What is Medical Fraud and How to Detect It

  • By David Lukic
  • Oct 07, 2020

Medical fraud and abuse in health care is most often committed by large organized crime groups and sometimes individual criminals. Regardless of who commits this type of crime, it costs the health care industry a lot of money, and they, in turn, pass that onto subscribers and patients. There are a few different types of health care fraud perpetrated by criminals to steal money or obtain services or medical supplies. 

medical fraud

Medical Fraud and Abuse in Health Care


According to the Association of Certified Fraud Examiners (ACFE), the top ten most common types medical scams and abuse in health care are: 

  1. Billing for services not rendered.

  2. Billing for a non-covered service as a covered service.

  3. Misrepresenting dates of service.

  4. Misrepresenting locations of service.

  5. Misrepresenting provider of service.

  6. Waiving deductibles and/or co-payments.

  7. Incorrect reporting of diagnoses or procedures (includes unbundling).

  8. Overutilization of services.

  9. Corruption (kickbacks and bribery).

  10. False or unnecessary issuance of prescription drugs.

Types of Health Care Fraud


Additionally, the National Health Care Anti-Fraud Association (NHCAA) provides their list of the most common types of health care fraud examples they see:

  • “Billing for services that were never rendered-either by using genuine patient information, sometimes obtained through identity theft, to fabricate entire claims or by padding claims with charges for procedures or services that did not take place.

  • Billing for more expensive services or procedures than were actually provided or performed, commonly known as “upcoding”-i.e., falsely billing for a higher-priced treatment than was actually provided (which often requires the accompanying “inflation” of the patient’s diagnosis code to a more serious condition consistent with the false procedure code).

  • Performing medically unnecessary services solely for the purpose of generating insurance payments.

  • Misrepresenting non-covered treatments as medically necessary covered treatments for purposes of obtaining insurance payments-widely seen in cosmetic-surgery schemes, in which non-covered cosmetic procedures such as “nose jobs” are billed to patients’ insurers as deviated-septum repairs.

  • Falsifying a patient’s diagnosis to justify tests, surgeries or other procedures that aren’t medically necessary. Whenever there is surgery or other procedures involved, make sure to share to talk to other people about it.

  • Unbundling - billing each step of a procedure as if it were a separate procedure.

  • Billing a patient more than the co-pay amount for services that were prepaid or paid in full by the benefit plan under the terms of a managed care contract.

  • Accepting kickbacks for patient referrals.

  • Waiving patient co-pays or deductibles for medical or dental care and over-billing the insurance carrier or benefit plan (insurers often set the policy with regard to the waiver of co-pays through its provider contracting process; while, under Medicare, routinely waiving co-pays is prohibited and may only be waived due to “financial hardship”).”

Health Insurance Frauds

Health insurance fraud is when fraudsters (sometimes shady medical practices) bill insurance companies for procedures and medical supplies that are not needed or performed. 

Drug Fraud


Purveyors of medicinal drugs may pass them off as something they are not. They may water down dosages or make promises about medications that are not even FDA certified and try to sell them. This practice is called drug fraud. 

Medical Fraud 

According to the National Health Care Anti-Fraud Association (NHCAA), tens of billions of dollars are lost each year to medical fraud. Medical fraud works by getting people to sign up for healthcare and charging them fees but never supplying the medical resources. Sometimes they use ads for cheap or free medical services, but in reality, these are just scams designed to steal money from people who require actual medical treatment.

Another component of medical fraud is identity theft, where someone’s medical information is used to impersonate them or receive services in place of them. This occurrence can be very damaging to the victim, and even fatal if incorrect information is used to treat them. 

health care fraud

Health Care Fraud Investigations

Medical scams is a federal offense. Therefore, the FBI is the government agency in charge of monitoring and administering justice to perpetrators of health care fraud. The minimum prison sentence for health care crimes is ten years, along with steep fees. If someone was injured or died as a result of the health care scams, the prison term can go up to 20 years. 

Congress created the “Coordinated Fraud and Abuse Control Program” to coordinate federal, state, and local agencies in pursuit of these crimes. 

Report Healthcare Fraud and Protect Yourself

  • Always keep your health insurance cards safe and never give out the number unless to a trusted organization. Don’t ever give out that information online or over the phone.
  • Avoid “free” medical services or offers of cheap medication.
  • If you are a victim, contact the FBI and report it immediately.
  • Review all your medical bills and look for suspicious charges, procedures never performed, and other errors.
  • Inform yourself of your health insurance benefits and the laws surrounding medical scams.
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