Pa. lawmakers roll out bipartisan proposal aimed at curbing Medicaid fraud

(*This story has been updated to accurately reflect the number of Medicaid fraud cases prosecuted by Attorney General Josh Shapiro’s Office in 2017 and 2018. A previous version of the story ascribed the data to just 2017.)

Saying Pennsylvania taxpayers annually lose millions of dollars a year to Medicaid fraud, a bipartisan coalition of lawmakers is pushing a package of bills that it says will offer expanded protections to whistleblowers to step up to report it

But pushback from business leaders to a proposed “False Claims Act,” began piling up less than a hour after Republicans and Democratic lawmakers in the state House and Senate, along with Democratic Attorney General Josh Shapiro rolled it out during a Capitol news conference.

“Pennsylvania taxpayers deserve to have their money spent in a responsible and accountable way,” Sen. Lindsey Williams, D-Allegheny, who’s sponsoring the Senate’s version of the bill, said. “Pennsylvania has lost millions of dollars to fraud. We simply cannot afford to wait any longer for this legislation.”

In a statement released later in the day by her office, Williams added that “Only about 2 percent of fraud is detected by law enforcement, while about 40 percent is detected by a tip.”

” … As both a whistleblower myself and as an attorney who worked with whistleblowers for years, I can tell you that people want to do the right thing and report fraud when they see it,” she said. “But there are a lot of risks in doing so. They can lose their job, their healthcare, and their pension all in one fell swoop.”

The package of anti-fraud bills introduced Monday, come from a November 2019 report by the watchdog House Government Oversight Committee. In addition to the False Claims Act, other proposals call for clamping down on improper payments to providers.

The committee’s work, in turn, was motivated by a grand jury report released by Shapiro’s office last April that called for multiple fixes to Pennsylvania’s Medicaid law.

According to Associated Press reports, Pennsylvania’s $33 billion Medicaid program obtains about two-thirds of its funding from the federal government. The rest comes through state tax collections, tobacco settlement money, revenue from the Pennsylvania state Lottery, and assessments on service-providers. The program, which is known as “Medical Assistance” in Pennsylvania, provides services to about 2.8 million people, including the elderly and children.

Shapiro said his Medicaid Fraud unit made 292 arrests resulting in 173 convictions and recovered $34 million for the state in 2017 and 2018*. But his office does not currently have the authority to go after companies that file fraudulent claims in civil court.

As a result, he said, “it’s possible, no, likely, that Pennsylvania is losing $3 billion a year to fraud,” he said.

In a statement, Gene Barr, the president and CEO of the Pennsylvania Chamber of Business & Industry, said that while his group supports rooting out fraud, the bill proposed Monday would “create an unbalanced litigation environment.

“False Claims incentivizes private individuals and plaintiffs lawyers to file lawsuits on behalf of the Commonwealth for alleged Medicaid fraud by increasing the percentage of the recovery,” Barr said. “This leads to the plaintiffs’ lawyers recovery increasing, while the Commonwealth’s portion of the recovery decreases.”

In a statement, the pro-tort reform Pa. Coalition for Civil Justice, said the bill would give rise to so-called “bounty hunter” plaintiffs looking for a payday, and cause the state to recoup less money because Shapiro’s office would need more taxpayer cash to investigate such claims.

“Wisconsin repealed its False Claims Act in 2015, and there are good reasons why many states have decided not to enact their own False Claims Act,” the group said in its statement.

The Pennsylvania Health Care Association, a statewide group that represents nursing home operators, said in a statement that it was “particularly concerned a state False Claims Act will lead to a dramatic increase in frivolous claims and further stigmatize long-term care providers as well as direct caregivers in an already difficult legal and regulatory environment, requiring providers to focus their limited resources on legal battles instead of investing in quality care.”

The proposal also ran into opposition from the Pennsylvania Hospital & Health System Association, a hospital industry trade group, who said that if the bill ever becomes law, “the only true winners … are the trial attorneys. And our patients stand to lose the most.”

“The Pennsylvania hospital community’s core mission is to care for every patient who walks through the doors, regardless of their health status or ability to pay. Hospitals and government share a common interest in being good stewards of taxpayer dollars; however, an unnecessary and duplicative state false claims act could threaten care for Pennsylvania patients. Take, for example, rural hospitals which already are operating on razor-thin margins. One frivolous suit could cause an entire community’s source of health care to disappear, jeopardizing the area’s economy at the same time.

An existing False Claims Act in federal law allowed the Justice Department to recover $2.8 billion for the taxpayers in 2018, Williams wrote in a memo seeking support for her bill. All told, 31 states have passed similar bills, Williams wrote.

Since enacting its law in 2015, Maryland has recovered $81.6 million for the taxpayers, while New Jersey has recouped $122 million since its law went on the books in 2008, Williams wrote.

On Monday, House Government Oversight Committee Chairman Seth M. Grove said the bills were aimed at shoring up both transparency and protections for the taxpayers.

“Fighting fraud is not a Democratic or Republican issue, it’s a good government issue,” Grove, R-York, said during a Capitol news conference. “It is a good government issue.”