Archives: 11/2014

Fraud in the Defense Department

The wars in Iraq and Afghanistan cost more than $1 trillion with billions going to Department of Defense (DoD) contractors. All of that spending has led to a large uptick in waste and fraud.

As much as $60 billion has been wasted on U.S. operations in those two countries, according to analysis from the Commission on Wartime Contracting in Iraq and Afghanistan. The Justice Department has brought more than 235 criminal cases since 2005.

The Associated Press highlights some examples:

In the past few months alone, four retired and one active-duty Army National Guard officials were charged in a complex bribery and kickback scheme involving the awarding of contracts for marketing and promotional material, and a trucking company driver pleaded guilty to bribing military base employees in Georgia to obtain freight shipments — often weapons which required satellite tracking — to transport to the West Coast.

More recently, a former contractor for the Navy’s Military Sealift Command, which provides transportation for the service, was sentenced to prison along with a businessman in a bribery case in which cash, a wine refrigerator and other gifts traded hands in exchange for favorable treatment on telecommunications work. Also, three men, including two retired Marine Corps officers, were charged with cheating on a bid proposal for maintenance work involving a helicopter squadron that serves the White House.

The story continues on with the long list of abuses:

Defense contractor Leonard Francis was arrested in San Diego last year on charges that he offered luxury travel, prostitutes and other bribes to Navy officers in exchange for confidential information, including ship routes. Prosecutors say he used that information to overbill the Navy for port services in Asia in one of the biggest Navy bribery schemes in years. Ethan Posner, a lawyer for Francis, declined comment.

Yet many others involve more mundane cases of contracting or procurement fraud. Consider the trucking company contractor in Afghanistan who bribed an Army serviceman to falsify records to show fuel shipments that were never delivered, or the former Army contractor who demanded bribes before issuing orders for bottled water at a military camp in Kuwait.

According to the story, the Defense Department acknowledges the issue and is working to improve the situation. But if this report is any indication, DoD has a long way to go.

New Essays in Cato Online Forum on Growth

Here are the latest entries in the Cato Institute’s online forum on reviving growth (see here for some more background about the forum):

1. Tyler Cowen contends that foreign policy can have a major impact on long-term growth.

2. Heather Boushey argues that a national program of paid family leave will boost labor supply and therefore growth.

3. Eli Dourado proposes incentive pay for Congress.

4. Peter Van Doren cautions that there are no easy answers.

Is the Obama Administration Losing Its Collective Mind over the Islamic State?

The president has added ground forces to the battle in Iraq and the military has suggested introducing thousands more. His officials reportedly have decided to focus on overthrowing Syrian President Bashar al-Assad in the name of fighting the Islamic State.

The U.S. has been back at war in the Middle East for more than two months. The results?

The administration’s vast coalition of 60 nations is mostly a PR stunt. The Arab states have done little in the air and nothing afoot. Most flagrantly AWOL is Turkey.

Nor has the administration’s scattershot bombing campaign had much effect. By one count U.S. strikes have killed 464 Islamic State personnel. However, the estimated number of ISIL fighters trebled to as many as 30,000 just a couple weeks into Obama’s war.

Moderate Syrian rebels favored by the administration have been routed in that country’s north. Many fighters defected or fled while abandoning their heavy weapons provided by Washington.

The Free Syrian Army, the biggest Western-oriented insurgent group, also is losing fighters, largely to al-Nusra. Yet, explained former U.S. ambassador Robert Ford:  some Syrians “are burning American flags because they think we are helping the regime instead of helping them.” Residents of Raqaa, the ISIL stronghold bombed by American forces, blame Washington for higher food and fuel prices.

Iraq’s Shiite majority has formed a new government—handing the Interior Ministry to a hardline Shia faction responsible for past atrocities against Sunni civilians. Moreover, last week reports emerged that the Islamic State and al-Nusra Front agreed to stop battling each other and even to fight together.

Drugs for the Deceased

Medicare fraud is rampant. The Government Accountability Office (GAO) estimates fraud compromises 8 percent of total expenditures, or $44 billion annually. Outside estimates are as high as $120 billion. A recent report from the Department of Health and Human Services Inspector General highlights just one of the many examples of waste, fraud, and abuse within the system: Medicare paying for drug coverage of deceased beneficiaries.

Medicare Part D provides prescription drug coverage to 39 million seniors costing taxpayers $59 billion annually, net of premiums paid by seniors. In 2013 Medicare paid for 1.2 billion prescriptions.

The Inspector General’s report details the fraud: “In 2012, Medicare paid for 348 HIV [human immunodeficiency virus] drugs for 158 deceased beneficiaries. The total cost for these drugs was $292,381.” The report studied HIV drugs as they are targets for abuse since they are so expensive.

These drug claims were not isolated instances. The IG found “each of the 158 beneficiaries had between 1 and 6 drugs dispensed after the date of death; most beneficiaries had at least 2.” Medicare spent $7,160 for three prescriptions for one patient’s drugs in Florida. They were approved on two separate occasions after his death. Medicare approved three prescriptions for a patient in Michigan costing $5,616.

Approvals occur because of a delay in receiving information about a beneficiaries death. This results in a period where the recipient is dead, but Medicare’s system still consider the patient to be alive.

This is not the first time that the Inspector General has criticized Medicare’s handling of deceased beneficiaries. In 2011 the Inspector General found that Medicare Part C and D paid $21 million for claims by deceased beneficiaries.

