By Curt Schroder
It’s budget season in Pennsylvania, which means politicians are grasping at any loose straws they can find to painlessly raise revenue without increasing taxes. Regardless of a proposal’s shortcomings, if it makes a good sound bite, it will be pushed as a potential revenue generator for the state. Such is the case with the state False Claims Act, or FCA. Unfortunately, like its very name, claims that it will fill the current revenue gap needed to pass a budget are false.
Simply put, such measures allow individuals to bring lawsuits against businesses and health care providers on behalf of the government in the name of rooting out Medicaid waste. On the surface it sounds like a good idea — allow a person to file suit and recover misspent dollars for the state. In fact, a news article posing the question: “False claims have brought in millions – Why hasn’t it passed in PA?” has appeared in news outlets around the state. A deeper dive into the details and repercussions of the policy reveal the reason.
Implementing an FCA is not the right move for Pennsylvania. While masquerading as a good government reform bill, it really is just a huge gift to the trial bar and plaintiffs’ attorneys who are constantly seeking to expand liability in the commonwealth for their own financial gain. It’s reasonable to ask, what’s in it for the relators (the private plaintiffs/bounty hunters who filed these cases)? Why would they go through the trouble of bringing forth a case at all. The answer is there’s a massive financial incentive — one that stands to increase exponentially to the detriment of small business, health care providers and the commonwealth if an FCA becomes law.
There are several reasons why a state FCA should not be implemented. For starters, the commonwealth already benefits from the federal FCA. The federal government and state split any Medicaid recoveries based on a formula that determines each entity’s funding support for Medicaid. Pennsylvania is in a supremely beneficial position under this system. The relator receives their compensation (up to 30%) from just the federal portion of the recovery. Pennsylvania receives 100% percent of its portion without having to pay anything to the relator.
Under a state FCA, the relator would be eligible for double recovery of up to 30% from the federal and state recoveries. Rather than being a financial windfall for the state, it leads to Pennsylvania recovering less than it does under the current system. Clearly the state does not benefit under this proposed scheme.
In addition, the onerous penalties of triple damages and up to $28,000 per claim will wipe out many small businesses, rural hospitals, physician practices and clinics. If one of these entities has a few hundred incorrectly coded claims at $28,000 per claim and triple the amount of actual damages, it will be financially ruined. This act fosters a sue and settle system. Lawyers make a fast buck knowing the people being sued will settle instead of risking financial catastrophe, even if the claim has little or no merit. That is not justice, it’s coercion.
A state-specific FCA is unnecessary. The state attorney general’s office already has tools at its disposal to pursue fraudulent Medicaid activity. Pennsylvania has one of the lowest Medicaid error rates in the country at just 2.5%. The fraud prevention mechanisms — including both the federal FCA and the attorney general’s office — are working.
So what is the purpose and point of implementing a state FCA? If lawmakers determine that more waste- and fraud-fighting tools are needed, give the attorney general additional tools to do the job. Yet some are pushing an ill-conceived proposal that would outsource this government function to attorneys motivated by profit and not correct and consistent application of policy.
Some supporters argue that a state FCA will magically provide $3 billion to Pennsylvania and reduce by half the revenue deficit in the governor’s current budget proposal. Experience in other states does not support that claim.
New York has only recovered roughly $4 billion under its state FCA since 2011. California has only recovered about $3 billion since 2000. Minnesota has recovered only around $60 million since 2010. Those are significant sums, but they accumulated over 15 years or more. These recoveries did not appear in a single budget cycle as supporters want you to believe will happen in Pennsylvania.
Let’s see this for exactly what it is. This isn’t a good government reform proposal. It’s a gift to the trial bar — expanding liability and increasing opportunities to go after the private sector for their own financial gain.
Outsourcing the collection of misspent government funds to profit motivated attorneys is not the answer to the state’s fiscal and budgetary challenges. The only ones who stand to profit off of a state FCA are the lawyers who are pushing for it. Pennsylvania’s rural health care and small-business sector would be clobbered. That’s why our state lawmakers should oppose efforts to implement one in the commonwealth.
Curt Schroder is the executive director of the Pennsylvania Coalition for Civil Justice Reform and a former state House member representing Chester County.