April 10, 2019 4:43PM

Medicare: Ripe for Rip‐​Offs

The $768 billion Medicare program is in deep trouble as America ages and elderly health care soars in cost. Medicare is a giant central planning scheme that imposes more than 100,000 pages of regulations and related rules on more than 600,000 health care providers. 

The inefficiency is vast, and the structure of the program makes it a perfect target for fraud and abuse. The system processes more than a billion provider claims a year. Auditors estimate that more than $50 billion of taxpayer money goes down the drain every year from improper payments. The New York Times highlights some alleged scams today stemming from a recent federal bust.

Congress should end traditional Medicare and give each enrollee a voucher to purchase a health plan of his or her choice. Funding Medicare through fixed‐​dollar vouchers would give enrollees more control over their medical care, encourage cost consciousness, spur innovation by eliminating price controls, and restrain spending.

A voucher‐​based system would also greatly reduce fraud because massive, complex, and open‐​ended federal billing would be replaced by simpler fixed payments to individuals.

Here is an excerpt from the NYT story. Fortunately, investigators caught these alleged fraudsters, but the article illustrates the vulnerability of the system where scam artists can rack up apparently bogus charges of more than $200 million.

Federal officials said Tuesday that they had dismantled a $1.2 billion Medicare scheme that spanned continents and ensnared hundreds of thousands of unsuspecting elderly and disabled patients.

Under the scheme, which the authorities described as one of the largest health care frauds in United States history, doctors prescribed back, shoulder, wrist and knee braces that were not needed, prosecutors said. Twenty‐​four people were charged, according to the Justice Department.

“These defendants — who range from corporate executives to medical professionals — allegedly participated in an expansive and sophisticated fraud to exploit telemedicine technology meant for patients otherwise unable to access health care,” Brian Benczkowski, the assistant attorney general for the department’s criminal division, said in a statement.

Some of the accused were owners of durable medical equipment companies that paid kickbacks and bribes to doctors to write prescriptions for braces that were medically unnecessary, according to the authorities.

An international telemarketing network with call centers in the Philippines and Latin America would reach out to Medicare beneficiaries, persuading them to get the free or low‐​cost braces. The doctors would sometimes write prescriptions without speaking to the patient.

“The defendants took advantage of unwitting patients who were simply trying to get relief from their health concerns,” Craig Carpenito, the United States attorney for New Jersey, said in a statement. “Instead, the defendants preyed upon their weakened state and pushed millions of dollars’ worth of unnecessary medical devices, which Medicare paid for, and then set up an elaborate system for laundering their ill‐​gotten proceeds.”

The defendants laundered the proceeds through international shell companies and used the money to buy exotic cars, yachts and luxury real estate around the world, the authorities said.

Prosecutors brought charges related to the payment of bribes, illegal kickbacks, money laundering and conspiracy to commit health care fraud against people in California, Florida, New Jersey, Pennsylvania, South Carolina and Texas.

… In Florida, Willie McNeal IV, the owner and chief executive of two telemedicine companies, hired health care providers and then paid them to prescribe braces for Medicare beneficiaries regardless of whether it was medically necessary, according to an indictment. Mr. McNeal would then receive illegal kickbacks in exchange for ordering those braces, the indictment said.

Mr. McNeal, 42, facilitated the submission of fraudulent Medicare claims worth nearly $250 million, the government said.

… In a case out of South Carolina, more than a dozen companies owned by Andrew Chmiel, 43, billed Medicare for more than $200 million as part of a scheme to sell medically unnecessary equipment, according to an indictment.

Headquarters, Department of Health and Human Services

By the way, the HHS headquarters building ranks as one of the ugliest in Washington. As this blogger notes, the federal government only hired architects with early onset glaucoma during the 1960s and 1970s.

However, it is also true that the Soviet‐​style brutalist design for HHS is ideal for a bureaucracy that imposes top‐​down central planning on a large part of the economy. The harshness of the building is a metaphor for the cold treatment of the citizenry under government‐​imposed planning schemes. 

