Federal health care programs are a cornerstone of the United States’ social safety net, designed to ensure access to medical services for millions of Americans. These programs, funded by the government, play a vital role in public health and welfare. However, the very nature of these large-scale programs makes them susceptible to fraud and abuse. Understanding what constitutes a federal health care program and the legal framework surrounding it is crucial for both healthcare providers and beneficiaries. This article delves into the definition of federal health care programs and the severe criminal penalties associated with fraudulent activities within these systems, as outlined in section 1320a-7b of the U.S. Code, offering a comprehensive overview for anyone seeking clarity on this important aspect of healthcare law.
Defining a Federal Health Care Program
So, What Is The Federal Health Care Program exactly? According to U.S. Code Title 42, Section 1320a-7b, a “Federal health care program” encompasses:
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Government-Funded Health Benefit Programs: This includes any plan or program that provides health benefits, whether directly, through insurance, or other means, that is funded directly or indirectly by the U.S. Government. Crucially, this definition explicitly excludes the health insurance program under chapter 89 of Title 5 (which pertains to federal employees’ health benefits).
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State Health Care Programs: This refers to programs defined as “State health care programs” in section 1320a–7(h) of Title 42. These are programs that receive federal funding and provide health benefits at the state level, often including Medicaid and other state-specific initiatives aimed at providing healthcare access to certain populations.
In essence, a federal health care program is any healthcare system where the U.S. government contributes financially to provide health benefits to individuals. This broad definition covers a wide range of programs, with Medicare and Medicaid being the most prominent examples. Understanding this definition is the first step in appreciating the gravity of laws designed to protect these vital programs from fraud.
Criminal Penalties for False Statements or Representations
One of the most significant aspects of Section 1320a-7b addresses the criminal penalties for making false statements or representations related to federal health care programs. This section aims to deter individuals from attempting to defraud these programs through deception. The law outlines several specific scenarios that constitute criminal offenses under this category:
(a) Making False Statements in Applications
It is a criminal act to knowingly and willfully make, or cause to be made, any false statement or representation of a material fact in an application for any benefit or payment under a federal health care program. This provision targets individuals who lie on their initial applications to gain access to program benefits they are not entitled to. A “material fact” is information that is significant enough to influence the decision-making process regarding benefit eligibility or payment amounts.
(b) False Statements to Determine Benefit Rights
Similarly, it is illegal to knowingly and willfully make or cause to be made any false statement or representation of a material fact for use in determining rights to benefits or payments under a federal health care program, at any time. This extends beyond the initial application and covers any false statements made throughout the duration of receiving benefits, whenever such statements are used to assess continued eligibility or payment adjustments.
(c) Concealing Events Affecting Benefit Rights
Individuals are legally obligated to disclose events that could affect their eligibility for benefits or the eligibility of someone on whose behalf they are receiving benefits. Concealing or failing to disclose such events with the intent to fraudulently secure benefits or payments in a greater amount than due, or when no benefit is authorized, is a criminal offense. This could include failing to report changes in income, marital status, or living situation that might impact eligibility.
(d) Misuse of Benefits Received for Another Person
When someone applies for and receives benefits on behalf of another person, it is illegal to knowingly and willfully convert those benefits, or any part of them, to a use other than for the use and benefit of that other person. This provision is designed to prevent caregivers or representatives from misappropriating healthcare funds intended for a beneficiary.
(e) Claims for Unlicensed Physician Services
Presenting or causing to be presented a claim for a physician’s service for which payment may be made under a federal health care program, knowing that the individual who furnished the service was not licensed as a physician, is also a criminal offense. This targets fraudulent billing practices where claims are submitted for services rendered by unqualified or unlicensed individuals posing as physicians.
(f) Counseling or Assisting in Asset Disposal for Medicaid Eligibility
Knowingly and willfully counseling or assisting an individual to dispose of assets (including through trusts) to become eligible for medical assistance under a state Medicaid plan, if this asset disposal results in a period of ineligibility for assistance under section 1396p(c) of Title 42, is also illegal when done for a fee. This provision aims to prevent individuals from artificially impoverishing themselves to qualify for Medicaid while benefiting from asset transfers.
