Tag: waste

‘Health-Care Executive’s Medicare Fraud Scheme Included Lobbying Washington’

In a recent article, I explained:

Politicians routinely subvert anti-fraud measures to protect their constituents. When the federal government began poking around a Buffalo school district that billed Medicaid for speech therapy for 4,434 kids, the New York Times reported, “the Justice Department suspended its civil inquiry after complaints from Senator Charles E. Schumer, Democrat of New York, and other politicians”…

It’s not just the politicians. The Legal Aid Society is pushing back against a federal lawsuit charging that New York City overbilled Medicaid. Even conservatives fight anti-fraud measures, albeit in the name of preventing frivolous litigation, when they oppose expanding whistle-blower lawsuits, where private citizens who help the government win a case get to keep some of the penalty.

An indispensable part of this fraud-protection scam are the lobbyists who work to enable fraud or block credible anti-fraud efforts.  The Washington Post reports:

Miami health-care executive Larry Duran orchestrated one of the largest Medicare frauds in U.S. history, submitting more than $205 million in phony claims and landing a record-breaking 50-year prison sentence for his crimes.

But another piece of Duran’s scheme also caught the eye of prosecutors. They say he extended his fraud through his lobbying efforts, all aimed at getting official Washington to make it easier for mental health centers such as his to make money.

An advocacy group he helped set up, the National Association for Behavioral Health (NABH), has spent more than $750,000 on lobbying efforts over the past five years, including staging “fly-ins” on Capitol Hill and providing advice to group members on how to get around Medicare denials, according to the Justice Department. The group also held fundraisers for lawmakers…

“Duran did not stop with just committing a massive fraud on the Medicare program through his own companies. Duran franchised his fraud to others,” trial lawyer Jennifer Saulino wrote in a sentencing memo. The advocacy group he helped found, she said, “provided Duran a legitimate-looking vehicle to lobby Congress to allocate more money, through Medicare, to Duran and his co-conspirators for their fraudulent schemes”…

Duran said he pleaded guilty in the case to atone for his actions…

The basic scheme, records show, worked like this: Duran and Valera paid up to $400,000 a month in kickbacks to assisted living centers, halfway homes and others to procure a steady stream of patients for their clinics, which claimed to be providing group mental health treatment. Doctors frequently faked records or signed off on charts without seeing any patients.

Patients often suffered from Alzheimer’s disease, dementia or other conditions unsuited for therapy and were frequently left to urinate or defecate on themselves as they waited for treatment that never came, testimony showed…

Part of Duran’s strategy, prosecutors alleged, was to use his connections to push for policy changes to benefit his fraudulent business. Justice Department officials said in court testimony that Duran was an NABH founder, a board member and a leading financial contributor…“He had a very integral part of the lobbying role,” FBI agent Patrick Koeth testified during sentencing. “Basically, his involvement was to keep pushing for those lobbying efforts”…

The group boasts of its success in fighting for higher Medicare rates for partial hospitalization programs — the type of service Duran offered — and solicited money for a “policy defense fund” to fight proposed cuts.

Here’s the sound-and-pictures version of my article:

The basic theorem is this: market actors have greater incentives to prevent fraud, because it’s their own money on the line.  Politicians are spending other people’s money, so their incentive to prevent fraud is far less.  Therefore, fraud will always be higher in government programs than in similar market endeavors.

Wartime Contracting Report Provides More Evidence to Exit Afghanistan

Over the past decade, American taxpayers have lost as much as $60 billion dollars to massive fraud and waste in the nation building campaigns of Iraq and Afghanistan, according to a report released today by the Commission on Wartime Contracting. The independent panel confirms much of what we already know about rent-seeking in wartime; nevertheless, the panel details specific reconstruction projects and programs that display a stunning array of mismanagement:

  • A modest $60 million agricultural development program in northern Afghanistan expanded to the south and east to the tune of $360 million. The cash-for-work program was intended to distribute vouchers for wheat-seed and fertilizer in drought-stricken areas. Today, the program spends $1 million a day. The panel reports, “The pressure to quickly spend the millions of dollars created an environment in which waste was rampant. Paying villagers for what they used to do voluntarily destroyed local initiatives and diverted project goods into Pakistan for resale.”
  • During operations in Iraq and Afghanistan, waste and fraud averaged about “$12 million every day for the past 10 years.” [Emphasis in original];
  • The Department of Defense (DoD) awarded an $82 million contract for the design and construction of an Afghan Defense University. Now, DoD officials say it will cost $40 million a year to operate—beyond the indigenous government’s ability to fund and sustain;
  • The U.S. Agency for International Development, the U.S. Government’s main distributor of development contracts, funded the Khost-Gardez road project. Originally valued at $86 million it has since mushroomed to $176 million;
  • The insurgents’ second-largest funding source is the U.S. taxpayer. Money for construction and transportation projects are diverted to the insurgency so Afghan subcontractors can pay them for protection. Of course, the insurgents use this money to buy bombs, IEDs, and other explosives to kill foreign troops and civilians.