April 10, 2019 4:15PM

Cato Files Brief Challenging Qualified Immunity for Warrantless Strip Search of 4‑Year‐​Old

For over a year, Cato has been leading the charge to challenge the doctrine of qualified immunity: an atextual, ahistorical doctrine invented by the Supreme Court in the 1960s, which shields government agents from liability for misconduct — even when they break the law. Today marks a huge milestone in that ongoing campaign, as Cato has just filed an amicus brief in support of a new cert petition calling on the Court to reconsider this doctrine. So has a diverse, cross‐​ideological alliance of over a dozen prominent public interest groups, as well a group of leading qualified immunity scholars. In the words of Wyatt Earp: “You called down the thunder. Well, now you’ve got it!

The case at issue is I.B. and Doe v. Woodard. When I.B. was a four‐​year‐​old girl, she was strip searched and photographed at her preschool by April Woodard, a state caseworker. Woodard had neither a warrant, nor the consent of the girl or her mother, nor were there any exigent circumstances requiring such an invasive search. All she had were unfounded abuse allegations (specifically, of a few marks and bruises on I.B.) which easily could have been checked and disproven through a non‐​invasive search. After I.B. complained to her mother about what happened, Woodard denied having performed a search at all, and continued to lie about that fact for several weeks, until finally admitting what she had done. I.B. suffered severe and ongoing emotional trauma as a result of being strip‐​searched and photographed against her will.

I.B. and her mother filed a Section 1983 against Woodard (and others), alleging violations of I.B.’s Fourth Amendment rights. But a divided panel of the Tenth Circuit held that the defendants were entitled to qualified immunity, because Woodard’s strip search did not violate “clearly established law.” The court failed to even address the Fourth Amendment claims on the merits, noting only that (1) there was a circuit split on whether a warrant was necessary under these circumstances, and (2) assuming a warrant wasn’t necessary, it was still not “clearly established” whether this sort of strip search was permissible. This latter holding is particular shocking, because the Supreme Court itself recently addressed this exact subject matter (warrantless strip searches of children in schools) in Safford Unified School District No. 1 v. Redding. In Safford, the Court even said it was seeking “to make it clear” that an intrusive strip search of a child was justifiable only with “specific suspicions” that evidence of danger or wrongdoing will be found in the area searched. For this reason, Judge Briscoe dissented in part from the Tenth Circuit’s decision, and would have held that I.B.’s strip search violated “clearly established law,” as stated in Safford. 

The Tenth Circuit’s decision exemplifies everything that is perverse and unjust about qualified immunity. I.B. had her constitutional rights violated in an egregious manner, yet she was left without a remedy because of a fictitious doctrine, with no grounding in the text or history of Section 1983. The Tenth Circuit refused to even decide whether her constitutional rights were violated in the first place, and it applied the “clearly established law” test so strictly that a seemingly on‐​point Supreme Court case concerning nearly identical circumstances was still insufficient to overcome qualified immunity. 

I.B. and her mother are now represented by Scott Keller, chair of Supreme Court practice at Baker Botts, and they’ve filed a powerful cert petition, asking the Supreme Court both to resolve the Fourth Amendment questions at issue here, but also to reconsider the doctrine of qualified immunity itself. Today, Cato filed an amicus brief in support of that petition, arguing that qualified immunity lacks any proper legal or historical basis, and that it is not entitled to respect under the doctrine of stare decisis. Specifically, we explain how (1) the “clearly established law” standard is so malleable and indefinite that it has failed to create the kind of stability and predictability that justify respect for precedent in the first place; (2) that the Supreme Court itself has already made major modifications to qualified immunity over the years, and therefore should have no qualms about reconsidering the doctrine now (but this time to bring it line with the statute Congress actually passed); and (3) that allowing the status quo to continue severely undermines public accountability and effectively subjects citizens to ongoing constitutional violations.

