In a recent article, I explained:
Politicians routinely subvert anti-fraud measures to protect their constituents. When the federal government began poking around a Buffalo school district that billed Medicaid for speech therapy for 4,434 kids, the New York Times reported, “the Justice Department suspended its civil inquiry after complaints from Senator Charles E. Schumer, Democrat of New York, and other politicians”…
It’s not just the politicians. The Legal Aid Society is pushing back against a federal lawsuit charging that New York City overbilled Medicaid. Even conservatives fight anti-fraud measures, albeit in the name of preventing frivolous litigation, when they oppose expanding whistle-blower lawsuits, where private citizens who help the government win a case get to keep some of the penalty.
An indispensable part of this fraud-protection scam are the lobbyists who work to enable fraud or block credible anti-fraud efforts. The Washington Post reports:
Miami health-care executive Larry Duran orchestrated one of the largest Medicare frauds in U.S. history, submitting more than $205 million in phony claims and landing a record-breaking 50-year prison sentence for his crimes.
But another piece of Duran’s scheme also caught the eye of prosecutors. They say he extended his fraud through his lobbying efforts, all aimed at getting official Washington to make it easier for mental health centers such as his to make money.
An advocacy group he helped set up, the National Association for Behavioral Health (NABH), has spent more than $750,000 on lobbying efforts over the past five years, including staging “fly-ins” on Capitol Hill and providing advice to group members on how to get around Medicare denials, according to the Justice Department. The group also held fundraisers for lawmakers…
“Duran did not stop with just committing a massive fraud on the Medicare program through his own companies. Duran franchised his fraud to others,” trial lawyer Jennifer Saulino wrote in a sentencing memo. The advocacy group he helped found, she said, “provided Duran a legitimate-looking vehicle to lobby Congress to allocate more money, through Medicare, to Duran and his co-conspirators for their fraudulent schemes”…
Duran said he pleaded guilty in the case to atone for his actions…
The basic scheme, records show, worked like this: Duran and Valera paid up to $400,000 a month in kickbacks to assisted living centers, halfway homes and others to procure a steady stream of patients for their clinics, which claimed to be providing group mental health treatment. Doctors frequently faked records or signed off on charts without seeing any patients.
Patients often suffered from Alzheimer’s disease, dementia or other conditions unsuited for therapy and were frequently left to urinate or defecate on themselves as they waited for treatment that never came, testimony showed…
Part of Duran’s strategy, prosecutors alleged, was to use his connections to push for policy changes to benefit his fraudulent business. Justice Department officials said in court testimony that Duran was an NABH founder, a board member and a leading financial contributor…“He had a very integral part of the lobbying role,” FBI agent Patrick Koeth testified during sentencing. “Basically, his involvement was to keep pushing for those lobbying efforts”…
The group boasts of its success in fighting for higher Medicare rates for partial hospitalization programs — the type of service Duran offered — and solicited money for a “policy defense fund” to fight proposed cuts.
Here’s the sound-and-pictures version of my article:
The basic theorem is this: market actors have greater incentives to prevent fraud, because it’s their own money on the line. Politicians are spending other people’s money, so their incentive to prevent fraud is far less. Therefore, fraud will always be higher in government programs than in similar market endeavors.
