Expanding its war on entitlement fraud, the Obama administration has begun cracking down on top corporate executives whose companies are found guilty of defrauding Medicare and Medicaid. It's a big shift in terms of who will be held responsible, the Associated Press reports:
Previously, if a company got caught, its lawyers in many cases would be able to negotiate a financial settlement. The company would write the government a check for a number followed by lots of zeroes and promise not to break the rules again …
Now, on top of fines paid by a company, senior executives can face criminal charges even if they weren't involved in the scheme but could have stopped it had they known. Furthermore, they can also be banned from doing business with government health programs, a career-ending consequence.
Industry leaders have slammed the crackdown as needlessly vindictive, giving politically appointed officials at Obama's Health and Human Services great leeway to punish those who might not even be directly responsible for fraud. Had such rules been in effect in 1997, for instance, Florida Gov. Rick Scott could have theoretically been punished: As the CEO of HCA/Columbia, he claimed that he was neither aware of nor involved in the hospital giant's massive Medicare fraud scheme, emerging unscathed even after the company paid a record $631 million fine for its ploy.
But the Obama administration's move could do more than just unsettle current and former health industry executives — it's indicative of a major development that's often gotten lost in the broader political debate over fraud in Medicare, Medicaid and other entitlement programs.
Lawmakers who demand a bigger crackdown on entitlement fraud frequently focus on isolated bad actors, whether they're welfare recipients or lone Medicare providers who've duped the system through false billing practices. In fact, such individuals often work alone or in small, localized networks, said Don White, spokesman for HHS's Office of the Inspector General. "They are crimes of convenience … it's not some mini-gang that’s running Medicare fraud across the country," White told me in an interview.
But such small-time fraudsters represent a small fraction of the Medicare and Medicaid fraud that's committed, White argues. Last year, the Justice Department recovered $3 billion in false claims overall, a record $2.5 billion of which came from the health-care sector. And, the HHS spokesman points out, big pharmaceutical and medical device corporations are among the worst offenders: Last year alone, the DOJ says it recovered $669 million from Pfizer, $302 million from AstraZeneca and $193 million from Novartis. That's why the Obama administration has focused on "large corporations, pharmaceutical companies who are illegally marketing" drugs that haven't been tested, White concludes.
Going after "impersonal" corporations by simply making them pay big fines doesn't seem to have deterred bad behavior, as repeat offenders abound, the Associated Press points out. By punishing individual senior executives, however, the federal government may not only force corporate leaders to combat fraud internally, but also draw greater public attention to the issue. As the past debate on entitlement fraud has shown, it often seems more politically persuasive to pin the blame on individuals than on institutions. Whether or not that's the federal government's intention, industry executives may soon end up becoming the poster children for health-care fraud.
Suzy Khimm is a staff reporter in the Washington bureau of Mother Jones.