Tenth Anniversary 1986 FCA Amendments

An Assessment of Economic Impact
September 1996

TAF recently commissioned a study to analyze the economic impact of the 1986 Amendments to the False Claims Act over the past decade and into the future. The research and analysis was conducted by William L. Stringer, Senior Lecturer in Economics and Finance, Fels Center of Government at the University of Pennsylvania. Mr. Stringer is also President of The Kalorama Consulting Group, Inc., a public policy research firm headquartered in Washington, D.C., and formerly served as Chief Economist for the U.S. Senate Budget Committee. Printed below is the study's executive summary.

Executive Summary

This paper examines the economic impact of the 1986 Amendments to the False Claims Act. The impacts examined are: (1) the additional cost savings by the US Government both currently and in the future, and (2) the deterrent effect of the Act's Amendments. To structure some insight into magnitudes of cost savings and deterrence resulting from the 1986 Amendments, the following are developed and analyzed: (1) an estimate of total fraud perpetrated against the US Government; (2) data relating to the number and amount of recoveries under the Act; (3) a theory for identifying the components of deterrence; and (4) a simulation of deterrence using a variety of plausible assumptions.

Among the conclusions reached in this paper are:

1. Total fraud recoveries since the 1986 Amendments can be expected to exceed $24 billion by FY 2006, with $21 billion of that amount coming in the next decade.

2. Qui tam recoveries are expected to equal between about $6.9 billion and $9.3 billion over the next ten years.

3. Deterrence of fraud due to the 1986 Amendments for their first ten years of existence (1986-1996) is estimated as between $147.9 billion and $295.8 billion, and for their second ten years of existence (1996-2006) is estimated as between $240.2 billion (23% of the fraud projected to be committed over that period) and $480.3 billion (46% of the fraud projected to be committed over that period), even assuming a conservative estimate of deterrent effect.

4. Deterrence of fraud due to the qui tam provisions of the amended Act for their first ten years of existence (1986-1996) is estimated as between $35.6 billion and $71.3 billion, and for their second ten years of existence (1996-2006) is estimated as between $105.1 billion and $210.1 billion, even assuming a conservative estimate of deterrent effect.

Copies of the complete study are available from TAF.