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Private Citizens Have the Power to Expose, and Collect Damages For, Medicare Fraud

It would be difficult to read a newspaper today without running across an article about how often the government — i.e., us taxpayers — is defrauded by improper Medicare payments. But one of the most pervasive frauds may not be obvious. Here is how it occurs: A person/company injures (the “Wrongdoer”) another through negligence. For instance a commercial trucker runs a red light and causes catastrophic injuries when he T-bones a vehicle. The catastrophically-injured person is on Medicare. Thus, Medicare foots his bill for his injuries, which can easily excess $1 million. Shouldn’t the Wrongdoer be required to pay back Medicare given that his negligence caused the need for the payments? The answer is not only morally “yes,” but it is also required by federal law.

Often, however, the Wrongdoer compensates the injured person via insurance, but the insurer then “forgets” to pay Medicare back. And given all of the other Medicare fraud out there, the Government hardly has the resources to police it all. So Congress has passed an important, but often overlooked, law that allows private citizens to sue these Medicare fraudsters, and recover double damages.

The law is buried in a section of the Federal Code called “Exclusions from coverage and medicare as secondary payer.” (Really, where do they come up with these names?) If you do not think that title is obvious, how about we refer to the section of the Code: 42 U.S.C. 1395y(b)(3)(A). (This is real!)  Okay, that won’t work either, so how about we call it the “Private Fraud Action.”

The Private Fraud Action works like this: Congress recognized that the person most likely to be aware of this fraud is the injured person who receives an insurance payment. Thus, the law allows the injured person to sue the fraudster in federal court and recover double damages – twice the amount that the fraudster should have paid back to Medicare.

Interestingly, several courts have held that the damages go the injured party, not to the government. For example in Woods v. Empire Health Choice, Inc., 574 F.3d 92 (2d Cir. 2009), the Court noted that “following a successful action, the victorious party will keep the entirety of any recovery.” While this may seem at odds with the law’s purpose, presumably it is meant to encourage private citizens to deter fraudsters.