Attorney General-elect Andrew Cuomo Calls For False Claims Act For New York State

Albany Times Union
State must correct failure to reward whistle-blowers
By Andrew Cuomo
First published: Sunday, December 31, 2006

On Election Day, New Yorkers demanded a sea change in state government. This week that call for reform will be entrusted in new leadership elected with a mandate to restore integrity and competence in government.

Yet, tomorrow, the very day we look forward to ushering in an era of reform, New Yorkers will pay a significant price, literally, for one of Albany's past colossal errors: its failure to empower and reward whistle-blowers to fight people and businesses defrauding state programs such as Medicaid.

Two critical events taking effect in the New Year, underscore the urgency for New York to act.

First, a little-known federal provision takes effect penalizing New York and other states that have neglected to pass False Claims Acts. Such acts permit whistle-blowers who discover large-scale theft of state dollars to sue the perpetrators (typically large corporations) to recover the stolen funds for the state. The act rewards whistle-blowers with a part of any recovery while defendants using fraudulent information (a "false claim") to obtain state funds must pay triple damages and face other sanctions, including the potential of criminal indictments by prosecutors.

Medicaid is a joint federal-state program, and the new penalty will cause New York to forfeit a 20 percent increase of its share from any successful Medicaid fraud litigation to the federal government.

New York, which has rightly complained for decades about the federal government shortchanging our Medicaid program, now risks giving up millions to Washington simply because it refuses to enact the nation's oldest, most reliable whistle-blowing tool.

The current federal False Claims Act was signed by President Lincoln to enlist citizens in the battle against crooked Civil War contractors. In 1986, the law was improved, and during the past 20 years, whistle-blowers and prosecutors recovered more than $20 billion in stolen funds under federal and state false claims acts. It has been estimated that taxpayers recover $15 of stolen funds for every dollar spent by the government on whistle-blower initiated investigations.

As President Clinton's secretary of Housing and Urban Development, I used the False Claims Act to go after swindlers stealing dollars from housing programs. As attorney general responsible for state Medicaid fraud litigation, I would be notified of any whistle-blower suit, and could control the litigation or permit the whistle-blower to continue without government help.

Albany's inaction has persisted despite bipartisan support and mountains of evidence that in the war against fraud, whistle-blowers are the state's strongest ally. Meanwhile, 16 states and the District of Columbia passed False Claims Acts. New York must be next in line in order to avoid the above penalty and guard tax dollars.

Second, there is another, greater penalty on the horizon. New York recently received a unique $1.5 billion federal grant to ease the pain of hospital closings and facilitate health care reform.

But there was a catch. Governor Pataki committed New York to drastically improving its Medicaid fraud recoveries by strict yearly quotas that escalate and more than triple by 2011. He also accepted sanctions for failing to hit the targets, which could reduce the grant by $500 million. It will be extremely difficult to meet these targets even with a False Claims Act, and nearly impossible without one.

New York is confronting these two penalties at the worst possible time. On Jan. 1, the Berger Commission recommendations to close and restructure hospitals become effective. Protecting the federal $1.5 billion cushion for these painful closings, by enabling whistle-blower suits, is an imperative.

Finally, whistle-blower suits aren't just about money. They have exposed unconscionable practices by Medicaid contractors, including discrimination against pregnant women, false marketing of AIDS medicine, and rigged diagnostic devices. Whistle-blowers protect patients -- period.

More than 30 years ago, New York created the national model for statewide Medicaid fraud units. Spitzer, the New York State Bar, New York State Assembly, the U.S. Congress, and even President Bush's Health and Human Services Department have all urged New York to pass a False Claims Act. Further delays are unacceptable.

Instead of turning a blind eye to Medicaid cheats, New York can enlist an army of professionals and patients from within the health care system to fight Medicaid fraud. In the process, two would-be federal penalties will be turned into hundreds of millions of dollars for health services to our neediest and middle class families.

It's time for New York to lead the nation again by bringing integrity and effective solutions back to state government.