Healthcare fraud is the deliberate deception of a health insurer or government program to collect money that isn’t owed. It drains tens of billions of dollars from the U.S. healthcare system each year, pushes premiums and out-of-pocket costs higher for everyone, and pulls funding away from patients who need care. Federal law responds on several fronts at once: the criminal healthcare fraud statute carries up to 10 years in prison per offense, civil penalties now reach $28,619 per false claim, and whistleblower lawsuits recovered more than $6.8 billion in fiscal year 2025.
Common Provider Schemes
Most healthcare fraud investigations begin with billing patterns that don’t match the care actually delivered. The volume of claims flowing through Medicare and private insurers is enormous, and inflated bills slip through routinely before anyone notices.
Upcoding means billing for a more expensive service than what was provided. A 15-minute follow-up visit gets submitted as a complex evaluation. A basic diagnostic test gets coded as an advanced procedure. The reimbursement difference between adjacent billing codes can be substantial, and across thousands of claims the overpayment compounds quickly.
Unbundling is the reverse trick. When related services are performed together, they’re supposed to be billed under a single bundled code at a set price. Unbundling breaks them into separate line items, each billed individually, so the total exceeds the bundled rate. CMS maintains a list of code pairs that generally should not be billed together when performed by the same provider on the same patient during the same visit.
Phantom billing involves submitting claims for services or supplies the patient never received. A facility might use a real patient’s identification to generate invoices for tests that never happened. Beyond the financial drain, phantom billing corrupts the patient’s medical record with procedures and diagnoses that can affect future treatment decisions and coverage.
Other common provider schemes include billing for longer appointments than actually took place, performing medically unnecessary procedures to generate revenue, and waiving patient copayments while billing the insurer for the full amount. Each exploits the gap between what happened in the exam room and what appears on the claim form.
Patient and Beneficiary Fraud
Fraud isn’t limited to providers. Patients and beneficiaries sometimes game the system in ways that carry serious federal consequences.
Medical identity theft happens when someone uses another person’s insurance card to obtain care or fill prescriptions. The victim often finds out only after receiving a bill for services they never had, being denied coverage because they’ve supposedly hit a benefit limit, or discovering that a stranger’s diagnoses and medications now sit in their medical history. Cleaning up a corrupted record is far harder than resolving a stolen credit card.
Eligibility fraud involves misrepresenting income, household size, or other details to qualify for Medicaid, subsidized Marketplace coverage, or similar programs. When someone who doesn’t meet the requirements takes a spot, the resources available for qualifying individuals shrink.
Doctor shopping targets controlled substances. A person visits multiple prescribers to stockpile medications, often hiding previous prescriptions from each new provider. The drugs may be for personal misuse or resale. Prescription drug monitoring programs have made this harder, but it still accounts for a significant share of prescription fraud.
A newer problem is unauthorized Marketplace enrollment. In 2024, CMS received over 183,000 complaints from consumers enrolled in federal Marketplace coverage without their consent, and another 90,000 complaints about unauthorized plan switches. In many cases, rogue agents or brokers changed plans or enrollment to collect commissions, sometimes without the consumer learning of it until coverage changed mid-year.
Pharmaceutical and Medical Device Fraud
Drug and device manufacturers operate under strict federal rules on how they market and price their products. When profit motives override those rules, the fraud tends to be large-scale.
Kickbacks to prescribers are among the most aggressively prosecuted schemes. A manufacturer pays doctors through consulting fees, speaker honoraria, lavish meals, or cash to steer prescriptions toward a particular drug or device. The clinical decision is driven by a financial relationship instead of what’s best for the patient. These arrangements can look legitimate on paper, which is exactly why federal law treats even the appearance of a quid pro quo as a felony.
Illegal off-label promotion is a related violation. Once the FDA approves a drug, a physician may prescribe it off-label if they believe it’s medically appropriate. Manufacturers cannot market or promote those unapproved uses. The FDA has said promotional statements about off-label uses may be treated as evidence that the company is introducing the product for a new intended use without approval, which violates federal law.
