Understanding the new federal health care fraud legislation.

• Author: Darken, Kevin J.

The Health Insurance Portability and Accountability Act of 1996, Public Law 104-191, contains many provisions of interest to white collar criminal defense lawyers, health care lawyers, and transactional attorneys. Although the Act was signed into law on August 21, 1996, many of its provisions only became effective January 1, 1997. This article summarizes the key sections of Public Law 104-191.

New Criminal Statutes

Subtitle E of the Act created five new criminal statutes effective January 1, 1997. Four of these new statutes use the term "health care benefit program" which is defined broadly in [sections] 241 as "any public or private plan or contract, affecting commerce, under which any medical benefit, item, or service is provided to any individual, and includes any individual or entity who is providing a medical benefit, item, or service for which payment may be made under the plan or contract."(1) Accordingly, a private insurance plan or insurance contract under which medical services, benefits, or items can be provided constitutes a "health care benefit program" under [sections] 241 and the new criminal statutes.

Section 242 established a new federal health care fraud offense which prohibits knowingly and willfully executing or attempting to execute a scheme or artifice to defraud "any health care benefit program" or to fraudulently obtain money or property of such programs in connection with the delivery of or payment for health care benefits, items, or services.(2) This offense is clearly patterned after the bank fraud statute,(3) which in turn was based on the mail and wire fraud statutes.(4) The maximum sentence is 10 years imprisonment, unless the violation results in serious bodily injury, in which case the maximum sentence rises to 20 years, or results in death, in which case the maximum sentence is life imprisonment. The benefit of this new health care fraud scheme offense to federal prosecutors is that it permits an entire scheme to be described in an indictment where no conspiracy or mail/wire fraud scheme is charged. It will also permit fraudulent intrastate electronic billings to private insurers to be prosecuted that could not have been presented under the wire fraud statute, which requires proof of an interstate wiring.

Section 243 created a new theft or embezzlement crime which prohibits knowingly and willfully embezzling, stealing, intentionally misapplying, or otherwise without authority converting any of the money, property, premiums, or other assets of a health care benefit program.(5) The maximum sentence is 10 years imprisonment, unless the value of the property taken does not exceed $100 in which case the maximum sentence is one year. The benefit of this new offense to federal prosecutors is that it permits thefts or embezzlements to be charged which do not meet the jurisdictional requirements under 18 U.S.C. [sections] 666, the existing statute which prohibits theft or embezzlement of $5,000 or more from an organization or agency which receives more than $10,000 of federal funds per year.

Section 244 established a new false statement offense which prohibits, in any matter involving a health care benefit program, knowingly and willfully 1) falsifying, concealing, or covering up a material fact by any trick, scheme, or device; 2) making any materially false, fictitious, or fraudulent statements or representations; or 3) making or using any materially false writing or document knowing that writing or document to contain any materially false, fictitious, or fraudulent statement or entry, in connection with the delivery of or payment for health care benefits, items, or services.(6) The maximum sentence is five years imprisonment. The benefit of this new false statement offense to federal prosecutors is that it covers statements and concealments made to private insurers which could not be prosecuted under 18 U.S.C. [sections] 1001, the existing statute which prohibits false statements to federal agencies.

Section 245 created a new obstruction crime which prohibits willfully obstructing, preventing, misleading, or delaying, or attempting to do so, the communication of information or records relating to a violation of a federal health care offense to a criminal investigator.(7) The term "criminal investigator" is defined to mean "any individual duly authorized by a department, agency, or armed force of the United States to conduct or engage in investigations for prosecutions for violations of health care offenses." The benefits to federal prosecutors of this new...