Ours is far from the only brief being filed today, however — we’ve also helped coordinate the drafting and filing of two additional amicus briefs. The first is on behalf of a group of leading qualified immunity scholars, who discuss the academic consensus that the Court’s qualified immunity doctrine is in serious need of correction. The second is on behalf of a diverse array of groups from across the ideological and professional spectrum, who nevertheless all share a common interest in ensuring that government officials are held accountable for their misconduct. This brief was joined by all of the following groups: the ACLU, Alliance Defending Freedom, American Association for Justice, Americans for Prosperity, Due Process Institute, Institute for Justice, Law Enforcement Action Partnership, MacArthur Justice Center, NAACP Legal Defense Fund, National Association of Criminal Defense Lawyers, Public Justice, R Street Institute, Reason, and the Second Amendment Foundation. Take a moment and consider just how egregiously misguided a Supreme Court doctrine has to be to unite all of these organizations in opposition, on a single brief. (Note also that several other groups have filed additional amicus briefs asking the Court to take the case, although we weren’t specifically involved with those.)

All in all, this case represents one of the most promising opportunities in the ongoing fight against qualified immunity. It highlights the sort of gross injustice that the doctrine regularly permits, demonstrates just how much cross‐​ideological consensus there is on this issue, and presents the Court with an ideal vehicle for restoring Section 1983 to its proper stature. We can only hope the Court answers the call. 

April 9, 2019 5:02PM

Criminal Aliens Are a Small and Falling Percentage of Border Patrol Apprehensions

Customs and Border Protection just announced that Border Patrol has apprehended 364,941 people from the beginning of fiscal year 2019 through to the end of March 2019. Border Patrol apprehensions this FY rose by 34 percent in the month of March. Although the number of apprehensions is rising, the proportion of all apprehensions who are criminal aliens is dropping, in a trend that I wrote about earlier this month. Furthermore, the absolute number of criminal aliens arrested by the end of FY 2019 will be below the number arrested in any year since CBP began publishing data. 

Border Patrol identifies criminal aliens as those who have been convicted of crimes here or abroad if the conviction is for conduct which is also criminal in the United States. From the beginning of FY 2015 through the end of March 2019, the absolute number and percent of criminal aliens arrested by Border Patrol have fallen in every year. In 2015, about 5.7 percent of all Border Patrol apprehensions were criminal aliens. For the beginning of FY 2019 through the end of March, only about 0.7 percent of people apprehended by Border Patrol were criminal aliens. If the number of criminal aliens apprehensions continues apace for FY 2019, the absolute number will be about 75 percent below the number apprehended in FY 2015. 

From February 2019 to March 2019, the total annual number of Border Patrol apprehensions climbed by 34 percent while the total number of criminal alien annual apprehensions rose by only 24 percent. In other words, the number of non‐​criminal apprehensions is rising much faster than the number of criminal aliens apprehended. As the flow grows, it is becoming less criminal. Only 0.5 percent of those apprehended in March were criminal aliens compared to 0.7 percent from October 2018 through February 2019.

From 2015 to FY 2019, the percentage of those apprehended by Border Patrol who were non‐​criminals rose from 94.3 percent to 99.3 percent while the percentage who were criminals fell from 5.7 percent to 0.7 percent (Figure 1). In absolute numbers, criminal aliens have also declined from 19,117 apprehensions in 2015 to 2,513 through half of FY 2019. If the trend of criminal alien apprehensions continues for the rest of FY 2019, there will be just over 5,000 by the end of this FY – well below the 6,698 recorded in 2018.


Figure 1

Non‐​Criminal and Criminal Aliens

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Source: Customs and Border Protection.  

The most consistent argument wielded in support of closing the border or harsher border security is that those being apprehended are dangerous criminals. Based on data supplied by Border Patrol, the absolute number of criminal aliens and their proportion of all apprehensions along the border are lower in FY 2019 than in previous years. While the government has an important role in keep criminal aliens out of the United States, the current situation along the border shows that Border Patrol has a better handle on crime than at any time in the recent past. 

April 9, 2019 3:52PM

Threefold Increases in Border Arrests for Nicaraguans and Indians in 2018

Since 2012, Border Patrol has apprehended a growing number of nationals from countries other than Mexico—almost all of them from Guatemala, Honduras, and El Salvador. Last year, however, the agency saw threefold increases in apprehensions of Nicaraguans and Indians. These spikes may represent a widening awareness that America will accept people from around the world who come to the border to request asylum.

