The Sequestration and Healthcare Anti-Fraud Programs

A bank employee counts one hundred dollar notes at a bank in Seoul February 26, 2009.

On February 11, 2013 the national Health Care Fraud and Abuse Control Program (“HCFAC”) released its annual report for the 2012 fiscal year.  The HCFAC program is a U.S. Department of Health and Human Services and U.S. Department of Justice joint program created to combat fraud in health care.  2012 was a record breaking year for health care fraud enforcement.

The HCFAC report indicates that in 2012, the federal government:

  • recovered $4.2 billion that was improperly obtained from federal health care programs,
  • convicted 826 defendants of health care fraud-related crimes,
  • opened 1,131 new criminal health care fraud investigations, and
  • excluded 3,131 individuals or entities from federal health care programs.

The report also indicates that over the last three years, for every health care fraud enforcement dollar spent, the government recovered $7.90.

U.S. Attorney General Eric Holder touted the success of the program in a press release:

“This was a record-breaking year for the Departments of Justice and Health and Human Services in our collaborative effort to crack down on health care fraud and protect valuable taxpayer dollars.  In the past fiscal year, our relentless pursuit of health care fraud resulted in the disruption of an array of sophisticated fraud schemes and the recovery of more taxpayer dollars than ever before.  This report demonstrates our serious commitment to prosecuting health care fraud and safeguarding our world-class health care programs from abuse.”

The sequester bill signed by President Obama on March 1, 2013 could impact these anti-fraud efforts.  The sequestration requires across the board cuts to most government agencies.  The anti-fraud and abuse programs are not exempt.

A report from the Office of Management and Budget details the funding cuts.  The report provides that $57 million will be cut from HCFAC, $40 million will be cut from the Centers for Medicare and Medicaid Services (CMS) program management fund and $3 million from Office of Inspector General.

Peter Budetti, CMS Deputy Administrator and Director of the Center for Program Integrity, addressed the sequestration during a February 27 appearance before the House Energy and Commerce Subcommittee on Health.  Dr. Budetti was asked if sequester cuts would negatively affect the fraud and abuse programs.  He responded:

“That is a serious consideration because what we have learned over the years of the Health Care Fraud and Abuse Control program is that the more we do spend looking for fraud, the more we find, and so the return on investment has actually gone up the more we spend. So cutting back would be expected to have just the opposite effect.”

Congressman Bill Cassidy of Louisiana questioned the wisdom of cutting funding for a fraud and abuse control program with an average return on investment of $7.90 for every dollar spent.  Dr. Budetti responded, “that our number one priority is making sure that beneficiaries get the medical care that they need.”

Now that sequestration is in effect, the health care industry is waiting to see exactly how these cuts will take shape and their impact on fraud enforcement for 2013.