The Inspector General acknowledged that the total amount of fraud was miniscule compared to total Medicare spending. HIV drugs represent just one-quarter of one percent of Part D prescriptions. But the approval process is the same for all Part D drugs meaning other drugs are also vulnerable to improper payments for deceased individuals. The report says “A change in CMS’s practice would affect all Part D drugs, not just HIV drugs. Considering the enormous number of Part D drugs, a change in practice could result in significant cost savings for the program and for taxpayers.” An estimate of cost savings is not included, but it would likely be in the millions.

Medicare does plan to fix the system for dead beneficiaries, but with billions  wasted on Medicare every year, stopping the tide of improper payments seems unlikely without major structural reform of the program.

Government Shutdown Theater: Republicans Should Not Surrender to Obama’s Blackmail

Notwithstanding the landslide rejection of Obama and his policies in the mid-term election, I don’t think this will produce big changes in policy over the next two years.

Simply stated, supporters of limited government do not have the votes to override presidential vetoes, so there’s no plausible strategy for achieving meaningful tax reform or genuine entitlement reform.

But that doesn’t mean that there won’t be important fiscal policy battles. I’m especially worried about whether we can hold on to the modest fiscal restraint (and sequester enforcement) we achieved as part of the 2011 debt limit fight.

Scaring Students For Their Own Good

“I thought he was going to shoot me.”

That’s the text message that a mother received from her terrified child at Jewett Middle Academy in Winter Haven, Florida. But the child wasn’t describing a psychotic school shooter. It was a drill. As the local CBS affiliate reported:

Students at Jewett Middle Academy said they were terrified when police officers burst in the doors for a planned active shooter drill – but students and teachers are irked they were not told ahead of time.

Seventh-grader Lauren Marionneaux told WTVT-TV that when the officers burst into her class with an AR-15, she was in fear for her life.

“We actually thought that someone was going to come in there and kill us,” the station quoted her as saying.

In the wake angry protests from parents, students, and teachers, school officials explained that the secrecy surrounding the drill was necessary for the students’ safety:

“Unfortunately, no one gets an advanced notice of real life emergencies,” Polk County Public Schools spokesman Jason Gearey said in an e-mailed statement to The Washington Post. “We don’t want students to be scared, but we need them to be safe.”

They don’t want students to be scared, but unannounced active shooter drill is guaranteed to scare kids. Moreover, as Lenore Skenazy points out, such drills could actually put people in danger:

Of course, the authorities neglected to notice that no one sets the school on fire to create more realistic fire drills. Nor do they drag in giant wind machines to replicate the feel of an impending tornado.

The fear that teachers might suffer heart attacks, that kids might experience psychotic breakdowns, that someone with his own weapon might shoot real bullets in defense—none of that seemed to occur to our peacekeepers. Nor did the notion that distraught parents might race frantically to the school, endangering anyone in their path.

No, these cops were so focused on the most horrific, least likely crime that nothing else mattered.

School shootings are every parent’s worst nightmare, but fortunately they are exceedingly rare. As I explained back in September, fewer than one in 10,000 schools have had a shooting in the last two years, and fewer than one out of every 2,273,000 students per year are killed at school including all types of violence, not just shootings. By contrast, according to National Geographic, the odds of being hit by lightning in a given year is one out of 700,000.

Some experts have also questioned the efficacy of unannounced active shooter drills. In the Wall Street Journal, a former SWAT officer who conducts seminars to teach civilians how to deal with mass-shooting scenarios panned the idea: “There ends up being zero learning going on because everyone is upset that you’ve scared the crap out of them.” The Journal also reported several other instances of drills gone awry. In one drill at a nursing home, a police officer posing as an armed intruder forced a nurse into an empty room at gunpoint where “she tearfully begged for her life.” She was so traumatized that she quit her job. Other drills also left civilians traumatized or even physically injured:

The confusion that sometimes ensues during drills also can have unintended consequences. In March, a teacher in Boardman, Ohio, filed a lawsuit against local police and school officials, claiming he was unexpectedly tackled by a police officer during a drill at a high school, seriously injuring his hip and shoulder.

Jesse McClain, 60 years old, had volunteered to participate and was playing the role of a “panicked parent” when the officer tackled him without warning, his lawyer, John O’Neil, said. Boardman Township’s police chief and the superintendent of the town’s school district declined to comment on the incident, citing the lawsuit.

In Florida, a woman filed a complaint in March with state officials on behalf of her sister, a Fort Walton Beach nurse, over a drill at an Okaloosa County Health Department office. According to the complaint, employees weren’t informed about the drill, which involved a police officer firing blanks, and many were “hysterical, crying and shouting.”

As with fires and other hazards, it is important for schools to be prepared for an emergency. But policymakers must keep things in perspective. Keeping kids safe does not require terrifying them.

Interpreting Obama’s Immigration Executive Action

President Obama will soon announce an executive action to defer the deportations of somewhere between 1 million and 4.5 million unauthorized immigrants. Those whose deportations are deferred will be eligible for a temporary work permit through a 1987 provision in the Code of Federal Regulations.

Those who support immigration reform note that any executive action by the President will poison the well for reform, making it impossible for Congress to move piecemeal bills to the President’s desk.  Last year, one of the most effective arguments against immigration reform was that President Obama would not enforce the law as written, a prediction that seems to be borne out with this executive action.  The Wall Street Journal editorial board said it the best:

If he does issue an executive order, we hope Republicans don’t fall for his political trap.  He and many Democrats want Republicans to appear to be anti-immigrant.  They want the GOP to dance to the Steve King-Jeff Sessions blow-a-gasket caucus.

To poison the well of reform there actually had to be water in the well to begin with. I’m not convinced there was.  If there was a serious Congressional effort to reform immigration in the immediate future, then the President’s actions here would totally derail it.