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A Foolish Way to Fight Fraud
Last July, the New York Times broke a story alleging widespread fraud and waste in New York's Medicaid program, the largest and most lavish in the nation.
The Times estimated that billions of dollars in the program were being misspent, leading many policymakers to call for legislative reforms. One of the reforms being suggested, however, is a state version of a federal law—the False Claims Act (FCA)that encourages whistleblowers to disclose fraud in return for a stake of any monies governments are able to recover.
Malanga, a contributing editor at the Manhattan Institute's City Journal, writes that while Medicaid reform is an important goal, state versions of the FCA are fraught with perverse incentives.
Fighting Medicaid abuse requires a whole arsenal of weapons—new technologies to sniff out fraud, tougher criminal penalties and increased oversight of who's allowed into the program.
Malanga concludes that New York legislators should only enact an FCA provision with strict oversight that encourages whistleblowers to "end fraud at their employer before filing suits." Knee-jerk reform that puts trial lawyers in the position of enforcing fraud statutes will only lead to "an open season on legitimate companies."
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