Penalties for False Statements
The penalties for these offenses vary depending on the context. For false statements, representations, concealment, failure to disclose, or conversion of benefits connected to the furnishing of items or services by the person committing the act, it is classified as a felony. Upon conviction, offenders may face:
- A fine of up to $25,000
- Imprisonment for up to five years
- Both a fine and imprisonment
For false statements, representations, concealment, failure to disclose, conversion, or provision of counsel or assistance by any other person (i.e., someone not directly furnishing the items or services), it is classified as a misdemeanor. Upon conviction, offenders may face:
- A fine of up to $10,000
- Imprisonment for up to one year
- Both a fine and imprisonment
Additionally, individuals convicted of these offenses who are otherwise eligible for federal health care program assistance may have their eligibility limited, restricted, or suspended for up to one year by the program administrator. This suspension, however, does not affect the eligibility of other individuals, regardless of their relationship with the convicted person.
Illegal Remunerations: Kickbacks, Bribes, and Rebates
Beyond false statements, Section 1320a-7b also addresses “illegal remunerations,” specifically targeting kickbacks, bribes, and rebates within federal health care programs. This section aims to prevent corruption and improper influence in healthcare referrals and purchasing decisions.
(a) Soliciting or Receiving Illegal Remuneration
It is a felony to knowingly and willfully solicit or receive any remuneration (including kickbacks, bribes, or rebates), directly or indirectly, overtly or covertly, in cash or in kind, in two specific scenarios:
- Referral Kickbacks: In return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a federal health care program.
- Purchasing Kickbacks: In return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a federal health care program.
(b) Offering or Paying Illegal Remuneration
Similarly, it is a felony to knowingly and willfully offer or pay any remuneration (including kickbacks, bribes, or rebates), directly or indirectly, overtly or covertly, in cash or in kind to any person to induce them to engage in the following actions:
- Referral Inducements: To refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made under a federal health care program.
- Purchasing Inducements: To purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a federal health care program.
Penalties for Illegal Remunerations
Conviction for either soliciting/receiving or offering/paying illegal remunerations is a felony, punishable by:
- A fine of up to $25,000
- Imprisonment for up to five years
- Both a fine and imprisonment
Exceptions to Illegal Remunerations
Recognizing that not all remunerations are inherently illegal or harmful, the law outlines several “safe harbor” exceptions to the illegal remuneration provisions. These exceptions protect legitimate business practices and arrangements. These exceptions include:
- Discounts: Discounts or price reductions obtained by providers or entities under a federal health care program, provided the discount is properly disclosed and reflected in claimed costs or charges.
- Bona Fide Employment: Amounts paid by an employer to a bona fide employee for employment in providing covered items or services.
- Group Purchasing Agents: Payments by vendors to authorized purchasing agents for groups of providers, under specific conditions including written contracts and disclosure of amounts received.
- Federally Qualified Health Center Waivers: Waivers of coinsurance under Medicare Part B by Federally Qualified Health Centers for individuals qualifying for subsidized services under the Public Health Service Act.
- Payment Practices Authorized by the Secretary: Payment practices specifically allowed by regulations promulgated by the Secretary of Health and Human Services.
- Risk-Sharing Arrangements: Remuneration between organizations and individuals/entities providing items or services under written risk-sharing agreements with eligible organizations under section 1395mm of Title 42.
- Pharmacy Waivers of Cost-Sharing: Waivers or reductions of cost-sharing under Medicare Part D by pharmacies (including Indian Health Service pharmacies, tribal pharmacies, etc.) under specific conditions.
- Federally Qualified Health Center and MA Organization Arrangements: Remuneration between Federally Qualified Health Centers and MA organizations under written agreements described in section 1395w–23(a)(4) of Title 42.
- Health Center Entity Arrangements: Remuneration between health center entities and individuals/entities providing goods, services, etc., that contribute to the health center’s ability to serve medically underserved populations.
- Medicare Coverage Gap Discount Program: Discounts on applicable drugs provided by manufacturers to applicable beneficiaries under the Medicare coverage gap discount program.
These exceptions are crucial for allowing legitimate business arrangements within the healthcare industry while still targeting truly fraudulent kickback schemes.
False Statements Regarding Condition or Operation of Institutions
Section 1320a-7b also criminalizes false statements or representations concerning the condition or operation of healthcare institutions seeking or maintaining certification under federal or state health care programs.
(a) False Statements for Certification
It is a felony to knowingly and willfully make, cause to be made, or induce or seek to induce the making of any false statement or representation of a material fact regarding the conditions or operation of an institution, facility, or entity in order for it to qualify (initially or upon recertification) as:
- A hospital
- A critical access hospital
- A skilled nursing facility
- A nursing facility
- An intermediate care facility for the mentally retarded
- A home health agency
- Or other entities requiring certification under subchapter XVIII of Title 42 (Medicare) or a State health care program.
