Coalition in Opposition to HR 3523 An Open Letter to Congress

Document posted by Consumers Union Washington D.C. Office

Coalition in Opposition to HR 3523
An Open Letter to Congress

March 31, 1998

Dear Member:

We are writing to express our deep concern about a recently introduced bill: H.R. 3523, the "Health Care Claims Guidance Act". Contrary to its title, H.R. 3523 would not provide "guidance" on health care claims. Instead it would provide a "free-fraud zone" for billions of dollars of health care fraud by exempting hospitals and other medical corporations from prosecution under the False Claims Act (FCA) in a broad range of circumstances. At a time when Congress has emphasized that we should be cracking down hard on Medicare and Medicaid fraud, this bill would take us in the wrong direction by eviscerating the False Claims Act -- the Government's most effective fraud-fighting tool.

Medicare service providers received $23 billion in "improper payments" during fiscal year 1996 -- a full 14% of the $168 billion in total payments, according to the Department of Health and Human Services. But despite the widespread evidence of improper billing practices in the health care industry, H.R. 3523 would carve out special exemptions just for health care claims, shielding health care companies from accountability under the FCA in the following circumstances:

H.R. 3523 creates "free-fraud zone": No health care fraud claim could be brought under the FCA when the Government's damages are not a "material amount". However, what is considered a "material amount" under the bill's definition could equal billions of dollars. The definition provides that a "material amount" will be defined by HHS as a fixed proportion of total claims filed by that provider to a federally funded health care program for the same calendar year. But the proportion must be based on the American Institute of CPA's definition of the term "material", which cites up to 10% as not being a material amount. This definition appears to allow industry to set a level of acceptable Medicare and other health care fraud -- the "free-fraud zone" .
H.R. 3523 creates loopholes for health care fraud: In addition, the bill further excuses, false billings by restricting when fraudulent claims can be added together to determine the materiality of damages. Claims can be aggregated "only if the acts or omissions resulting in such damages were part of a pattern of related acts or omissions by such person". Thus, health care corporations may be able to dodge FCA liability by engaging in billing practices that spread out fraud among different federally funded health care programs, different years, and different schemes. In effect, this provision amounts to "guidance" on how to maximize illegal profits.
Even if the false claims are a "material amount", the bill gives health care companies three more chances to get off the hook: First, companies can evade FCA enforcement if they submitted claims "in reliance on" verbal or written information provided by any federal agency or any agent thereof. Following advice by fiscal intermediaries can already be a defense to a FCA charge -- this provision, however, would unreasonably turn existing protections into an absolute defense and encourage wrongdoers to manipulate the intermediaries and other federal agencies or agents.

Second, fraud would be tolerated under the FCA when the company submitting the claim "is in substantial compliance with a model compliance plan". Therefore, health care companies could insulate themselves from liability simply by showing that they will establish better procedures in the future even if they are defrauding Medicare today.

Third, the bill makes it significantly harder to prove that claims were wrongfully submitted by changing the burden of proof for all health care claims from the usual civil "preponderance of the evidence" standard to the elevated "clear and convincing evidence" standard. This goes far beyond the normal standard and would make it far more difficult to prove liability.

The False Claims Act was first signed into law by Abraham Lincoln in 1863 and then modernized by Ronald Reagan in 1986. Since 1986, the Act has returned more than $4 billion to the Treasury. Perhaps more importantly, estimates indicate that the FCA has deterred approximately $150 to $300 billion between 1986 and 1996 and, in the next ten years, will deter as much as $480 billion. Given the FCA's proven record of effective enforcement, it is not surprising that industry lobbyists have put the FCA under attack. We urge you not to allow hospital corporations to turn the FCA into a license to steal from taxpayers. Please do not support H.R. 3523.

Sincerely,

American Federation of Teachers
American Federation of State, County and Municipal Employees
The CFIDS Association of America
Coalition for Nursing Home Reform
Communications Workers of America
Consumer Federation of America
Consumers Union
Government Accountability Project
Justice for All
National Association of Social Workers
National Council of Senior Citizens
National Health Law Program
National Senior Citizens Law Center
Office for Church in Society
The Older Women's League
Project on Government Oversight
Service Employees International Union
Taxpayers Against Fraud, The False Claims Act Legal Center
United Church of Christ
United Steelworkers of America
UNITE

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