The Return on Investment from False Claims Act Partnerships

A new report released by Taxpayers Against Fraud, concludes that every dollar invested by the government in investigation and prosecution of federal health care fraud returns at least $20 back to the American people.

In Fighting Medicare & Medicaid Fraud: The Return on Investment from False Claims Act Partnerships, health care economist Jack Meyer looked at total federal health care investigation and prosecution costs, and compared them to the amount of money returned to the Federal treasury minus the cost of awards to whistleblowers that help the government understand and prosecute these often-complex frauds.

Meyer calculates that in the 5-year period from 2008 to 2012, the Federal government spent $574.6 million to recover $9.384 billion in federal civil health care fraud related settlements and judgments, for a return-on-investment of over 16 to 1. Meyer notes, however, that federal civil recoveries are only part of the picture when it comes to False Claims Act cases. During the same five-year period, the federal government also collected over $4.539 billion in federal criminal recoveries in False Claims Act cases, and the states collected an additional $4.07 billion in civil recoveries associated with FCA cases.  Meyer concludes “If all costs and benefits are accounted for, the benefit to cost ratio of False Claims Act law enforcement now exceeds 20:1. Civil health care fraud is one area where federal and state governments are recovering far more than they are spending.”

Meyer notes that direct returns actually underestimate the impact of False Claims Act law enforcement in the health care arena.

“Major settlements with large recoveries have a ripple effect that reduces the likelihood of even greater frauds against the Medicare and Medicaid programs” says Meyer. “We don’t know exactly how much fraud is being deterred by the False Claims Act, but the number is almost certainly many billions of dollars a year more than is simply being recovered.”

Patrick Burns of the TAF Education Fund notes that the success of the False Claims Act has sparked the creation of similar legislation in 29 states, at the Internal Revenue Service, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.

“We are on the edge of a new era of incentivized integrity programs,” says Burns, “It takes a long time to investigate, negotiate and litigate these cases, but I think we will see billions recovered under these programs in the years ahead.  Right now, for example, the IRS has over 10,000 whistleblower cases in their backlog, with each case reported to be worth in excess of $2 million, and some cases known to be valued by defendants at more than $1 billion.”

Download the full report here.