Cato Journal

Cato Journal

Spring/Summer 2002


HIPAA and the Criminalization of American Medicine
By Grace-Marie Turner



Waste, fraud, and abuse in federal health care programs are serious problems, but so are the federal government's efforts to combat them. There are egregious cases of fraud, and those engaged in these criminal activities should be stopped and prosecuted. But an expanding dragnet for "health care criminals" is threatening and intimidating innocent doctors as well. It is creating an unhealthy climate of fear and defensiveness that is having an adverse impact on the medical profession.

In its zeal to rid the nation's health care system of waste, fraud, and abuse, Congress has passed a blizzard of new federal criminal statutes targeting the health care industry, including those contained in the Health Insurance Portability and Accountability Act (HIPAA) of 1996. Congress created new "health care" laws on top of the existing mountain of rules and regulations and funded an army of enforcement agents. The statutes are being enforced by hundreds of federal agents, armed with hundreds of millions of dollars in investigatory funds. This new army of law enforcement agents has been sweeping through hospitals and doctors' offices throughout the country to investigate a new class of "health care offenders."

Mark L. Bennett Jr., an attorney with the firm of Bennett & Dillon, L.L.P. in Topeka, Kansas, says that health care has become the prosecution of choice for many U.S. attorneys: "At one point in time, drugs and drug offenders got the most attention from the authorities, then it was banking and savings and loan violations. Now . . . one of the prosecutions of choice is fraud relating to the provision of medical services. . . . That's where the money is" (Bennett 1998: 1).

The federal government uses the threat of prosecution and arbitrary penalties to collect excessive settlements from doctors "guilty" of clerical errors. Federal officials developed a crude system to extrapolate fines on doctors and hospitals. Any billing practice that established a physician as a financial outlier on a computer statistical analysis could lead to a payment audit. The audit may look at a fraction of the doctor's medical records, identify a percentage that have coding or billing errors, and then extrapolate the estimated overbillings to the whole practice based upon the sample. But Medicare enforcement officials do not stop there—they then may impose penalties as great as three times the total amount of those estimated overbillings.

Many of the nation's 650,000 physicians are living in fear that they could face armed federal agents, prosecution, and even jail time because of a dangerous new trend to criminalize the practice of medicine. "Demonizing the entire medical community with the broad brush of 'fraud, waste and abuse' trivializes real fraud and sets up an adversarial tension in every patient-physician encounter," according to Nancy Dickey, M.D., former president of the American Medical Association (Dickey 1999).

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