Medicare Part D is the federal program that subsidizes prescription drug costs for Medicare beneficiaries. Administered through private insurance plans approved by the federal government, this program provides essential medications to millions of Americans.
Medicare Part D is an optional prescription drug benefit that beneficiaries can include in their Medicare plan. It started in January 2006.
Private insurance companies, known as plan sponsors, offer prescription drugs either directly or via pharmacy benefit managers (PBMs) or brokers.
These sponsors then bill the Centers for Medicare & Medicaid Services (CMS) for the drugs they dispense to beneficiaries. However, the structure and scale of Medicare Part D also make it a significant target for fraudulent activities.
The vast sums of money involved, coupled with a complex billing system involving multiple parties—including beneficiaries, physicians, pharmacies, and private insurers- create abundant opportunities for illicit schemes.
Federal agencies take a zero-tolerance approach to Medicare fraud, dedicating substantial resources to investigating and prosecuting offenses related to the program.
Key Takeaways
- Common Medicare Part D fraud schemes include billing for services or prescriptions never provided, offering "free" yet unnecessary items, and using deceptive tactics to pressure beneficiaries.
- Examples of Medicare fraud include billing for medications not received, providing free medical equipment in exchange for a Medicare number, and using scare tactics such as threatening to cancel coverage to obtain personal information or influence plan changes.
- Deceptive offers often involve providing "Free" or low-cost items, such as medical equipment, genetic testing, or prescriptions, to obtain your Medicare number.
- Plans are prohibited from offering cash or gifts as incentives for joining, although companies can provide legitimate promotional gifts.
- Fraudsters may produce misleading materials that appear to be from the government or Medicare, aiming to trick you into enrolling in a plan or revealing your personal information.
- You might receive a call informing you that you need to change plans, that a new plan is "pre-approved" for you-often with a fee-or that there's an issue with your current plan that can only be resolved by switching.
- Medicaid investigations may take months or even years, depending on the case's complexity, the amount of evidence, and whether they are conducted at the state or federal level.
- Federal pharmacy fraud charges involve illegal actions connected to Controlled Substances Act (CSA) registrations, forged prescriptions, and falsified records. Convictions for these crimes carry severe penalties.
Let's look at some of the more common Part D fraud schemes that investigators are on the lookout for.
Prescription Drug Diversion
Prescription drug diversion involves the redirection of legitimate prescription medications for illegal purposes. In the context of Medicare Part D, this scheme often involves obtaining covered drugs and selling them on the black market.
This can happen in several ways. A beneficiary might conspire with a pharmacist to fill prescriptions they do not need and then sell the drugs.
In other cases, organized criminal rings may use stolen patient information to bill Medicare for expensive medications, which are then diverted for illegal resale. The drugs most commonly targeted in these schemes are those with a high street value, such as opioids, HIV medications, and antipsychotics.
Kickbacks and Bribes
Illegal kickbacks are a frequent element in Medicare Part D fraud cases. This scheme involves offering, paying, soliciting, or receiving any form of compensation in exchange for referring an individual for a service or item payable by a federal healthcare program.
For example, a pharmaceutical company might offer kickbacks to physicians to incentivize them to prescribe their specific brand of drug, even if a less expensive or more effective alternative is available.
Similarly, a marketer could receive payments for steering beneficiaries toward a particular pharmacy or Part D plan, regardless of the patient's best interests. These arrangements compromise medical decision-making and increase costs to the Medicare program.
Billing for Unprovided or Unnecessary Medications
A straightforward yet common form of fraud is billing Medicare for prescriptions that were never dispensed to the beneficiary. A pharmacy might submit claims for medications a patient never picked up or for refills not authorized by a physician.
Another variation involves billing for medications that are not medically necessary. This can occur when a physician prescribes drugs that have no legitimate medical purpose for the patient's condition, often in collusion with a pharmacy that bills Medicare for the prescription.
These schemes rely on falsified records to appear legitimate. Some of the most common schemes related to billing include:
- Billing for services or prescriptions not received involves a provider or pharmacy falsely charging Medicare for medication or services the patient never received.
- "Upcoding" or double-billing involves charging Medicare for a more costly service than what was actually given, or submitting multiple bills for the same service.
- "Rolling lab" schemes involve scammers visiting a patient's home or community events to collect blood or cheek swabs for unnecessary and expensive lab tests that a doctor did not prescribe.
Identity Theft and Fictitious Beneficiaries
Criminals may use the stolen identities of Medicare beneficiaries to perpetrate fraud. By obtaining a beneficiary's Medicare number and personal information, a fraudulent operator can create false claims for prescription drugs.
These drugs are not provided to the beneficiary but are billed to the beneficiary's Part D plan. In more complex schemes, perpetrators may create "phantom" clinics and pharmacies that exist only on paper, using stolen or fictitious patient and doctor information to bill Medicare for millions of dollars in non-existent prescriptions.
Medical identity theft occurs when criminals use your stolen personal information to commit fraud, like using your Medicare number to obtain prescription drugs or services in your name.
Prescription "Farming"
Prescription farming involves physicians or other prescribers who issue a high volume of prescriptions for controlled substances or other expensive drugs without a legitimate medical purpose.
These prescribers may run "pill mills," where patients receive prescriptions with minimal or no medical examination. The prescriptions are then filled at complicit pharmacies and billed to Medicare Part D.
The drugs may be for the patient's personal use, for others, or diverted for illegal sale. Federal investigators use data analysis to identify outlier prescribers who write an unusually high number of prescriptions for certain drugs.
Pharmacy Enrollment Fraud
Pharmacy enrollment fraud occurs when individuals or entities submit false or misleading information to enroll a pharmacy in the Medicare Part D program. By doing so, they gain access to billing privileges without meeting eligibility requirements or without any intent to operate a legitimate business.
Once enrolled, these entities may bill Medicare for high volumes of prescriptions never dispensed, dispense substandard or counterfeit medications, or quickly cease operations to avoid detection.
Phishing and Scams
Phishing and scams related to Medicare Part D include the following:
- Impersonating Medicare or government officials: Fraudsters might contact you by phone, mail, or in person, pretending to be from Medicare to steal your personal information, such as your Medicare number or bank account details.
- Threats to cancel coverage: Scammers may call claiming there's an issue with your Medicare account, threatening to cancel your benefits if you do not share personal information or enroll in a new plan.
- "New card" scams involve calls or mailings that falsely claim you must give your information to receive a new Medicare card or to "verify" your account.
Why You Need a Federal Defense Lawyer
Being accused of Part D fraud is no laughing matter. Investigators use data analysis, undercover operations, and tips from informants to identify suspicious activity and build cases against those suspected of Medicare fraud.
This means by the time you are indicted, the government has already likely built a strong case against you. A conviction can result in severe penalties, including long prison sentences, substantial fines, restitution payments, and exclusion from all federal healthcare programs.
For this reason, your best chance of a more favorable outcome is with a federal criminal defense attorney experienced in healthcare fraud cases. For more information, contact Eisner Gorin LLP in Los Angeles, CA.
