The Government's Envy Engine

September 4, 2002

Many Americans understandably are concerned about the Bush administration's proposed Terrorist Information Prevention System, a program to encourage citizens to report suspicious activities to government officials.

While commonsense diligence must always be encouraged, this program raises serious civil liberties concerns. Do we really want a government program to encourage us to spy and snoop on each other as if we live in some communist country, tempting neighbors to report the neighbors they dislike as suspicious characters

A preview of what TIPS will offer exists. It's a legal monstrosity that encourages citizens to rat out individuals who accept federal money and who allegedly violate federal regulations.An old Civil War-era statute, revived in the 1986 Federal Civil False Claims Act, allows private parties to file "Qui Tam" actions in the name of the feds, with government informants getting one-third of the loot that the feds take in fines or reimbursements from often-innocent victims.

Cases under this provision have risen from 32 in 1987 to over 1,500 in 2001, with nearly $1 billion in collections.

Qui Tam might seem to be a good way to encourage people to report misuse of taxpayer funds. In fact, Qui Tam encourages disgruntled or fired employees to seek revenge on their bosses, divorcees to inflict maximum pain and suffering on their ex-spouses, ingrate customers to grab quick big bucks from those who do them a service, and trial lawyers to plunder the productive elements of society.

Consider how this envy engine actually works.

Many Qui Tam cases involve Medicare and government payments to physicians.

Physicians must attest to their familiarity with the laws governing those funds. Medicare has over 110,000 pages of regulations. No doctor, patient, bureaucrat, or legislator actually can read and understand those complex, contradictory regulations. Further, not just intent, but an honest mistake—an inevitable outcome when more than 100,000 pages of regulations are involved—can get you convicted.

Worse still, there is a $10,000 fine for each alleged infraction, plus triple damages assessed for the allegedly misbilled amount, plus other penalties.

Consider the case of Irwin Halper, whose lab performed 65 medical tests for which he billed $12 each for a total of $780. According to the feds, Halper should have charged only $3 per procedure and collected only $195. For this $585 error he was fined $130,000—with a snitch getting part of the take—and spent two years in jail.

Consider the case of J.J. Rutgard, who earned $65,140 for removing cataracts from 15 patients among the nearly 20,000 that he treated over a five-year period.

The skillfully done operations were necessary to improve the patients' vision, and the patients were thrilled with their improved eyesight. But the eyesight of those 15 patients was not considered poor enough for the procedure to be "medically necessary" as defined by the Medicare regulations for that year.

Several employees, seeing an opportunity to destroy their boss and feed off his shattered life, ratted him out.

Rutgard's fine was $16.2 million, of which his ex-employees took their cut, and he was sentenced to 11 years in a federal penitentiary. After appeal, he served five years in the clink.

Consider the current case of an orthopedic surgeon who did successful procedures on the elbows of 300 patients, at $250 a piece, or $75,000 total over a three-year period. His fired office manager, who was having an affair with the surgeon's wife, argued that the good doctor had billed improperly, using the wrong reimbursement code.

The anticipated fine: $3.25 million. The adulterous office manager expects to run off with the doctor's wife and a cool $1 million. We can expect more such cases in the future.

Activists hold seminars for the elderly, giving them 1-800 numbers so they can supplement their Social Security by stealing from their doctors.

Non-medical Qui Tam abuse abounds as well.

Gilbert Realty allegedly overcharged the government $1,630 over a number of months for providing housing for the poor. The fine: $290,000. The tenant Mr. Smith who already had his rent subsidized by the taxpayers was able to commit a Qui Tam theft against the landlord.

Mr. Bajakajian had contracted a legal debt of $357,144 and had the legal right to take the money out of the country in order to pay the debt. When he failed to fill out the proper form, he was reported in a Qui Tam action. The fine: the total $357,144. The snitch expected over $100,000.

The Qui Tam record augers the effects of the TIPS program on our personal liberty and our civil culture. TIPS will unleash people's lower urges, and give them a dangerous weapon with which to indulge petty jealousies, irrational impulses, and mean little hatreds.

A free society is built on laws that foster mutual respect, not malicious envy. A free society stimulates trust, not suspicion between citizens. The TIPS program, like its Qui Tam predecessor, will undermine rather than protect our freedoms.

Madeleine Cosman, Ph.D, Esq., was president of Medical Equity Inc.

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