Americans can always trust Congress to find new ways to spend money and make criminal laws. While we know the precise amount of money Congress spends; we do not know exactly how many criminal laws Congress creates—all we know is that there are a lot of them.
Now comes another: In July, Senators Marco Rubio (R–FL) and Amy Klobuchar (D–MN) introduced S. 3254, the Eliminating Kickbacks in Recovery Act of 2018. The bill would make it a federal crime for residential facilities that treat people suffering from drug dependence (colloquially known as “sober homes”) to provide certain financial or in-kind kickbacks to individuals or organizations who refer patients to these facilities for treatment. The bill would also make it illegal for individuals to receive or solicit a kickback from a sober home facility.
The word “kickbacks” is, however, a convoluted term. Not all kickbacks are inherently illegal—nor should they be. Rather, at least in relation to kickbacks in the addiction-treatment industry, it is the process by which funds are obtained to pay the kickbacks that should and does give rise to their illegality. This process involves a practice known as “patient brokering.”
Patient brokering occurs when a sober home utilizes third parties—sometimes referred to as “body brokers”—to recruit patients in exchange for kickbacks, usually from funds obtained by the operator of the sober home through fraudulent health insurance reimbursements for substandard (or, in some cases, non-existent) patient treatments. Patient-brokering kickbacks are, therefore, harming not only the health care system by driving up costs, but also individuals who are desperately seeking help for their addictions.
Senators Rubio and Klobuchar are touting S. 3254 as a weapon against patient brokering and health care fraud. In explaining the impetus behind the bill, Rubio stated: “Too many Americans suffering as a result of the opioid epidemic are exploited by bad actors seeking to make a profit from addiction.” He added, “This bill will help stop the cash flow for middlemen involved in illicit sober homes and paid referrals.” And Klobuchar stated: “When people are struggling with addiction, their focus should be on getting well, not worrying whether the treatment facilities are trying to take advantage of them to make more money.”
The bill, which certainly has a laudable goal, would purportedly close a loophole in current federal law that allows sober homes to fund patient-brokering schemes through fraudulent private health insurance reimbursements. According to the bill’s proponents, current federal law only prohibits patient-brokering schemes funded through fraudulent public health insurance, not private insurance. But that understanding of existing federal law is wrong.
Health care fraud, including private health care fraud, is manifestly illegal under current federal health care fraud law—in addition to being illegal under the wire fraud and mail fraud statutes, among others. With so many federal criminal laws already written into the United States Code, including the myriad of federal fraud laws, it is unlikely that S. 3254 would do anything more to combat patient brokering and health care fraud than those fraud laws already in existence. Instead, the bill’s more plausible effect would be to further complicate things by duplicating existing federal and state laws, especially as it relates to fraud.
The Patient-Brokering Problem
More and more sober homes are opening across the country, due largely to the nation’s opioid epidemic. Many of these facilities are doing great work for individuals with addictions, but other facilities are doing little, if anything, positive. In fact, some are making the situation worse. These illegitimate sober homes have begun exploiting patients, especially those with good health insurance plans, through a practice known as “patient brokering” or “body brokering.”
Patient brokering is a scheme in which sober home operators promise to pay kickbacks to patients, counselors, other sober home operators, treatment specialists, interventionists, and others who act as brokers to recruit new patients to sober home facilities. Once a broker recruits and refers a patient to a sober home, the sober home operator induces the patient to undergo costly and questionable addiction treatments, like unnecessary drug and alcohol screening, acupuncture, and nutritional counseling. The operator then files health insurance claims with the patient’s insurance company to recover the cost of these unnecessary treatments. The insurance claims can amount to tens and hundreds of thousands of dollars in reimbursement payments, but the actual cost of the treatments is far less. Sober home operators and patient brokers therefore stand to profit tremendously through these kickback schemes. Once the fraudulent sober home operators receive the insurance reimbursements and account for the costs of the treatments, they pay out a portion of the money as kickbacks to the brokers and pocket the rest. The process then repeats.
It is important to note, however, that not all kickbacks in the addiction treatment industry are fraudulent. Organizations can and do operate legitimate referral programs that are not funded through health care fraud and that successfully rehabilitate patients. Of course, these organizations are not interested in defrauding patients and their health insurance companies to generate large and illicit profits. Rather, their focus is to provide real help and treatment to those with addiction problems.
