President Biden’s Budget Proposal Highlights the Importance of Combating Fraud on Government Programs

Last week, President Biden released his proposed $6.8 trillion budget for the next fiscal year. The proposal, of course, covers the gamut of the federal government’s functions, but two of the President’s priorities stand out. The budget seeks to extend the solvency of the Medicare program through 2050 while simultaneously decreasing the deficit.

To shore up the Medicare trust fund and curb the increase in prescription drug costs, the budget would expand Medicare’s ability to negotiate drug prices, bring drugs into the negotiation process sooner, require drug manufacturers to pay more in rebates to Medicare, and increase taxes on high-income earners.

According to the White House, President Biden’s plan would reduce the budget deficit by nearly $3 trillion over the next 10 years. Combatting fraud can be a significant element of reducing the deficit, as it returns ill-gotten gains to the government. According to government estimates, Medicare and Medicaid made over $127 billion in improper payments in 2022 alone.[1] If current trends hold, well over $1 trillion will have been defrauded from Medicare and Medicaid over the next decade.

Cutting off the fraud spigot would go a long way toward closing budget deficits and towards shoring up the Medicare program. Thankfully, there is a tool for that: the False Claims Act. The law empowers ordinary people who are aware of fraud against the government to file a lawsuit on the government’s behalf to recover the stolen funds and penalties.

The law is widely recognized as the government’s most important fraud-fighting tool. In 2022, the government recovered over $2.2 billion in defrauded funds using the False Claims Act. Of that amount, over $1.9 billion came from cases brought by whistleblowers. (The remainder of the recoveries were in cases brought by the government without a whistleblower). Moreover, last year’s figure was relatively modest compared to prior years. Over the past decade, the government has recovered an average of $3.7 billion each year under the False Claims Act.

Fraud on Medicare and Medicaid diverts taxpayer funds meant to support the elderly and economically vulnerable. By cheating the government out of these funds, fraudsters are hurting the financial well-being of the United States. Whistleblowers can and are fighting back. The False Claims Act will play an important role in achieving the priorities set out in the President’s budget, regardless of whether it is adopted.

John Tremblay is an Associate at Phillips & Cohen LLP

[1] (fee-for-service Medicare); (managed Medicare); (Medicare prescription drug coverage); (Medicaid).