Fraud Busting Begins at Home

New York Times op-ed January 29, 2006

Fraud Busting Begins at Home

By MARK GREEN

When it comes to fighting fraud, New York State is 143 years behind the times.

In 1863, President Abraham Lincoln signed the False Claims Act, allowing ordinary people to blow the whistle on fraudulent federal contractors by suing them on behalf of taxpayers. The so-called Lincoln Law gave whistleblowers an incentive to fight fraud by rewarding them with a portion of recovered stolen money.

Since Congress modernized it in 1986, the Lincoln Law has become the federal government's single most important tool in combating fraud. According to Taxpayers Against Fraud, a public interest group, federal whistleblower lawsuits have recovered $17 billion and saved billions more by deterring corrupt practices.

Yet New York's Legislature has been unwilling or unable to pass a False Claims Act to combat fraud against state programs, even though California, Florida, Texas and more than a dozen other states have done so, recovering tens of millions of dollars for their taxpayers. Just last month, Congress, which allows states to keep a percentage of Medicaid dollars recovered through federal whistleblower suits, approved a 10 percent penalty on states without False Claims Acts -- a penalty New York can ill afford.

New Yorkers deserve better. A strong False Claims Act would allow anyone with inside information about a major scheme bilking the state to secretly file a case against the perpetrators. The case would be referred to the attorney general, who could take over the suit, dismiss it, settle it or allow the whistleblower to prosecute it on the state's behalf. A guilty party would pay the state treble damages plus additional fines, and could be barred as a government contractor. The amount of money the whistleblower gets would depend on the value of the information provided, and the time and expense he or she spent on the lawsuit. Crucially, the law would prohibit employers from retaliating against whistleblowers for exposing fraudulent practices.

Although a False Claims Act would apply to all state spending, health care fraud best illustrates the need for the Legislature to act now.

For the same reason that Willie Sutton famously robbed banks, big-money schemes aim at Medicaid and other state health care programs. A former state investigator recently estimated that Medicaid fraud alone costs New Yorkers as much as $18 billion a year.

Health care fraud is particularly pernicious in New York because Gov. George Pataki's Department of Health, which is charged with referring Medicaid fraud cases to the attorney general for prosecution, has been ineffective. Health Department regulators last year discovered only 37 cases of suspected fraud out of 400 million claims and audited just 95 healthcare providers out of 140,000.

Complicated health care schemes are similar to the complicated Wall Street schemes that Attorney General Eliot Spitzer (whose office I will be running for) investigated because often only insiders can detect them. It turns out that health care workers like doctors, nurses, accountants and administrators are perfectly positioned to be health care fraud inspectors. The genius of a False Claims Act is that it gives workers strong incentives to expose fraud and strong protections against employer retaliation. It also gives health care unions an incentive to educate members how to spot, expose and prosecute health care fraud. If New York had its own law, it would better empower New York's attorney general to aggressively fight fraud against Medicaid and other joint federal and state programs in the face of federal inaction.

Opponents of whistleblower suits claim they invite frivolous and abusive litigation. To no one's surprise, these opponents tend to be big health care conglomerates and drug companies that are used to receiving a lot of government money with little government oversight. (They are also a major source of campaign contributions.) The truth, though, is that the attorney general's ability to dismiss a whistleblower-initiated lawsuit basically eliminates the risk of frivolous or abusive litigation.

In addition, empowering patients and health care workers to expose health care fraud isn't just a lifeline for the state's struggling Medicaid program, but also a lifesaver for Medicaid patients. For example, it's a fraud to bill Medicaid for faulty medical equipment, improper medical procedures or shipments of medicine with false expiration dates. Combating such practices can save patients from dangerous health care providers and businesses.

Lincoln knew government must be accountable to taxpayers, and that ordinary taxpayers can help. He was right. It's the status quo in Albany that's wrong. Mark Green is the former public advocate for New York City.


Mark Green is the former public advocate for New York City.