Mr. President, it is no longer a secret that fraud represents one of the fastest growing and most costly forms of crime in America today. In no small part, our current economic crisis can be…
Mr. President, it is no longer a secret that fraud represents one of the fastest growing and most costly forms of crime in America today. In no small part, our current economic crisis can be attributed to unchecked mortgage fraud. Mortgage fraud itself was spurred by rampant accounting fraud, which enabled crooked executives to fatten their larders on a bubble of fake equity. And on the back- end, securities fraud, in the form of market manipulation and insider trading, hastened the eventual market crash and maximized its impact on Main Street and average American investors. In response, this body passed the Fraud Enforcement Recovery Act, FERA, which directed critical resources and tools to anti-financial fraud efforts.
FERA was passed in response to an unprecedented financial crisis. Americans should expect Congress to do more than simply react to crises after their most destructive impacts have already been felt. We owe it to our constituents to be proactive and to seek out and solve problems on the horizon so that disaster can be averted.
In the midst of the debate concerning comprehensive health care reform, we must be proactive in combating health care fraud and abuse. Each year, criminals drain between $72 and $220 billion from private and public health care plans through fraud. We pay these costs as taxpayers and through higher health insurance premiums. As we take
steps to increase the number of Americans who are covered by health insurance, and to improve the health care system for everyone, we must also ensure that law enforcement has the tools that it needs to deter, detect, and punish health care fraud.
The Finance and HELP committees have worked long and hard to find ways to fight fraud and bend the cost curve down. They have done a great job. There's more work to be done, however, which is why today I, along with Senators Leahy, Specter, Kohl, Schumer, and Klobuchar, introduce the Health Care Fraud Enforcement Act of 2009.
This bill makes straightforward but critical improvements to the Federal sentencing guidelines, to health care fraud statutes, and to forfeiture, money laundering, and obstruction statutes. The bill would also make available more Federal resources to activities specifically designed to target health care fraud. Taken together, these measures send a strong and unmistakable signal to those who would engage in health care fraud that they will be caught, and they will be punished.
The bill makes important changes to the Federal sentencing guidelines to ensure that health care fraud offenses will be punished commensurate with the cost that these offenders inflict upon our health care system. Health care represents \1/6\ of our national economy, and so unchecked health care fraud has the potential to inflict devastating harm to our national prosperity.
Despite the enormous losses in many health care fraud cases, analysis from the United States Sentencing Commission suggests that health care fraud offenders often receive shorter sentences than other white collar offenders in cases with similar loss amounts. And according to statements from cooperating health care fraud defendants, many criminals are drawn to health care fraud because of this low risk-to- reward ratio. For this reason, the bill directs the Sentencing Commission to increase the offense score of health care fraud offenses by two to four levels, depending on the dollar amount involved in the crime.
The bill also clarifies that courts should refuse to entertain arguments by defendants that they can avoid stiff punishment because only a portion of their fraudulent claims were likely to be paid.
In addition, the bill updates the definition of ``health care fraud offense'' in the Federal criminal code to include violations of the anti-kickback statute, the Food, Drug and Cosmetic Act, and certain provisions of ERISA. These changes will allow the full panoply of law enforcement tools to be used against all health care fraud.
The bill also strengthens whistleblower actions based on medical care kickbacks, which tempt by health care providers to churn unnecessary medical care at great risk to patients and great cost to the taxpayer. By making all payments that stem from an illegal kickback subject to the False Claims Act, this bill leverages the private sector to help detect and recover money paid pursuant to these illegal practices.
The Department of Justice has had success both prosecuting illegal kickbacks and pursuing False Claims Act matters based on underlying violations of the Anti-Kickback Statute. Nevertheless, defendants in such FCA cases continue to mount legal challenges that sometimes defeat legitimate enforcement efforts.
For example, a court recently held that, even though a device company may have paid a kickback to a doctor to use a particular medical device, the bill to the government for the procedure to implant the device was not false or fraudulent because the claim was submitted by the innocent hospital, and not by the guilty doctor. In other words, a claim that results from a kickback and that is fraudulent when submitted by a wrongdoer is laundered into a ``clean'' claim when an innocent third party finally submits the claim to the government for payment. This has the effect of insulating both the payor and the recipient of the kickback from False Claims Act liability. This obstacle to a successful action particularly limits the ability of the Department of Justice to recover from pharmaceutical and device manufacturers, because in such instances the claims arising from the illegal kickbacks typically are not submitted by the doctors who received the kickbacks, but by pharmacies and hospitals that had no knowledge of the underlying unlawful conduct.
This bill remedies the problem by amending the anti-kickback statute to ensure that all claims resulting from illegal kickbacks are ``false or fraudulent,'' even when the claims are not submitted directly by the wrongdoers themselves. I want to emphasize that in such circumstances, neither anti-kickback nor False Claims Act liability will lie against the innocent third party that submitted the claim.
