MEDICARE FRAUD: Illinois Blue Cross Fined $144 Million
Blue Cross and Blue Shield of Illinois pleaded guilty yesterday to defrauding Medicare, agreeing to pay $144 million in federal fines. The Chicago Sun-Times reports that Illinois Blue Cross, also known as Health Care Service Corp., "will pay $140 million in civil penalties and $4 million in criminal fines for faking reports about claims (Sweet, 7/17). The Chicago Tribune reports that the case is "by far the largest fraud penalty against a Medicare claims processor." The Chicago-based insurer, which processes Medicare claims from Illinois and Michigan for the federal government, "submitted false statement to the federal health program" starting in 1985 and ending in 1994, prosecutors charged. By "routinely overstat[ing]" claims, Blue Cross received $1.29 million in "undeserved bonuses" from the government. "Trust was flagrantly violated by a prestigious, nationally known company. It engaged in unconscionable conduct that adversely affected Medicare beneficiaries, providers and the program itself," said June Gibbs Brown, inspector general for the Department of Health and Human Services (Bendavid/Japsen, 7/17).
Crime And Punishment
In the plea agreement filed yesterday in federal court, Illinois Blue Cross pleaded guilty to eight felony charges: "six counts of making false statements to the government, one count of conspiracy and one count of trying to obstruct federal auditors," the New York Times reports. According to Deputy Attorney General Eric Holder, in some cases the insurer "simply paid the Medicare claims without even reviewing them." Blue Cross spokesperson Robert Kieckhefer said the criminal activity involved "a few employees in one office." But the New York Times reports that "the plea agreement says managers and supervisors were also involved."
The Justice Department was alerted to the fraudulent activity by former Blue Cross employee Evelyn Knobb. Under federal law, a "whistle-blower" is entitled to at least 15% of the money the government collects in the case. While the Department of Justice said Knobb would receive $21 million, she "seemed uncertain" about receiving the funds, according to the New York Times. "What they say and what's true are not necessarily the same," she said.
Carry A Big Stick
The New York Times notes that Blue Cross' plea "is the latest result of a federal crackdown on fraud and abuse in the Medicare program." Many hospitals and health plans have complained that the federal government is unfairly harassing them under the False Claims Act -- the law used to convict Blue Cross -- and that many billing errors arise from the complexity of the program's regulations. But Sen. Charles Grassley (R-IA), "a leading expert on the False Claims Act," said the act is "the government's most effective tool against health care fraud" (7/17). The law "has recovered hard-earned tax dollars from an unscrupulous Medicare contractor. And every dollar recovered from the bad actors is a dollar that can be used to provide health insurance for older Americans," Grassley said (Grassley release, 7/16).
Not A Problem
Blue Cross of Illinois' plea agreement "doesn't affect plans" for the insurer to merge with Blue Cross of Texas, according to Mark Lane, spokesperson for the Texas company. "The events [yesterday] are not going to ... diminish our desire to successfully complete the proposed merger," he said. Lane said he believed the Illinois company would "be able to absorb the setback and still pursue strategic initiatives." Bloomberg News/Dallas Morning News reports that the intended merger still needs regulatory approval. In February, Texas Attorney General Dan Morales (D) unsuccessfully "challenged the deal in state District Court in Austin," but still may appeal (Ornstein, 7/17).