Optimizing Qui Tam Litigation and Minimizing Fraud and Abuse: A Comment on Christopher Alexion’s Open the Door, Not the Floodgates

Fraud is one of the most serious problems infecting our nation's health care system. The National Health Care Anti-Fraud Association estimates that 3% of health care spending is lost to health care fraud-$68 billion in 2007.1 The FBI cites estimates that health care fraud accounts for 3%-10% of the nation's health care bill.2 During 2010, the Medicare fee-for-service program had an estimated payment error rate of 10.1%, while the estimated error rate for the Medicare Advantage managed care program was 14.1% (although not all erroneous payments are attributable to fraud).3 While private insurers and self-insured employers are subject to fraudulent and abusive billing, just like government programs, fraud against government programs is particularly troublesome because the cost of fraud is borne by taxpayers. Widely publicized fraud against Medicare and Medicaid also undermines public support for these vital programs.But fraud against government programs also presents an opportunity. One of the most contentious issues in the current debate over the federal budget deficit is how to cut health care spending. Medicare, Medicaid, and the Children's Health Insurance Program (CHIP) made up 21% of the federal budget in 20IO.4 Health care expenditures are also one of the largest expenditures in state budgets.5Cutting health care expenditures is always difficult. The cost of health care, like the cost of anything else, is a function of the volume of items and services purchased and the price of each item or service. When a public program tries to restrict the volume of items and services purchased, however, it is met with cries of "rationing." When a program tries to reduce prices, or even to reduce the rate of growth in prices, it is met with stiff resistance from professionals, providers, and suppliers whose income and profit are threatened by cost control.6Everyone, however, supports eliminating health care fraud (even if there is not always consensus as to which billing practices are fraudulent).7 If we can just eliminate program fraud, we can cut program spending without anyone having to suffer pain. Eliminating fraud has thus become the silver bullet needed to achieve health care spending reduction.One of the primary weapons in the federal government's health care fraud armamentarium is the civil False Claims Act (FCA).8 The FCA allows courts to impose damages of three times the amount falsely claimed plus up to $11,000 per claim against providers who file false claims for compensation with the federal government or who make false statements to the federal government in order to be paid.9 The sheer magnitude of potential FCA damages, which can amount to millions of dollars per provider, often results in substantial settlements in favor of the federal government and provides a significant deterrence against fraud.10A key feature of the FCA is its qui tarn provision, the focus of Christopher Alexion's Note.11 The qui tarn provision allows a person with special knowledge of a fraud to sue on behalf of the government and to keep part of the recovery.12 This is true whether or not the qui tarn plaintiff, or relator, is an innocent observer of the fraud or an active participant. Indeed, Congress intentionally intended to encourage "a rogue to catch a rogue"13 when it adopted the FCA during the Civil War to combat wartime procurement fraud.The qui tam provisions of the statute, however, raise a central problem: When does a qui tarn claimant provide sufficiently valuable information that the claimant should be granted a share of the recovery (which, as has been noted, can be very substantial)? On the one hand, a person should not be able to bring a qui tarn action based on information read in the morning newspaper. On the other hand, a person with special inside knowledge should be allowed to bring a qui tarn action even though the federal government already had some information about a fraud that was being perpetrated as long as the relator in fact provides useful information not previously available. …