A recent article in Modern Healthcare titled “Anti-fraud fervor: States step up false claims actions to recover Medicaid dollars” discussed the increasing trend of “states using their own false claims laws to pursue questionable Medicaid billings by drugmakers, healthcare providers and suppliers.”  These False Claims Act statutes allow states to recover money from companies engaged in fraudulent billing.  They also provide a financial reward to whistleblowers who help the state identify the fraud and bring the fraudsters to justice.

The financial benefit to these states can be significant – and not just for the largest states like Texas (which recovered $182 million in just one case).  “Since 2009, Indiana has recovered more than $165 million as a result of whistle-blower cases filed under its false claims act.”  Similarly, “Maryland passed a false claims law in 2011, and recovered $39.8 million in fiscal 2014, up from $1.2 million in fiscal 2012.”  Accordingly, the article notes: “Lured by the potential for big paydays, several states, including Maryland and Vermont, passed or expanded their false claims laws this year, bringing the number of states with their own false claims statutes to nearly 30….”

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Given the financial success of state False Claims Acts, and tight state budgets, it is surprising then that just last month, Wisconsin repealed its own False Claims Act.  With “no hearings or even public discussion” the legislature included language in the state’s budget bill that repealed the law that had helped Wisconsin recover “millions of dollars from lawsuits initiated by whistle-blowers since the law was enacted in 2007,” according to the Milwaukee Journal Sentinel

So who would want to repeal this law, and why?

In praising the repeal, the United States Chamber of Commerce Institute for Legal Reform criticized the law for authorizing private citizens (whistleblowers) and attorneys to bring lawsuits on behalf of the state to combat fraud.  It derided the public-private partnership created by the False Claims Act – where private resources and expertise are brought to bear to help the government investigate fraud – as authorizing “bounty hunting” and “lead[ing] to abuses by the trial bar.”  Similarly, in its 2015-16 legislative agenda, the Wisconsin Chamber of Commerce (known as the Wisconsin Manufacturers & Commerce) criticized and called for the repeal of the statute, arguing that rather than allow “private attorneys to sue businesses for alleged fraud,” the state should leave this job to the government employees at the Department of Justice.

This is curious.  In pretty much every other arena, the Wisconsin Chamber of Commerce loves outsourcing traditional government functions to private entities.  In that very same legislative agenda, the Wisconsin Chamber offers privatization of government functions as the solution to all manner of problem.  On the question of how to address “Taxes & Government Spending,” the Chamber’s agenda recommends: “LEVERAGE THE PRIVATE SECTOR,” explaining “State and local government should outsource as many functions as possible to the private sector, which can accomplish them more cheaply and efficiently than government can.” 

To address “Transportation & Infrastructure,” a key solution is to:  “LEVERAGE THE PRIVATE SECTOR.” 

Care about “Jobs & Economic Development,” then you should:  “LEVERAGE THE PRIVATE SECTOR.” 

So too for Education.  The Chamber pushes “Expand[ing] Charter School Options . . . to allow more than just public school districts and certain universities to authorize charter schools.”

Outside of fraud enforcement, it seems, the chamber views the private sector as able to “accomplish [government functions] more cheaply and efficiently than government can.”  Yet somehow, when it comes to holding businesses accountable for defrauding the state, the chamber suddenly trusts the government and disdains private enterprise.

Why could that be?

Given the incredible success of the False Claims Act – not only the Wisconsin statue, but the companion statutes of the United States and close to 30 other states – in empowering whistleblowers and private attorneys to bring their knowledge, expertise and resources to bear in helping the Government combat fraud it is hard to imagine that a lack of effectiveness is the real problem.  Instead, might the problem for the Chamber and the powerful business interests it represents – many of whom earn a lot of money from government business and contracts – be the exact opposite?

McCormack is a lawyer and partner in the Washington DC office of Constantine Cannon LLP. Knobler is a lawyer and an associate at Constantine Cannon.