Figure 1 shows that from fiscal year 2017 to 2018, the number of Nicaraguans arrested by Border Patrol increased from 1,098 to 3,337—a 204 percent increase—and the number of Indians grew from 3,135 to 9,234—a 195 percent increase. That said, the two nationalities still represent a relatively small share of the total number of non‐​Mexican arrivals. The two nationalities grew from 2.4 percent of all other than Mexican apprehensions to 5 percent from 2017 to 2018. But the jumps are noteworthy as similar jumps in the Northern Triangle were a prelude to a snowball effect later.

India’s economy is growing, but its unemployment rate appears to be the highest in 45 years. Meanwhile, Nicaragua has suffered from political protests after the country lost aid from Venezuela, and its government had to cut benefits. The government has cracked down on the protests, killing hundreds of people. The Nicaraguan economy has hit a severe recession. Given its proximity to the United States and to the Central American caravans moving north, Nicaraguans who initially retreated south to Costa Rica may start to head to the U.S.-Mexico border to claim asylum.

Initial reports from FY 2019 imply that this upward trend for Nicaraguans may have continued. PRI reported in late September:

‘What’s changed is the scope with which people have been targeted,’ said Alexander Parcan, an attorney with the group Human Rights First who is representing Nicaraguans seeking asylum in the United States. He said until this year, the few people fleeing Nicaragua were mostly outspoken political activists. But he says now Ortega is labeling regular people who participated in the protests — teachers, bus drivers, nurses, etc. — as political enemies.

According to Mexican immigration officials, the number of Nicaraguans detained has increased 125 percent since April. US Border Officials don’t have statistics on how many Nicaraguans are applying for asylum, but immigration attorneys say they are also seeing an increase. Much of the increase is from people like Maciel García and her family. 

Moreover, Costa Ricans started to protest the camps of Nicaraguans in their country, possibly incentivizing others to head through El Salvador, Guatemala, and Mexico to reach the United States. More Nicaraguans have shown up in the caravans in FY 2019 as well. It is likely that this summer will see yet more arrive. Congress needs to intervene to make legal immigration possible, particularly for migrants from the Northern Triangle countries, to make the asylum process manageable again.

April 9, 2019 2:34PM

Did You Get a Tax Cut?

Federal tax returns for 2018 are due April 15 in most states. With your filing, you can see how your taxes changed after the Tax Cuts and Jobs Act of December 2017.

You can compare your total taxes paid in 2018 to the amount paid in 2017. But your income may have changed, so instead you can compare your ratio of taxes to income in the two years. Middle-income filers received an estimated average tax cut of $780, and the ratio of their individual income, payroll, and excise taxes to income fell 9 percent (see top of table 1).

Polls show that the GOP tax cuts are not particularly popular. But that might be because of continued disinformation in the press. For example, in criticizing Steve Moore recently, Vanity Fair writer William D. Cohen said:

[Moore] started by saying that the tax law would reduce taxes for 90 percent of Americans. I objected strenuously. 'Moore shouldn't be allowed to do this anymore,” I said. “He's been trying to do this for 35 years, talking about trickle-down economics for 25 years. He shouldn't be allowed to do this anymore.'

I went on: 'This isn’t a tax cut for 90 percent of the Americans. This is a tax increase for anybody who makes money paying ordinary income taxes. Maybe if you pay capital gains taxes, maybe like Donald Trump if you have a lot of partnership income, this could be a tax cut. But from both people who get a paycheck who have a W-2, this would be a tax increase.'

What the heck? There were only minor changes to capital gains taxes in the law, and Cohen’s claim that most or all ordinary folks got tax increases is far off base. Moore’s claim that 90 percent received cuts is more accurate.

The table below from the Tax Policy Center (TPC) shows the share of households that received individual cuts in 2018 within five income groups (see top of table 2).