Medical equipment fraud typically means billing for expensive devices a patient doesn’t need or never receives. Durable medical equipment like wheelchairs, oxygen concentrators, and orthotics is a frequent target because reimbursement rates are high and ordering doesn’t require the same in-person oversight as a surgical procedure. The HHS Office of Inspector General has identified this as a persistent enforcement priority.
Drug pricing manipulation is subtler. Manufacturers in the Medicaid Drug Rebate Program must report accurate pricing and classification data, because rebate amounts depend on whether a drug is classified as brand-name or generic. An OIG investigation found that manufacturers may have misclassified hundreds of drugs, costing Medicaid an estimated $1.3 billion in lost rebates over a five-year period.
The Federal Laws
Congress built a layered enforcement framework. Different statutes cover different aspects of healthcare fraud; some are criminal, some civil, and several overlap on purpose so prosecutors can attack the same conduct from multiple angles.
Criminal Healthcare Fraud Statute
The broadest criminal tool is 18 U.S.C. § 1347, which makes it a federal crime to knowingly carry out any scheme to defraud a healthcare benefit program or to obtain money from one through false pretenses. A conviction carries up to 10 years in prison. If the fraud causes serious bodily injury, the maximum jumps to 20 years. If someone dies as a result, it can reach life in prison. Prosecutors don’t need to prove the defendant knew about this specific statute; knowingly running the scheme is enough.
False Claims Act
The False Claims Act (31 U.S.C. §§ 3729–3733) is the government’s primary civil weapon. It imposes liability on anyone who knowingly submits a false claim for payment to the government. “Knowingly” is defined broadly to include actual knowledge, deliberate ignorance, and reckless disregard. Each false claim triggers a civil penalty between $14,308 and $28,619 as adjusted for inflation through 2025, plus three times the amount the government lost on that claim. When a large provider submits thousands of false claims over several years, the math turns devastating.
Anti-Kickback Statute
The Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) makes it a felony to offer, pay, solicit, or receive anything of value in exchange for referrals of patients or business paid for by a federal healthcare program. Both sides of the transaction are liable. A conviction carries up to $100,000 in fines and 10 years in prison. The statute reaches cash payments, gifts, excessive compensation for sham consulting arrangements, and any other form of remuneration designed to influence referrals.
Stark Law
The Physician Self-Referral Law, usually called the Stark Law (42 U.S.C. § 1395nn), prohibits physicians from referring patients for certain health services to entities in which the physician or an immediate family member holds a financial interest. Unlike the Anti-Kickback Statute, Stark is a strict liability statute. There’s no requirement to prove corrupt intent: if the financial relationship exists and the referral happens, it’s a violation, and the entity receiving the referral is barred from billing Medicare for those services.
The Stark Law carves out specific exceptions, including in-office ancillary services performed within a physician’s own practice, fair market value compensation arrangements, and bona fide employment relationships. Each exception has detailed requirements, and failing to meet even one element means the referral prohibition applies in full.
Civil Monetary Penalties Law
The Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a) gives the HHS Office of Inspector General authority to impose per-claim penalties on anyone who submits a false claim to a federal healthcare program. It specifically targets claims for items or services not provided as claimed, claims the submitter knows are false, and claims for services furnished by unlicensed or excluded providers. The OIG can pursue these penalties administratively without a full federal court trial, which makes it a faster enforcement tool than the False Claims Act for certain misconduct.
Criminal Penalties
Federal prosecutors frequently bring charges under several statutes at once, and the penalties stack. Section 1347 alone allows up to 10 years per offense, with enhanced maximums of 20 years when a patient suffers serious bodily injury and life imprisonment when the fraud contributes to a patient’s death.
Anti-Kickback violations are separately punishable by up to $100,000 in criminal fines and 10 years in prison per count. Because kickback schemes typically involve many individual transactions, each payment or referral can be charged as a separate count. A provider involved in both billing fraud and a kickback arrangement faces potential sentences under both statutes.
Healthcare fraud cases often include additional federal charges for wire fraud (up to 20 years per count), money laundering, and conspiracy. Prosecutors layer these to give juries multiple paths to conviction and to increase sentencing leverage.
