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Stopping Fraud to Pay for Reform

FRAUD1

When, earlier this year, the United States racked up two $1 billion-plus settlements from drug manufacturers for alleged fraudulent drug marketing, estimates that fraud costs the nation more than $60 billion annually gained new credence. And proponents are counting on Medicare and Medicaid fraud recoveries as a major source of funding for health care reform, says Laurence Freedman, a partner in Patton Boggs’ health care practice.

Passed in May, the Fraud Enforcement and Recovery Act broadens the federal whistle-blower act to “ensure that it reaches every corner of the health care industry, or any industry that receives federal money,” Freedman says. The bill also provides substantial additional funding for enforcement to increase the number of fraud investigations and speed cases toward expected recoveries.

Despite the publicity that has accompanied the pharmaceutical marketing cases, the bulk of the dollars wasted in fraud are likely the result of smaller-scale, blatantly criminal activities, says Laura F. Laemmle-Weidenfeld, a partner at Patton Boggs. A typical example is when a medical equipment provider, existing only on paper, charges for products never delivered to beneficiaries. But these smaller operations may not attract the attention of whistleblowers or lawyers seeking a big payday.

A new multicity Medicare fraud strike task force group, also announced in May, may put a dent in such operations, she says.