Overall, 65 percent of households received a tax cut and just 6 percent had an increase. However, the bottom two income groups, on net, do not pay any individual income taxes. The tax “cuts” for those two groups are mainly increases in refundable tax credits.

Looking at households that pay federal income taxes—those in the top three groups—more than 82 percent received an individual tax cut under the GOP tax law. If you include the effects of the corporate tax cuts, more than 90 percent of households in these tax-paying groups received a cut (see bottom of table 2).

Numerous aspects of the GOP tax law were misguided, including the increased progressivity it created, as noted here and here. Furthermore, Republican efforts to increase spending on defense, farm subsidies, and many other things are grossly inconsistent with their tax-cutting agenda.

However, the vast majority of tax-paying households did in fact receive a tax cut under the GOP law, and Steve Moore should “be allowed” to say it.

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April 9, 2019 11:31AM

Sen. Warren Calls for Imprisoning Executives Over Negligent Harm

Presidential candidate and Sen. Elizabeth Warren (D‑Massachusetts) wants to see more business people behind bars, and she’s not fussy about how to make that happen. In a Washington Post op‐​ed last week she unveiled a new Corporate Executive Accountability Act, which in her words would expand “criminal liability to any corporate executive who negligently oversees a giant company causing severe harm to U.S. families.” She says she wants top executives to know that they can be (again in her own words) “hauled out in handcuffs for failing to reasonably oversee the companies they run.”

Under longstanding legal protections in the Anglo‐​American legal system, before convicting you of most crimes prosecutors must ordinarily show that you had mens rea, a guilty state of mind. Occasionally one or another law relaxes the standard of guilt to “willful blindness” or gross negligence. More rarely, as under a controversial doctrine in FDA law, courts have permitted convictions on a theory of what amounts to vicarious criminal liability, as of a drug executive whose underlings commit certain offenses even absent proof that the higher‐​up knew of, encouraged, or was willfully blind toward the offenses. I criticized that “responsible corporate officer” doctrine in the FDA setting in this space two years ago, as well as in the chapter on white‐​collar prosecution in the Cato Handbook for Policymakers. Warren explicitly states that her proposal “builds on” it as the basis for her proposals for what should happen to executives generally.

Cato has been sounding the alarm about decay in mens rea standards for years, even as some civil libertarians have chosen to stay on the sidelines. But you don’t have to be libertarian to find what Warren is proposing a “very bad idea,” one based on “dangerous” arguments and propelled by “political rhetoric that is designed to inflame voters’ sense of injustice and righteous indignation.” Writing in Slate, law professors Carissa Byrne Hessick and Benjamin Levin observe:

Negligence is an incredibly low standard for criminal punishment. A person who is acting negligently does not know that what she is doing (or failing to do) is wrong or risky. Negligence means that a “reasonable person” in that position would have realized that there was a risk of harm. Prosecutors are likely to think that defendants should have known that there were risks simply because something bad occurred—not because they necessarily would have recognized the risks themselves if they’d been in that situation.

Warren backs her call for a simple negligence standard for criminality with what Hessick and Levin call a “highly misleading” example in which hypothetical executives are aware that their conduct might break the law but are willing to count on a low risk of being held personally to account. But that’s not a case of simple negligence, but of “recklessness or ‘willful blindness’ —mental states that are both more serious and more difficult to prove than the negligence standard she proposes.” In other words, Warren demands a broad dragnet while inveighing against conduct that could have been addressed with a much narrower prohibition. Is the senator’s slipshod manner of argument merely negligent? Or should we interpret it as reckless or perhaps even as deliberate misconduct?

One of Warren’s most dangerous arguments for relaxing the law’s standards for knowingness and requisite mental state is that prosecutors often find it difficult to prove higher and more exacting standards. The effect, note Hessick and Levin, is “to water down the law simply to make it easier to punish people.” Some may imagine that prosecutors will use the broader powers only against defendants who did something that is worse but harder to prove. Hessick and Levin call that argument “very dangerous”: 

We should not change the law to include conduct we don’t actually want to punish in order to make it easier for prosecutors to punish people we think do bad things that are hard to prove. Overly broad laws essentially delegate the content of the criminal law to prosecutors. And prosecutors will decide what is worthy of punishment using criteria that the public doesn’t know about and that can change from case to case and defendant to defendant. Prosecutors can even enforce the law as written—to cover truly accidental behavior—and there is nothing potential defendants can do about it. 