The report goes on and on with examples that should disgust U.S. taxpayers. In addition, the report was released amid news that August 2011 was the deadliest month for U.S. service members, and 2011 shaping up to be the deadliest year for Afghan civilians. Despite the spin from warhawks, people in the region know the coalition has lost. Last year, the “Godfather of the Taliban,” Hamid Gul, the former head of Pakistan’s Inter-Services Intelligence agency, laid out in extensive detail why America has been defeated (for skeptics of withdrawal, it’s worth reading).

The United States has largely disrupted, dismantled, and defeated al Qaeda. America should not go beyond that objective by combating a regional insurgency or drifting into an open-ended occupation. We have endured enough with tens of thousands of people killed, injured, and traumatized, and billions of dollars wasted.

Washington Post Asks for Budget Plans

The Washington Post’s editorial board issued a challenge to the president and his Republican opponents: “show us your plans” for deficit reduction. In fact, the Post says it would be “delighted” to receive plans from its readers. However, the Post isn’t interested in “meaningless promises” to cut “waste, fraud, and abuse”—it wants specifics:

Here’s what we’re not looking for: pablum about eliminating unnecessary spending without identifying where. Gauzy rhetoric about making hard choices without making them. Meaningless promises about eliminating waste, fraud and abuse. Broad assertions about where to find the money — “Medicare savings,” “tax reform” — without specifics. Arbitrary spending caps without accompanying details about how those limits are to be met. If you believe, for example, that federal spending should be kept to a specific share of the economy — 18 percent? 20 percent? — show the plausible path to getting there.

Amen. Chris Edwards and I have been beating the drum for Republican policymakers in particular to get specific about what they would cut. Chris recently noted that with the exception of Sen. Tom Coburn (R-OK), Sen. Rand Paul (R-KY), and perhaps a few others, Republicans aren’t putting much effort into identifying programs to terminate. And I have noted that “It’s more common to hear Republicans blubber on about ‘reducing waste, fraud, and abuse’ in government programs and ‘saving’ the pillars of the welfare state (Social Security and Medicare) for ‘future generations.’”

As for deficit reduction ideas from Washington Post readers, we have a balanced budget plan on our Downsizing the Federal Government website. In fact, not only do we have a plan, we have over three dozen essays on numerous government agencies that provide details on what programs to cut and why.

The NYT’s Weak Defense of Homeland Security Grants

Last week, the House passed a homeland security appropriations bill slashing funding for grants to states and localities. The New York Times has now noticed and unleashed an indignant editorial:

House Republicans talk tough on terrorism. So we can find no explanation — other than irresponsibility — for their vote to slash financing for eight antiterrorist programs. Unless the Senate repairs the damage, New York City and other high-risk localities will find it far harder to protect mass transit, ports and other potential targets.

The programs received $2.5 billion last year in separate allocations. The House has cut that back to a single block grant of $752 million, an extraordinary two-thirds reduction. The results for high-risk areas would be so damaging — with port and mass transit security financing likely cut by more than half — that the chairman of the House Homeland Security Committee, Peter King of New York, voted against the bill as “an invitation to an attack.”

Only a few months ago, Times editorials accused King of trying to “hype” and “stoke” fear of homegrown Muslim terrorism. It’s sort of touching to see them get behind his fearmongering when the beneficiaries are local firefighters, police, and other local interests.

But the editorial has trouble worse than hypocrisy. For starters, it’s light on facts. Its accounting seems to omit over $320 million in funds for local firefighters that a floor amendment put in the bill. It also fails to mention that the bill eliminates a formula that ensures that homeland security funds are distributed to every state. Because it means that counterterrorism spending is highest per-capita in rural areas where the threat from terrorism is lowest, homeland security watchers have long attacked that minimum funding provision. So while this bill would indeed cut homeland security funds going to New York, it would also mean that New York gets more of the remaining funds.

More importantly, the Times evidently did not try too hard to find an explanation for the cuts once they settled on irresponsibility, given that Republican appropriators readily offered one: the funds are wasteful. Rather than explain why they think the money is well spent (my definition of responsibility), the editorial conflates spending on security with security itself. It says the cuts will be “damaging,” but it cites only damage to the budgets of recipient agencies, not their purpose.

