The Obama Administration recently announced a plan to cut $320 billion over ten years from the projected growth of Medicare and Medicaid. The plan would raise premiums and deductibles, lower payments to hospitals and require elderly people who receive care at home to make co-payments. Kathleen Sharp wrote an excellent piece that appeared last month in The New York Times, addressing an issue that without a doubt is very important to U.S. taxpayers. It was noted in the article that before charging consumers more and eliminating valuable services, the government should “be much more aggressive in recovering money stolen from these taxpayer-supported programs.” According to some estimates, health care fraud is a $250 billion-a-year industry. Significantly, about $100 billion of that is said to be stolen from Medicare, the health care program for the elderly, and Medicaid, the insurance program for the poor and disabled.

It was pointed out that there are many ways to defraud taxpayers. For example, a hospital chain can buy drugs at a steep discount and then bill Medicare for high sticker prices. Doctors can bill for procedures that never happened, or for drugs that were supplied to them by pharmaceutical companies free of charge, or pharmaceutical companies can promote a drug for risky, unapproved uses. There is also massive cheating by drug manufacturers in the Medicaid program.

We have seen first hand, in our firm’s handling of actual cases, how a number of drug companies have cheated the state Medicaid programs. The Times’ article mentioned how state Attorneys General have gone after drug companies that were cheating the Medicaid program. This type cheating is being litigated in what has become known as the “AWP litigation.” Drug companies, over a period of years, over-changed for drugs in the Medicaid programs. The companies would furnish false prices to the states for reimbursement purposes and the states would act on the false information and pay out excessive amounts. This has cost the states billions of dollars. Alabama was one of the first states to get involved in this litigation and our firm has been involved since the beginning.