In 1995, there was no criminal law concerning Medicare fraud. The problem was either considered too minor to address or it had not occurred to legislators that such a thing could exist. It is difficult to explain how something could go from being of no concern to being at least a $100 billion per year issue. Medicare and Medicaid and the ways in which those programs are managed may explain why health care fraud has become so common. Some doctors and hospitals contend that the reimbursement rates offered by those programs are too low for hospitals serving large numbers of eligible patients to survive. Moreover, the billing and reimbursement policies have encouraged questionable billing practices.
The Center for Medicaid and Medicare Services is responsible for determining when payments from these programs should not be made. In the past, years might pass from the time the CMS had reason to suspect incorrect billing and the time it took any action. If improper claims were denied from the beginning, law enforcement would not have to concern itself with recovering fraudulent payments and tracking down old mistakes. The government did not even begin reviewing claims prior to paying them until 2007.
Medicare and Medicaid billing is not a simple process. Administrators would surely embrace a system that identified mistakes before they had the chance to blossom into serious criminal issues. It has been only recently that the government has decided to make examples of a few defendants to show that it is tough on health care fraud. Massive sentences, extreme departures from prior and even contemporary penalties, have been levied against select people charged with health care fraud.
Source: LA Weekly News, "How Medicare Fraud Became the Nation's Most Lucrative Crime," by Chris Parker, 25 April 2013