The convictions this week of former WellCare executives for various federal crimes arising out of a scheme to defraud the Florida Medicaid program sends a wider message to white-collar criminals. By pursuing criminal charges against individuals rather than letting corporate higher-ups write a big check to solve their problems, the Justice Department warns others who occupy corner offices to think twice before defrauding taxpayers and making the health care system more expensive for everyone.
Under an agreement with Florida's Agency for Health Care Administration, WellCare had agreed to spend 80 percent of the money it received on behavioral health services for the poor. But rather than return the unused money, prosecutors say, WellCare executives inflated spending reports so they could keep the money and cheat Medicaid out of nearly $30 million. To settle corporate fraud charges, WellCare paid $80 million in 2009 and settled with the Justice Department for $137 million in 2010.
But the tenaciousness with which the Justice Department pursued criminal charges against the company's top executives over six years makes this case a national model. The federal trial that started in February came to a close Monday after nearly three weeks of jury deliberations. The convictions against the company's former officials carry some hefty prison time. WellCare former CEO Todd Farha, former CFO Paul Behrens and former vice president William Kale were found guilty of two counts of health care fraud. Each count carries a prison term of up to 10 years. Behrens was also found guilty on other charges. A fourth defendant, former vice president Peter Clay, was found guilty of making false statements to federal agents, a charge that carries a maximum of five years in prison. The men were acquitted on other charges, and the jury deadlocked on still others.
The case has broader implications, since the 80 percent spending requirement under which WellCare operated is similar to a relatively new Affordable Care Act rule that says health insurers of small group and individual policies have to spend at least 80 percent of premium dollars on health-related services or issue a rebate to policyholders. The WellCare case tells company executives who evade this rule by falsifying or mislabeling spending that there are real consequences to being caught.
Health care fraud in the United States costs as much as $250 billion annually, with $100 billion of that stolen from Medicare and Medicaid. This is partly why medical costs have exploded and strains have been put on Medicare's trust fund. The Obama administration has made tackling this fraud a priority, and the Affordable Care Act gives the government new resources, tools and authorities to pursue it. But aggressively bringing criminal charges against health insurance executives who engage in fraud sends an unmistakable message that stealing from taxpayers will not be tolerated.