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Please begin with an informative title:

The U.S. nailed Merck down with Medicare fraud last week. The news hit the wires and the media is touting this settlement as a success. I'm glad Merck was made to pay for giving selective discounts, but Merck admitted no liability and this settlement would not have happened without a former District Sales manager blowing the whistle. It took 12 years from the start of wrong doing in the mid 1990's to last week before this "successful" settlement came to be.

Some say whistle blowers do it for the reward instead of easing their conscience. True, whistle blowers can receive up to 30% of what the  government receives in restitution. This one received about 10% of the $650-$671 million for about $6.8  million. A tidy sum, but before you want to become a whistle blower you need to know more about what can happen when you are David calling out Goliath.


You must enter an Intro for your Diary Entry between 300 and 1150 characters long (that's approximately 50-175 words without any html or formatting markup).

The problem with whistle blowing is that you can't unblow the whistle. Fear of retaliation. Fear of losing your job. Fear of the unknown.  That's why medical fraud is almost impossible to stop. You have to feather your nest or make sure you'll receive a big enough nest egg before you blow, because once you turn over the evidence, you may never work in health care again. Worse than that, you might find yourself in a handbasket on it's way to hell.

Before you turn in your employer, you need to have a plan. You need to have a job lined up. Hop to it, then turn the schmucks in. Even if you lined it all up, you can still find yourself unemployed and unemployable, if your name is listed prominently in the newspaper.

Sure, there are whistle blower acts, but you might have to figure out how to live for the 7 years or so it takes to settle a case. Whistle blower  legislation is meant to encourage people to do the right thing and it works some of the time. The problems are that the legal system works slowly. It's not like a medical situation where a 10 second delay can kill someone. In law, it can take 20 years to kill somebody. None the less, the Sarbases-Oxley Act of 2002 and the False Claims Act (originally passed in 1863, amended since) have encouraged many whistle blowers to come forward.

Sarbanes-Oxley actually has two enforcement regimes--one civil, one criminal--to protect people who report on corporate fraud. The civil provision creates a right to reinstatement, back pay and damages for whistle-blowers. The criminal provision makes it a felony to retaliate against a protected whistle-blower.

Not just corporations are at risk. Individual managers--for example, a human relations executive or a whistle-blower's supervisor--can be charged with unlawful retaliation and face up to ten years in prison and a $250,000 fine.

quite nice.

Then The False Claims Act details wrong doing against the government:

While the False Claims Act imposes liability only when the claimant acts “knowingly,” it does not require that the person submitting the claim have actual knowledge that the claim is false. A person who acts in reckless disregard or in deliberate ignorance of the truth or falsity of the information, also can be found liable under the Act.

In sum, the False Claims Act imposes liability on any person who submits a claim to the federal government that he or she knows (or should know) is false.

Then there's the reward part:
In addition to its substantive provisions, the FCA provides that private parties may bring an action on behalf of the United States. These private parties, known as “qui tam relators,” may share in a percentage of the proceeds from an FCA action or settlement.

FCA provides, with some exceptions, that a qui tam relator, when the Government has intervened in the lawsuit, shall receive at least 15 percent but not more than 25 percent of the proceeds of the FCA action depending upon the extent to which the relator substantially contributed to the prosecution of the action. When the Government does not intervene, [FCA] provides that the relator shall receive an amount that the court decides is reasonable and shall be not less than 25 percent and not more than 30 percent.

and whistle blower protection:
The FCA provides protection to qui tam relators who are discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of their employment as a result of their furtherance of an action under the FCA. Remedies include reinstatement with comparable seniority as the qui tam relator would have had but for the discrimination, two times the amount of any back pay, interest on any back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees.
Although whistle blowing protection encourages people to do the right thing, the reality is that fraud isn't that big of a chunk of Health care spending most people think it is. According to the ABC News/Kaiser Family Foundation/USA Today Poll done October 2006, more than a third (37 percent) say fraud and waste in the health care system is one of the biggest factors in rising costs (pg 5). CBS in December 2006 made a case that 10% of the Medicare budget is spent on fraudulent claims - a whopping $50 billion per year. That same year the biggest fraud settlement occurred - $155 million. So, you'd think fraud is a major cost of our failed health care system.

Think again. It is millions of dollars every year, but we spend trillions on health care annually. Reining in fraud is a good idea, but it isn't the only good idea for decreasing health care costs.

The $671 million recouped funds that were fraudulently obtained over a 12 year period.

$671 million divided bt 12 = $55.9 million per year.
and Let's add the $155 million from the older restitution award.
Add $50 billion per year for Medicare fraud

$671 mil + $155 mil + $50 bil = $50.2109 billion in annual medical fraud.

Compared to $2.35 Trillion in annual health care spending.

The U.S. actually spent about $2.35 trillion on health care in 2006, but this governmental publication shows it to have been projected to be $2.12 trillion.

Taken either way:

$50.2109 B / $2120 B = 2.14% of all health care spending for 2006


$50.2109 B / $2350 B = 2.37% of all health care spending for 2006

That's right, recouping those fraudulently spent funds saves us a little over 2%.

Compare that to requiring health insurers spend 85% of premium dollars on health care and conservatively reducing the estimated 31% spent on health care administration to say half or 15.5%. That would save much more money.

$2.12 Trillion x .155 = $330.7 Billion


$2.35 Trillion x .155 = $366.6 Billion

A far more substantial savings.

or, you could get a ratio

330.7 B / $50.2109 B = 6.58 times the savings from fraud.

The FBI uses a different number for the costs of health care fraud with the high end being about $100 billion per year.

The National Health Care Anti-Fraud Association estimates that this fraud collectively costs Americans between $60 billion and $100 billion a year. Ouch.

Ok, so a $100 billion is about 4.2-4.7% of total health care spending which is getting up there, but 4.2% and 4.7% are both less than 1/3 the savings of trimming administrative costs to 15.5%.

The bottom line is that although fraud is a problem and it needs to be stopped, the murder by spreadsheet ways of private health insurers are 3- 6.5 times the problem of health care fraud. Clearly, health insurance profit gouging is 3-6.5 times the problem of health care fraud. So, why aren't the news hounds talking about this story? Their advertisers forbid it.

I know what I want to do.

Cut the fraud and murder by spread sheet ways.

Extended (Optional)

Originally posted to JDWolverton on Mon Feb 11, 2008 at 06:25 PM PST.

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