The False Claims Act

Every medical billing and coding professional in the United State should be aware of the False Claims Act. Signed into law in 1863, this piece of legislation was originally meant to deal with contractors who sold the Union Army sick horses and faulty weapons during the American Civil War. The legislation was modeled on laws that were passed in the middle ages aimed at rewarding whistleblowers for exposing corruption in a kingdom.

With its most recent revision in 2010, the False Claims Act is relevant in today’s time because it allows any whistleblower to earn money from exposing cases of fraud against the federal government. Every year the US federal government spends billions of dollars on programs that range from defense to healthcare and education. Under the False Claims Act, anyone who exposes fraud against the federal government is entitled to a percentage of the damages owed by the offending party to the federal government. As it happens, payouts to whistleblowers under the False Claims Act are some of the highest in the healthcare industry.

To-date in the 25 years leading up to the present, the federal government has recovered nearly $40 billion under the False Claims Act. It is not uncommon for the largest amounts of annual fraud to be uncovered in the healthcare sector. In 2013 this proved to be the case, with the federal government recovering $2.6 billion from fraudulent claimants and related penalties.

Any insurance company or medical billing professional who is reimbursed or collects payments from the Medicare or Medicaid programs – which are both administered by the federal Centers for Medicare and Medicaid Services (CMS) – are subject to actions under the False Claims Act if they are found to be defrauding the government. To monitor this, in addition to the federal government, every state has its own system in place to detect and report instances of fraud against the government.

Individuals who are found to be committing fraud against the government are liable to pay three times the amount of damages inflicted against the government, plus civil fines that range from $5,000 to $10,000 for each fraudulent claim that is made. And ignorance is not necessarily a defense. Anyone who is found to have a reckless disregard for the truth or to be deliberately ignorant is subject to this penalty.

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Most Recent Updates to the False Claims Act

When the Patient Protection and Affordable Care Act was signed into law in 2010 it contained several changes to the False Claims Act:

  • Previously whistleblowers who came forward after a public disclosure of fraud could have been prevented from receiving any financial reward and subsequently have their case dismissed; after the 2010 revisions the government can now prevent such a case from being dismissed by the court
  • Since the 2010 revisions whistleblowers can now benefit from exposing fraud after a public disclosure as long as they can materially add to the case against the alleged perpetrator of fraud; previously they could only have benefited in such an instance if they had direct and independent knowledge of such information
  • The 2010 revision made anyone who receives an overpayment from Medicare or Medicaid who does not return the overpaid amount subject to prosecution and penalty under the False Claims Act