Civil Penalties and Program Exclusion
Civil enforcement often hits harder than criminal prosecution in dollar terms. Under the False Claims Act, each false claim triggers a penalty of $14,308 to $28,619, plus treble damages. A provider who submits a few hundred fraudulent claims over a couple of years can face civil liability in the tens of millions. In fiscal year 2025, the Department of Justice recovered over $6.8 billion through False Claims Act cases, with healthcare fraud the largest share.
The most career-ending consequence is exclusion from federal healthcare programs. The OIG maintains an exclusion list, and anyone on it cannot receive payment from Medicare, Medicaid, or any other federally funded health program for any items or services they provide, order, or prescribe. For a physician or facility that depends on Medicare patients for a significant portion of revenue, exclusion effectively ends the practice. Employers who hire an excluded individual can face civil monetary penalties of their own.
Stark Law violations carry their own civil penalties and require repayment of all amounts collected for services furnished under prohibited referrals. Because Stark doesn’t require proof of intent, even an inadvertent violation triggered by a poorly structured compensation arrangement can produce substantial liability.
Whistleblowers and Qui Tam Lawsuits
The False Claims Act’s qui tam provision is the single most powerful enforcement mechanism in healthcare fraud. It allows private citizens, typically employees, contractors, or business associates who discover the fraud from the inside, to file a lawsuit on behalf of the federal government. These cases are filed under seal, so the complaint stays confidential while the Department of Justice investigates and decides whether to take over.
The financial incentives are substantial. If the government intervenes and pursues the case, the whistleblower receives between 15% and 25% of whatever the government recovers. If the government declines and the whistleblower litigates independently, the share rises to between 25% and 30%. Given that healthcare fraud recoveries routinely reach hundreds of millions, those percentages translate into life-changing sums.
Federal law also protects whistleblowers from retaliation. Under 31 U.S.C. § 3730(h), any employee, contractor, or agent who is fired, demoted, suspended, harassed, or otherwise punished for pursuing a qui tam action can sue for reinstatement, double back pay with interest, and compensation for special damages, including attorney’s fees. The statute gives whistleblowers three years from the date of retaliation to bring a claim.
How to Report Healthcare Fraud
If you believe a provider, facility, or individual is defrauding Medicare, Medicaid, or another health program, several reporting channels exist depending on the program involved.
- HHS Office of Inspector General: file a complaint through the HHS-OIG portal or call the OIG Hotline at 1-800-HHS-TIPS (1-800-447-8477). The OIG handles fraud, waste, and abuse across HHS programs.
- Medicare Parts A and B: 1-800-MEDICARE (1-800-633-4227), TTY 1-877-486-2048.
- Medicare Part D prescription drug plans: 1-877-7SAFERX (1-877-772-3379), or your plan directly using the fraud-reporting number in your plan materials.
- Medicare Advantage (Part C): contact your plan using the fraud-reporting information in your plan documents, since procedures vary by plan.
- Senior Medicare Patrol: 1-877-808-2468 for help understanding whether something is fraud or filing a report.
You don’t need to be certain fraud occurred before reporting. Agencies investigate tips and decide whether the activity crosses the line. Reports can be made anonymously, though providing contact information allows investigators to follow up with questions that may strengthen the case.
Protecting Yourself
The best defense against becoming a victim, or an unwitting participant, is paying attention to your own paperwork. Every time you receive an Explanation of Benefits from your insurer, check the dates, provider names, locations, and services listed against what you actually received. Billing errors are common and aren’t always fraud, but a charge for a service you never had or a provider you never saw is worth investigating. Contact your insurer if anything doesn’t match.
Guard your insurance card and Medicare number the way you’d guard a credit card. Don’t share your insurance information with anyone who isn’t a provider actively treating you, and be skeptical of unsolicited calls or messages offering free medical equipment, testing, or screenings in exchange for your insurance details. Those are among the most common entry points for schemes that use your identity to bill for services you never needed.
If you discover that someone has used your medical identity fraudulently, act quickly. Request copies of your medical records from any providers listed on suspicious claims and ask that the fraudulent information be corrected. File a report through IdentityTheft.gov, the federal government’s identity theft recovery portal, which generates an FTC Identity Theft Report and a personalized recovery plan. Medical identity theft is harder to unwind than financial identity theft, because incorrect diagnoses, medications, and allergies in your records can directly affect the care you receive next.