony: Tens or hundreds of thousands of dollars in fines plus five years of imprisonment for each violation
- Misdemeanor: Tens or hundreds of thousands of dollars in fines for each violation
Are You Facing a Medicaid Fraud Investigation?
If you are being investigated by an MFCU, the U.S. Department of Justice (DOJ), the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (DHSS), the Drug Enforcement Administration (DEA), or any other state or federal law enforcement authority, it is important for you to retain experienced, effective legal representation. If you have not yet been charged, you need to do everything in your power to avoid having your investigation lead to civil or criminal prosecution.
At The Criminal Defense Firm, we have decades of experience representing clients in Medicaid fraud investigations, and several of our senior attorneys worked for the DOJ and state prosecutors’ offices before entering private practice. Once you get in touch, we will quickly make contact with the investigating authority in order to intervene in the investigation. As soon as we determine the specific allegations against you, we will then develop and execute a customized defense strategy designed to resolve your investigation without charges and without long-term impact to your business or practice.
Contact The Criminal Defense Firm
Call (888) 452-2503 or contact us online to speak with the Medicaid fraud defense attorneys at The Criminal Defense Firm With offices in California, Louisiana, Michigan, New York, and Texas, we represent health care providers nationwide.
Not all attorneys of The Criminal Defense Firm are licensed in California and nothing contained herein is meant to constitute the unauthorized practice of law.
Brian Kuester offers his extensive experience to counsel companies and individuals under civil or criminal government investigation. When resolution requires litigation, clients choose Mr. Kuester’s proven court and litigation experience.