Medical Fraud
What It Is, Why It Matters, and How to Protect Yourself
By Alexander Nury, Co-Author of Survival Guide to Caring for Aging Parents
Medical fraud drains tens of billions of dollars from the American healthcare system every year. And despite what many people assume, insurance companies aren’t the only ones paying for it. Premiums go up, and unexpected bills arrive due to medical fraud. In some cases, your actual medical care gets put at risk. This problem is important to understand — because knowing what to look for can save you money, and possibly a lot more than that.
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What Exactly Is Medical Fraud?
At its core, medical fraud happens when someone — a provider, an insurer, or even an individual patient — deliberately submits false information to an insurer to collect money or benefits they have no right to. This covers a wider range of behavior than most people expect. Some of the most common forms of fraud include the following:
Billing for services that never happened. A provider charges your insurance for an appointment, test, or procedure that never actually took place.
Upcoding. You came in for a routine checkup, but the bill says, “complex consultation.” The difference in reimbursement can be significant.
Unbundling. One procedure gets split into several separate charges to run up the total.
Phantom prescriptions. Medications — often controlled substances — get prescribed to patients who don’t need them, or to patients who don’t even exist.
Identity and insurance theft. Someone uses your personal information to receive care or file claims under your name.
Kickbacks. A provider refers you to a specific lab or specialist -- not because it’s the best option for you, but because someone is compensating them for sending patients there.
One thing worth noting: fraud doesn’t always come from strangers. It can originate from a billing department you’ve never spoken to, or occasionally from someone close to you who borrowed your insurance card.
Why This Is Actually Your Problem
There’s a tempting logic that goes insurance companies have deep pockets, they overcharge anyway, so let them eat the loss. The trouble is that it doesn’t work that way. Fraud losses get built back into your insurance premiums — meaning everyone’s rates creep upward to cover all these illegitimate claims. That’s money coming directly out of your paycheck or your household budget. More personally troubling: if your insurance identity is stolen, someone else’s diagnoses and treatments can end up attached to your medical record. That is now more than just a paperwork headache. It can complicate your future care, create problems with coverage eligibility, or even lead to you receiving genuinely dangerous treatment decisions made based on a history that isn’t yours.
How to Protect Yourself
Most people assume the healthcare billing system is too complicated to scrutinize, that it’s best left to the professionals. This is an incorrect assumption. You don’t need any specialized knowledge to catch obvious problems. You just need to pay attention.
Look at your Explanation of Benefits (“EOB”). After any medical visit, your insurer sends an EOB, which is a summary of what your provider billed and what the insurer paid. It takes a few minutes to read. Look for services you don’t remember getting, dates that don’t match your calendar, or procedures that seem unfamiliar. Billing errors are common and don’t necessarily mean fraud, but anything that doesn’t add up is worth a phone call.
Request your Medical Records Periodically. Under Federal law, you have the right to access your personal medical records and providers are required to make them available. Check for diagnoses, treatments, or prescriptions you don’t recognize. This matters especially after a hospital stay or any period of intensive treatment.
Treat your Insurance ID Like a Credit Card. It’s just as useful to a fraudster. In fact, it may even be more valuable than a credit card, which can be easily canceled. Don’t give out your insurance ID over the phone unless you made the call, and question anyone who asks for it without a clear and verifiable reason.
Be Skeptical of “Free” Health Offers. Unsolicited screenings, equipment, or consultations tied to your insurance — especially ones that seem to come out of nowhere — are a classic fraud entry point. The goal is usually to harvest your information and bill for services that were never provided or never needed.
Check Your Medicare or Medicaid Summary Notices. If you’re on Medicare or Medicaid, read your summary notices. Treat them the way you treat a bank statement. Report anything suspicious to the HHS Office of Inspector General (1-800-HHS-TIPS) or your state’s Medicaid fraud control unit.
Verify Provider Credentials. Use trusted providers but, if you are seeing a new provider, check their credentials before you see them. A quick check through your state’s medical licensing board takes minutes. Be cautious of clinics with aggressive treatment plans — the kind that suddenly discover you have a serious condition you’ve never heard of and immediately push expensive procedures. Get a second opinion before agreeing to anything that doesn’t feel right.
Say Something. If a bill looks wrong, a provider is pushing hard for something that seems unnecessary, or a prescription strikes you as off, contact your insurer’s fraud hotline. File a report with your state Attorney General or the Federal Trade Commission at reportfraud.ftc.gov.
Trust your Instincts; They are Worth Acting On. Medical fraud survives on the assumption that patients won’t look too closely. The billing system is genuinely complex, and most of us have been conditioned to assume we’re not qualified to question it. But you don’t need a medical degree to notice a charge for an appointment you never had.
A few minutes of attention each time a bill or EOB shows up in your mailbox may be all it takes. Ask questions. Read the paperwork. And don’t take a bill at face value just because it arrived on official letterhead.