In fact, the threat of terrorism is so low in the United States and the efficacy of the funds in mitigating it so uncertain that the right amount of homeland security spending in most parts of the United States is none. That is especially true now that we are roughly a decade removed from the September 11 attacks, which spawned a massive increase in homeland security grant-making. That splurge was meant to bolster our ability to defend against what has proved a massively inflated threat of catastrophic terrorism; it was not meant to be a permanent subsidy to state and local governments.

New York City is uniquely threatened, but that does not mean that federal taxpayers should foot the bill. The federal government should collect intelligence on terrorists and hunt them down. Local and state officials should use that information to determine the right amount of local security spending. They have to ask whether normal policing funds, school spending, or slightly lower taxes are worth sacrificing for a new camera or chemical clean-up suit. Federal grants, because they are buried in a massive budget and partially deficit-funded, dilute our ability to perceive those tradeoffs. They also heighten fear of terrorism by encouraging state and local interests to overstate their peril to win the grants, as the editorial demonstrates.

It ends by instructing the Senate to “stand up for security over politics” and restore funding to past levels. But these decisions should be made politically. We give power over security policy to politicians — rather than leaving it exclusively to unelected bureaucrats — because these decisions are important. That is a product of design, not an accident. The notion that security is too important for politics is backwards.

Luckily, the attempt to divorce security policy from electoral politics is a pretense. The Times is engaging in politics by asking for funds. They aim to politically punish those that oppose their preferred policies. If the Senate restores most of the grant funds, as it likely will, it will do so for sound political reasons.

Cross-posted from The National Interest.

Truth Is, All of Higher Ed Is Broken

Over at the New America Foundation’s “Higher Ed Watch” blog, Stephen Burd purports to know “the truth behind Senate Republican’s boycott of the Harkin hearing.” And what is that truth? Republicans are trying to “discredit an investigation that has revealed just how much damage their efforts to deregulate the industry over the past decade have caused both students and taxpayers.”

Really?

Okay, it is possible that Republicans are trying to save themselves some sort of blame or embarrasment – I can’t read their minds – but if so they’ve done a terrible job. Every time Harkin holds one of his hearings the bulk of the media coverage treats it like it has revealed shocking abuse by the entire for-profit sector. And don’t forget the damage done by the now-discredited – at least for those wonks who have followed it – GAO “secret shopper” report that was baised against for-profits enough on its own, but Sen. Harkin abused even beyond what the GAO wrote was reasonable.  So Harkin has defintiely gotten his message across, and he certainly hasn’t hidden past Republican efforts to reduce regulatory burdens on for-profit schools.

The fact remains, however, that the whole Ivory Tower – every floor and staircase – is loaded down with luxurious but crushing waste, and the crumbling foundations are being propped up with huge amounts of taxpayer dough and student debt. Not addessing that, as the boycotting Senators have stated, is what has been blaringly wrong with Harkin’s crusade. (Not that I think either party is likely to do what needs to be done: phasing out federal student aid.)

So absolutely, let’s stop forcing taxpayers to prop up the for-profit part of the tower. But let’s also stop pretending that that part isn’t just one rotten level in a much bigger, buckling edifice.

‘Gainful Employment’ Regs Softened, Still a Diversionary Sideshow

The hotly anticipated – and dreaded – “gainful employment” regulations aimed at for-profit colleges were released this morning, and based on media reports the big news is that they are a little more lenient than originally expected. Most importantly, schools that fail to meet debt-to-income and debt-repayment requirements will not be cut off from federal student aid – the financial crack on which almost every college and university depends – until 2015.

That’s the big news, at least as reported. But it isn’t the important story.

The real story remains that the Obama administration, and at least the education leadership in the Senate, continues to divert the public’s eye towards for-profit schools when the entire higher education system is a waste-engorged, parasitic mess.

Yes, for-profit schools have low program completion rates, but the overall six-year completion rate for four-year programs is just around 57 percent. And yes, for-profit schools leave many students with big debt, but the average debt for all four-year undergraduate students who have taken loans is around $24,000. And yes, students at for-profit institutions draw heavily on the public treasury to pay for the studies they don’t complete, but higher education overall is a gigantic leech feeding off  taxpayers, taking in hundreds of billions of dollars every year from all levels of government. And it is ever-growing aid to students from vote-hungry federal politicians that is likely the most potent force enabling rampant price inflation and massive college overconsumption. After all, the price becomes a lot less important – and extravagances more enticing – when someone else is footing much of the bill.

Now that these rules have been published, let’s move on to what really needs to happen: Phasing out government subsidies for the entire draining Ivory Tower.

This Week in Government Failure

Over at Downsizing the Federal Government, we focused on the following issues this week:

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