On paper, it looks like 2016 was a great year for MassHealth fraud recoveries. State officials claim they have recovered $80 million. That number is a bit misleading, however. While we certainly praise the efforts of the Massachusetts Attorney General and the Massachusetts Medicaid Fraud Division, their efforts have barely made a dent in the state’s burgeoning fraud epidemic. Without whistleblowers, the state doesn’t have a chance.
To better understand why we say whistleblowers are so necessary, let’s look at some facts.
Medicaid is the health insurer of last resort. In Massachusetts, Medicaid is called MassHealth and is funded by both the state and federal government. In other words, it is funded with tax dollars.
MassHealth provides health insurance for about 1.8 million low and moderate income and disabled people in the Commonwealth. That’s about 25% of the state’s population. Insuring all those folks is expensive. In 2015, the taxpayers tab for MassHealth was $14.7 billion.
Unfortunately, the FBI says that as much as 10% of Medicaid and Medicare funds are lost to fraud and waste. By our math that is as much as $1.5 billion. Suddenly, an $80,000,000 recovery isn’t so much. While those numbers appear enormous, they are just a small percentage of the total dollars lost to fraud.
2016 MassHealth Fraud Recoveries
Let’s break down the recoveries in 2016. The $80 million figure comes from 29 settlements.
The biggest chunk of the MassHealth fraud recovery totals comes from a single case. Last May, pharmaceutical giant Pfizer paid $784 million to resolve charges that the company was overcharging the government for drugs. $68 million of that settlement was allocated to Massachusetts.
The remaining $12 million came from 28 cases. That suggests an average recovery of less than $500,000 per prosecution.
Some folks may say that the AG’s office and the Medicaid Fraud Division is not doing enough. Considering everything on their plate, they do a great job.
In addition to their Medicaid fraud responsibilities, the division is also tasked with investigating patient abuse, neglect, mistreatment and financial exploitation claims. Patient safety comes first meaning prosecutors and investigators are often forced to wear two hats.
There are other reasons why MassHealth fraud recoveries are so low. Absent a hot tip, the fraud investigators must rely on auditors to find overpayments and waste. Unfortunately, auditors nationwide are only able to review one half of one percent of all providers each year.
Massachusetts False Claims Act and Whistleblower Awards
Massachusetts is one of 29 states with a Medicaid fraud whistleblower award law. Called the Massachusetts False Claims Act, the law allows whistleblowers with inside information about MassHealth fraud to receive an award of up to 30% of whatever the state collects from wrongdoers. With treble damages and large fines for each violation, the awards can be substantial.
Let’s look at an actual example.
$784 Million Medicaid Fraud Recovery from Wyeth and Pfizer
The $784 million settlement that netted the Bay State $68 million was started by a whistleblower. In March of 2002, Dr. William St. John Lacorte filed a complaint under the federal False Claims Act. Since Medicaid is funded with both state and federal dollars, Dr. Lacorte decided to file his complaint in federal court.
Dr. Lacorte claimed that Wyeth was overcharging the Medicaid program for a drug called Protonix.
Because Medicaid is funded with tax dollars, Congress says that pharmaceutical companies must give the government their best price on drugs. Dr. Lacorte claimed that Wyeth was selling Protonix to some hospitals for 16¢ per pill. He said the government, however, was being charged $3.00 per tablet! (Wyeth was acquired by Pfizer while the case was pending.)
Do you remember the stories of the government paying $1400 for a toilet seat and $900 for a hammer? According to Dr. Lacorte, Wyeth had marked up the price of Protonix by 1875%.
Why did Wyeth mark up drug costs so much? Dr. Laporte believes that the company wanted to “induce hospitals to utilize Protonix so that patients would be discharged on this drug thereby requiring these patients to seek outpatient acquisition of this drug at higher the market prices.”
Like street level drug dealers that give samples of highly addictive drugs to get their customers hooked, Wyeth was allegedly doing the same thing. They got the hospitals to prescribe their drug knowing that patients would need to keep taking those drugs when discharged.
Whistleblowers, the Number One Weapon in the Fight against MassHealth Fraud
Dr. Laporte’s case was filed in New Orleans but was national in scope. It also took 15 years to resolve, one of the longest cases we have seen. Unlike the Wyeth case where the defendant chose to fight, most cases settle quickly. Because the government can impose massive penalties for each violation and can triple damages, companies that are guilty often elect to cooperate and minimize penalties.
Dr. Laporte may have had to wait 12 years but in the end, he and a second whistleblower were awarded $98,058,190. Not a bad payday for speaking up against fraud.
In announcing the settlement, a Justice Department spokesperson said, “This settlement demonstrates our unwavering commitment to hold pharmaceutical companies responsible for pursuing pricing schemes that attempt to manipulate and overcharge federal health care programs – programs that protect the poor and disabled – for drugs sold to commercial customers at much lower prices.”
The Next Medicaid Fraud Whistleblower Award Could be Yours
Not every case pays out $98 million. Awards in the millions are not uncommon, however. Each of those awards started with an ordinary person that decided to speak up and report fraud.
Obtaining an award requires several steps:
- You must have inside (original source) knowledge of fraud involving Medicare, Medicaid, MassHealth or Tricare.
- Only the first to file generally gets an award.
- You must file a sealed lawsuit in court.
Many lawyers are willing to file these claims but few are willing or have the experience to try these cases on their own if the government declines prosecution. During the next several years, we expect significant budget cuts. That will likely continue the trend of more and more cases being declined by the government and prosecuted privately.
For more information, visit our Medicare and Medicaid Fraud information page. Ready to start or have questions? Contact attorney Brian Mahany at or by phone at (414) 704-6731 (direct).
MahanyLaw – Medicaid and MassHealth Fraud Lawyers