No Mirage: Waste, Fraud, and Abuse is Real

It is easy to be cynical whenever political leaders talk about trimming budgets by targeting "waste, fraud, and abuse." Public sector veterans know that such savings are often mirages -- numbers that look big from a distance but disintegrate into small change when you get down to details. Relying on such savings in projecting budgets is just a way to avoid hard choices.

Or so goes conventional wisdom.

Well, conventional wisdom is wrong. Curbing waste, fraud, and abuse won't eliminate the deficit, but it can save the government tens of billions of dollars every year and avoid cuts elsewhere. What's more, the federal government is already making big gains in this area that have attracted little notice -- and the Obama Administration has been especially aggressive on this front.

The biggest low hanging fruit is Medicare and Medicaid fraud. Rampant overbilling and defrauding of these programs costs taxpayers up to $40 billion a year -- with some figures ranging much higher. Some of the costliest frauds have been perpetrated by leading pharmaceutical companies, which have misled public healthcare programs about the actual cost of prescription drugs and conspired with doctors to systematically overcharge the government for drugs. (These schemes allow Big Pharma to offer fat financial rewards to doctors who prescribe their drugs.) It used to be the defense industry perpetrated the most fraud against the U.S. government; now it is Big Pharma.

But, for nearly a decade now, federal and state authorities have been trying to stop such fraud -- with some success. According to an authoritative study by Public Citizen, the government has settled 80 cases with pharmaceutical companies accused of overcharging public healthcare programs since 1991, with most of those settlements in recent years. All told, these companies have paid $2.3 billion penalties in such cases -- and many billions more to settle other charges.

This crackdown on Big Pharma started during the Bush years, but the Obama Administration has ramped up the pressure. Absurdly, as I have written elsewhere, not a single top pharmaceutical exec has been indicted for any crimes -- even though, clearly, major crimes have occurred. Still, it seems the crackdown is having some effects.

Meanwhile, the Obama Administration has mounted a historic dragnet aimed at smaller fraudsters -- including many doctors -- who've been stealing from Medicare and Medicaid. In May 2009, Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius announced the creation of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) -- dramatically bumping up the muscle and high-level attention going to fight fraud. Since then, authorities have arrested and indicted hundreds of individuals.  

Beyond healthcare fraud, military contractors are still stealing a fortune from taxpayers -- or wasting this money in egregious ways. Over the past three years, a bipartisan panel -- the Commission on Wartime Contracting in Iraq and Afghanistan -- has been investigating these abuses and its initial findings were revealed this week. According to the panel, at least $34 billion has been wasted or misspent -- mostly by just 23 large contractors.

A big reason so much cash has gone down the drain is that, as the Wall Street Journal reports, "the federal work force assigned to oversee those contracts hasn't grown in parallel with the massive growth in wartime expenditures."

So just to be clear, the story here is not that government managers are incompetent; it's that there aren't enough public sector eyes watching the money handed out to private companies.

Fraud is flourishing in other parts of the defense industry, too -- like around weapons procurement. Remember the $600 hammer? Well, those practices continue at many companies. According to the Public Citizen report cited earlier, defense contractors have paid financial penalties in 1,652 settlements with the government since 2005.

Fraud and abuse is also common at the state and local level. In New York, for example, it was revealed earlier this year that some $700 million was wasted creating a computerized personnel system, CityTime -- with tens of millions of that stolen outright by corrupt contractors. "The CityTime project was corrupted to its core by one of the largest and most brazen frauds ever committed against the city of New York," said the U.S. Attorney last month in announcing more indictments in this case.

There is much more to be said about fraud -- and also tax evasion, where the government loses even bigger money. The criminal behavior that has led to a hemorrhaging of tax dollars is no mirage. And we can do something about it.

Comments

[LewisKlim@rocketmail.com]

Mr. Callahan is partly correct. The amount of fraud goes way beyond mere corporate malfeasance. To say there is an insufficient amount of "public sector eyes", however, is not. I came forward, years ago, to my agency's IG, but was met with incredulity. Sometimes, politics, corrupt officials, bureaucratic inertia, and all sorts of things unfortunately get in the way of the truth and the public who pays the bills. For what it is worth, still many more years ago I took an oath to defend my city charter, state constitution and the US constitution. In the latter, there is one crime, and only one crime that is specified therein and that is treason. Unfortunately, the US attorneys want to make everything a parking violation, only on a larger scale.