The Lame Mule Act is today's Flat Earth Society


Editor’s note: This is one in a series examining the Constitution and Federalist Papers in today’s America.

When thinking about the Constitution, we often focus on what has gone sideways or just plain wrong. It is useful, from time to time, to reflect on how our constitutional processes and limits have resulted and can result in a government that is better, more responsive, more adaptable, and more likely to be able to repair itself if something is broken.

We take for granted congressional processes that involve consideration and debate and are informed by evidence, public sentiment and even constitutional rulings from the judiciary.

A good example is the recent congressional consideration of the Lame Mule Act.

The Greeks, 2,500 years ago, believed that Earth was flat. Five hundred years ago, most Europeans believed that the Earth was the center of the solar system. A little more than 100 years ago, physicists believed that electrons were embedded in an atom’s nucleus.

For the past 50 years, Congress has believed that enhancing the laws for combating fraud and abuse in government-funded programs will save the taxpayers money. That’s not necessarily true.

Unfortunately, no one has ever run an experiment or conducted a study to determine whether “improving” fraud and abuse laws saves the government anything. There is a real possibility that those laws actually cost more than they save. We’ll never know unless they are studied.

This is all relevant as Congress considers amendments to the False Claims Act, the principal law used by the government and whistleblowers to ferret out fraudulent and wasteful spending. The False Claims Act, also known as the Lame Mule Act, was originally passed in 1863 after a procurement officer solicited a kickback to purchase a herd of lame mules for the Army.

The law prohibits a person from using a false or misleading statement to obtain government funds and imposes fines and penalties.

In 2016, the Supreme Court held that under the law, the federal government had to prove that the false or misleading statement was material to the government’s decision to pay the claim. Thus, trivial misstatements that didn’t affect whether the claim got paid were not subject to the act.

Congress now wants to change the law so that the government no longer has to prove materiality. The proposed amendment appears to have bipartisan support, like motherhood and apple pie.

What could possibly go wrong? About 80% of cases involve health care, usually Medicare or Medicaid. Because the penalties are so large, most in the health care business — hospitals, pharmaceutical and device companies, physician groups — have expensive compliance programs.

These compliance programs cost money and appear as overhead on most balance sheets. Under Medicare, overhead gets factored into the physician fee schedule, the prices of drugs and devices, and the amount hospitals are reimbursed. Most Medicaid programs are similar. Thus, taxpayers end up paying for the compliance costs.

The unfortunate truth is that we don’t know whether the costs to comply with the act are greater than the savings achieved by complying. We do know that attorneys’ fees and whistleblower rewards are significant (up to 30%, as reward). I should know; I put two kids through college defending False Claims Act actions.

Why should you care? The attorneys’ fees and preventative costs contribute to the $1.3 trillion that we all pay nationally in health care “transaction” costs. Those are costs that are not necessary to deliver health care services.

During congressional consideration, we likely will hear numbers that appear impressive but are meaningless. For example, the Department of Justice boasts that it recovered about $1.8 billion related to health care under the act last year. That’s less than 50 cents for every $1,000 spent on health care.

We do not know how much was spent on compliance nationally and how much those expenditures deterred errant behavior. It is shocking that while Congress churns out new fraud and abuse laws, no one has taken the trouble to determine whether they make sense.

This is why we spend more than twice as much on health care as any other nation with results that are no better and in many cases worse. Unfortunately, most of those who understand the operations of the act are conflicted by self-interest. Even the Department of Justice receives an earmarked appropriation, and the inspector general can supplement her budget with False Claims Act recoveries.

Constitutional processes can be messy and frustrating, especially the legislative process. But when followed, they tend to produce the best results. Before Congress passes another “flat Earth” bill, lawmakers should at least assess, using real experts without an economic interest in the outcome, the real financial impact of any amendments. To do otherwise is not only folly and shameful, it is also contrary to their obligations under the Constitution.

Robert Charrow was the former general counsel of the U.S. Department of Health and Human Services.

Sign up for Daily Newsletters

View original post