We should be clear about who will be at risk if Sen. Warren passes her law. The civil courts already hear many thousands of cases seeking damages over claims that serious harm arose from industry conduct that falls short of being reckless or deliberately wrongful. Not infrequently — as with claims over supposed “sudden acceleration” in cars, cancer from Roundup, and autoimmune disease from silicone breast implants — large sums get paid even when science finds no basis for concluding the products caused the harms alleged, such is our legal system’s tendency to tilt against business defendants as unsympathetic. Under the Warren standard, complaints that driverless cars have gotten into avoidable accidents or vaccines have caused side effects — maybe even that cheeseburgers, supersize sodas, and margaritas have worsened the harms of obesity — will put business people at risk for long prison terms. To her backers, will this count as a bug? Or a feature?


April 9, 2019 10:22AM

They Still Call It An “Opioid Epidemic.” Why’s That?

The Cleveland Plain Dealer recently reported that, while overdose deaths have come down slightly over the past year in the Cleveland metropolitan region, a new killer has emerged on the scene: cocaine mixed with fentanyl.

The Cuyahoga County Coroner’s Office informs the public that cocaine was involved in 45 percent of overdose deaths last year, the highest rate in ten years. It reports that cocaine is being found in combination with fentanyl with increasing frequency, and it is believed that many cocaine users are either unaware of the presence of fentanyl or, if they are, they are uncertain as to the amount that is present. The highly potent fentanyl (roughly 100 times more potent than morphine) causes them to asphyxiate and die.

This phenomenon was reported a year ago in Massachusetts and the New England region. According to the Drug Enforcement Administration, fentanyl has been supplanting heroin as the narcotic often combined with cocaine to affect “speedballing”—a dangerous technique designed to minimize the negative effects of the “come‐​down” after the rush from cocaine. 

The rise in cocaine‐​related overdose deaths is also associated with a change in the demographic mix of overdose victims. The Plain Dealer report states:

Historically in Cuyahoga County, opioid deaths have had the most severe impact among white people, and in suburban communities, Gilson said. Cocaine, on the other hand, has largely been linked to overdose deaths among African‐​Americans, and in urban communities…

“We’re starting to see a rise in fentanyl deaths among African‐​Americans, but we’re also seeing more cocaine in the fentanyl deaths among the white, suburban residents,” Gilson said. “Now, as those two interface, we start to see more deaths, period.”

One encouraging part of the Plain Dealer story is that the overall overdose rate in Cuyahoga County came down slightly in the past year. Credit has been given to the more liberal distribution of the overdose antidote naloxone as well as the distribution of fentanyl test strips. Originally approved by the FDA for urine drug testing, they are now being used “off‐​label” to test for the presence of fentanyl in a drug bought on the black market. Distributing naloxone and fentanyl test strips are two harm reduction strategies. 

A Canadian firm, BTNX, manufactures the test strips and has neither sought nor gained approval for their use in this context. The test strips work well for IV heroin users, who adjust their heroin dose or even discard the heroin according to the amount of fentanyl detected. Public health officials are concerned that it might be more difficult to use the test strips with cocaine, because the substance must be liquified in order to test it. In most cases, the heroin is already in liquid form because it is intended for injection.

Sadly, in many states with anti‐​paraphernalia laws, such as my home state of Arizona, fentanyl test strips are illegal for distribution because they are considered a form of drug paraphernalia. Last June the Maryland legislature removed fentanyl test strips from that state’s drug paraphernalia list.

As public health and law enforcement authorities more openly discuss the prevalence of cocaine, fentanyl, heroin, and methamphetamines in the overdose statistics, it is reasonable to ask why they and the media continue to refer to this as an “opioid epidemic” when it is obviously a “prohibition crisis.”