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The False Claims Act: Explained

Nov 20 | 2013  by

The False Claims Act has recovered approximately $18.3 billion dollars for the federal government from 2008 through 2012. For every dollar the government invests in fighting healthcare fraud, the government gets $16 dollars in return.

The False Claims Act is a Civil War-era law, dating back to 1865. The Act is meant to fight companies who defraud governmental programs. People that are not affiliated with the government are also allowed to file actions on behalf of the government; this is known as “whistleblowing”. Whistleblowers can receive up to 15-25% of recovered damages. 

In the past two years, there has been a tremendous increase in healthcare fraud cases. For example, in 1987-1992, there were only 62 healthcare fraud cases filed by “whistleblowers”. The number of cases in 2011 and 2012 adds up to 829 cases.

Supporters of The False Claims Act explain that this revenue actually returns a large amount of money to U.S. taxpayers. The report from the Washington-based group, D.C.-based Taxpayers Against Fraud, states that this revenue can fund the entire Children’s Health Insurance Program, serving more than 5 million people, for approximately four years.

Although there are many supporters of the act, there is also some opposition. For example, the U.S. Chamber of Commerce believes that this act needs a lot of reform to encourage companies to try to fix the fraud issue internally. Penalties for healthcare fraud are actually three times the amount of the actual damages and the Chamber of Commerce explains that these penalties are handed out without any due process.

The Chamber of Commerce explains that these penalties are too harsh and this makes companies less likely to come forward and ask for help in solving their issues with internal fraud. For example, the Chamber of Commerce thinks a good idea for reform would be to create benefit incentives for companies who create in-house programs against fraud.

Healthcare fraud continues to be a serious problem and initiatives to fight healthcare fraud continue. For more information please read Beckers Hospital Review and Institute for Legal Reform websites.