This provision also applies to false statements related to information required to be provided under section 1320a–3a of Title 42, which concerns disclosure of certain ownership and control information.
Penalties for False Statements Regarding Institutions
Conviction for making false statements related to institutional certification is a felony, carrying the same penalties as other felony offenses under this section:
- A fine of up to $25,000
- Imprisonment for up to five years
- Both a fine and imprisonment
Illegal Patient Admittance and Retention Practices
This section addresses unethical and illegal practices related to patient admittance and retention in facilities under state Medicaid plans.
(a) Overcharging Under Medicaid
It is illegal to knowingly and willfully charge money or other consideration for services provided to a patient under a state Medicaid plan at a rate exceeding the rates established by the state. This also applies to services provided to individuals enrolled in Medicaid managed care organizations, where charges must not exceed the rates permitted under the contract.
(b) “Upcharging” for Admission or Continued Stay
It is also illegal to charge, solicit, accept, or receive, in addition to any amount required to be paid under a state Medicaid plan, any gift, money, donation, or other consideration (excluding charitable, religious, or philanthropic contributions from unrelated organizations or persons) as:
- A precondition for admitting a patient to a hospital, nursing facility, or intermediate care facility for the mentally retarded.
- A requirement for a patient’s continued stay in such a facility, when the cost of services is paid for (in whole or in part) under the state Medicaid plan.
These provisions aim to prevent facilities from exploiting vulnerable patients and their families by demanding extra payments beyond what Medicaid covers for admission or continued care.
Penalties for Illegal Patient Admittance and Retention Practices
These offenses are classified as felonies, with the standard felony penalties:
- A fine of up to $25,000
- Imprisonment for up to five years
- Both a fine and imprisonment
Violation of Assignment Terms
This section addresses violations related to accepting assignment under Medicare, where providers agree to accept Medicare’s approved amount as full payment for covered services.
(a) Repeated Violation of Assignment Terms
For those who accept assignment as described in section 1395u(b)(3)(B)(ii) of Title 42 or agree to be a participating physician or supplier under section 1395u(h)(1) of Title 42, knowingly, willfully, and repeatedly violating the terms of such assignments or agreements is a criminal offense. This targets providers who consistently bill patients above the agreed-upon Medicare rates.
Penalties for Violation of Assignment Terms
Violations of assignment terms are classified as misdemeanors, with lesser penalties compared to felonies:
- A fine of up to $2,000
- Imprisonment for up to six months
- Both a fine and imprisonment
Liability Under the False Claims Act
Section 1320a-7b also clarifies the relationship between violations of this section and the False Claims Act.
(a) False Claims Act Liability
In addition to the criminal penalties outlined in Section 1320a-7b and Section 1320a-7a, a claim that includes items or services resulting from a violation of Section 1320a-7b constitutes a false or fraudulent claim for the purposes of subchapter III of chapter 37 of Title 31, which is the False Claims Act. This means that individuals and entities who violate Section 1320a-7b may also be subject to civil penalties and liabilities under the False Claims Act, including significant financial penalties and treble damages.
Actual Knowledge or Specific Intent Not Required
A critical aspect of Section 1320a-7b is subsection (h), which clarifies the intent requirement for violations.
(a) General Intent Standard
For violations of Section 1320a-7b, a person does not need to have actual knowledge of this specific section or specific intent to commit a violation to be found guilty. This “general intent” standard means that prosecutors do not need to prove that a defendant was aware of the specific law or intended to break it. It is sufficient to show that the person acted knowingly and willfully in committing the prohibited acts, regardless of whether they knew those acts were specifically illegal under this particular statute. This lowers the bar for prosecution and underscores the seriousness with which the law treats fraud in federal health care programs.
Conclusion
Understanding what is the federal health care program and the laws designed to protect it is essential for anyone operating within or interacting with the U.S. healthcare system. Section 1320a-7b of the U.S. Code stands as a powerful deterrent against fraud and abuse within these programs. By outlining specific prohibited acts and imposing significant criminal penalties, this law aims to safeguard taxpayer dollars, ensure program integrity, and ultimately protect beneficiaries from harm. Whether you are a healthcare provider, administrator, or beneficiary, familiarity with these regulations is crucial for ethical and legal compliance within the complex landscape of federal health care.