The bill also addresses confusion in the case law over the appropriate meaning of ``willful'' conduct in health care fraud. Both the anti-kickback statute and the health care fraud statute include the term ``willfully.'' In both contexts, the Ninth Circuit Court of Appeals has read the term to require proof that the defendant not only intended to engage in unlawful conduct, but also knew of the particular law in question and intended to violate that particular law.
This heightened mental state requirement may be appropriate for criminal violations of hyper-technical regulations, but it is inappropriate for these crimes, which punish simple fraud. The Finance Committee health care reform bill, America's Healthy Future Act, addresses this problem for the anti-kickback statute, but not for the general health care fraud offense. Accordingly, the Health Care Fraud Enforcement Act tracks the Finance bill and clarifies that ``willful conduct'' in this context does not require proof that the defendant had actual knowledge of the law in question or specific intent to violate that law. As a result, health care fraudsters will not receive special protection that they don't deserve.
Next, the bill provides the Department of Justice with critical subpoena authority for investigations conducted pursuant to the Civil Rights for Institutionalized Persons Act, also known as CRIPA.
Pursuant to that important statute, the Civil Rights Division of the Department of Justice investigates conditions in publicly operated institutions, such as nursing homes, mental health institutions, facilities for persons with disabilities, residential schools for children with disabilities, as well as jails and prisons, where there has been an allegation of pattern or practice of violating residents' Federal civil rights. Under CRIPA, only injunctive relief is available; the statute does not provide for the award of damages.
CRIPA investigations commonly concern allegations of inadequate medical and mental health care, unsafe living conditions, and the failure to protect residents from harm. The majority of CRIPA investigations are conducted with the voluntary cooperation of state and local jurisdictions. When unlawful conditions are identified, CRIPA investigations are typically resolved through a negotiated settlement agreement that addresses the reforms necessary to correct policies, procedures and practices to address the identified deficiencies.
Some jurisdictions, however, have refused to cooperate with the Division. CRIPA does not authorize the Department of Justice to issue subpoenas for documents, records, or even for access into the institution that is the target of the investigation. As a result, investigations have been hamstrung and the effectiveness of CRIPA to remedy systemic abuse of institutionalized persons has been unnecessarily limited.
For example, in a CRIPA investigation of a county nursing home in New Jersey, the local jurisdiction would not cooperate. The Division's investigation revealed inadequate medical and mental health care, unlawful restraint, and inadequate nutrition and hydration. In one particularly serious incident, which occurred weeks after a meeting with the county officials to request their cooperation with the investigation, a resident was fed so quickly by staff that she aspirated and died. Emergency room physicians extracted a volume of mashed potatoes from the resident's lungs that filled a Ziploc bag. Another nursing home resident slowly starved to death because staff improperly positioned that resident's feeding tube. The Division was compelled to file suit, resulting in a negotiated settlement more than 4 years after the investigation began. To be sure, these
abuses are a civil rights issue that demand attention even in the absence of fraud prevention. But substandard care also represents fraud and waste, because taxpayers have paid for the provision of satisfactory medical services at facilities that fall under CRIPA jurisdiction.
The absence of subpoena authority enables non-cooperating jurisdictions to obstruct and delay the Division in its mission to ensure that the Federal rights of persons in the custody of state and local officials are respected. The resultant litigation when jurisdictions exploit the absence of subpoena power is extraordinarily costly, yet the substantive outcome, appropriate injunctive relief, is the same.
The bill addresses the problem by authorizing the Department of Justice to issue subpoenas for access to any institution that is the subject of an investigation related to a violation of CRIPA, and for any documents, records, materials, files, reports, memoranda, policies, procedures, investigations, video or audio recordings, and quality assurance reports of such institution.
In a final substantive change, the bill corrects an apparent drafting error by providing that obstruction of criminal investigations involving administrative subpoenas under HIPAA, the Health Insurance Portability and Accountability Act of 1996, should be treated in the same manner as obstruction of criminal investigations involving grand jury subpoenas.
Finally, the Health Care Fraud Enforcement Act provides the resources needed for law enforcement to uncover and go after these frauds. Health care fraud cannot be fought effectively without more investigators and prosecutors. This bill authorizes the appropriation of $20,000,000 each year from 2011 through 2016 for investigations, prosecutions, and civil or other proceedings relating to fraud and abuse in connection with any health care benefit program. The bill authorizes the United States Attorneys' Offices to be appropriated an additional $10,000,000 each year for this purpose, the Criminal Division of the Department of Justice, $5,000,000 each year, and the Civil Division of the Department of Justice, $5,000,000 each year.
As we move toward meaningful health care reform, we must ensure that criminals who engage in health care fraud, and those who contemplate doing so, understand that they face swift prosecution and substantial punishment. Congress should move quickly to pass this legislation so that American taxpayers can be confident that their government has the tools and resources necessary to protect its investment in the health and welfare of our Nation.
I urge my colleagues to support the Health Care Fraud Enforcement Act of 2009.