The Overfederalization of Criminal Law
Overfederalization occurs when the federal government asserts its authority unnecessarily by creating new federal crimes in an attempt to address every possible problem in society—even instances in which state criminal laws already cover the conduct in question. It can be a serious problem for the public (who are left to guess whom to call when a crime occurs), law enforcement officers (who then argue over jurisdiction), federal judges (who must hear cases that in actuality belong in state court), defendants (who face decades of imprisonment under “charge stacking”—viz., the filing of multiples charges under different criminal laws for the same conduct), and taxpayers (who pay the tab). A classic example of overfederalization of the criminal law is the Federal Anti-Car Theft Act of 1992, which made carjacking a federal crime—despite the fact that theft and kidnapping were already crimes in each of the 50 states.
Overfederalization is a byproduct of overcriminalization, which often results from political pressure. Creating new criminal laws is an especially easy way for politicians to drum up political support because it gives the public a sense that “something is being done” about crime. Alternatively, failing to create new criminal laws can be a political disaster. “Once a new crime statute is introduced, it is often considered politically unwise to vote against it even if it is misguided, unnecessary, and even harmful. No politician wants to be accused by an opponent as being ‘soft on crime.’”
It is not surprising then that Congress has once again resorted to the criminal law in an attempt to solve the patient-brokering problem, even though patient brokering is already illegal.
Patient Brokering Is Already Illegal
State Law. Some states, including Florida, have already made it a crime to fund patient-brokering schemes through either public or private health insurance plans, and other states are in the process of passing similar laws. These states are also actively enforcing their existing laws against illegitimate sober home operators. In Florida, for example, Palm Beach County has organized a task force, which investigates and prosecutes sober home operators and patient brokers who are engaged in private health care fraud and illegal patient-brokering schemes. In 2017, the task force arrested three men for violating the state’s patient-brokering laws. All three men pleaded guilty, were sentenced to prison terms, ordered to pay fines, and agreed to cooperate with state authorities.
In Massachusetts, the State Attorney General prosecuted a doctor under the state’s health care fraud laws for funding a patient-brokering scheme by filing fraudulent public health care claims with the state’s health care system. The doctor was convicted of the crimes, sentenced to 11 months in prison, and ordered to pay $9.3 million in restitution.
Federal Law. Additionally, patient brokering and health care fraud are already illegal under the existing federal fraud laws. Despite a press release from Senator Rubio’s office stating that “there is no federal law to prohibit [patient brokering] in private health insurance plans,” using fraudulent public or private health care reimbursements to fund a kickback scheme violates existing federal law. There is no loophole in federal law that permits sober homes to lawfully fund patient-brokering schemes with private (or public) health insurance reimbursements.
In fact, one year before S. 3254 was introduced on the Senate floor, the Department of Justice announced that it had charged 77 individuals in the Southern District of Florida as part of the largest health care fraud takedown in the Department’s history. The two primary defendants have been charged with running a sober home while paying and receiving patient-brokering kickbacks funded through private health insurance reimbursements, in addition to other criminal acts. According to the Justice Department’s criminal complaint, these two individuals funded a patient-brokering scheme by defrauding patients’ private health insurance plans—the type of conduct that would also be covered by S. 3254, should it become law.
The Justice Department charged these two individuals with conspiracy to violate the federal health care fraud law, which makes it illegal to knowingly and willfully defraud or attempt to defraud any health care benefit program. Federal law defines “any health care benefit program” as “any public or private plan or contract, affecting commerce, under which any medical benefit, item, or service is provided to any individual, and includes any individual or entity who is providing a medical benefit, item, or service for which payment may be made under the plan or contract.” The Justice Department also alleged possible violations of the federal anti-kickback statute, which makes it illegal to pay and receive kickbacks in connection with a public health insurance program.
Additional Laws. This type of kickback scheme would also likely violate the federal mail and wire fraud statutes. Those fraud statutes “reach all frauds in which the use of the mails or wire communications is part of the execution of the fraud”; and the two statutes “should be sufficiently broad to reach any fraud of concern to the federal government.” Clearly, the myriad of fraud statutes in the U.S. Code, as well as separate state fraud laws, would suffice to prosecute those engaged in patient-brokering and health care fraud—regardless of whether they involve public or private insurance plans. It appears, then, that much of what S. 3254 would purportedly make illegal—funding kickback schemes through fraudulent health insurance reimbursements—is, in fact, already illegal at both the federal and state levels, which undermines any rationale for passing the bill.
Florida is home to a $1 billion addiction treatment industry, and southern Florida is known as the “Rehab Capital of America.” Warm weather and restorative beaches make Florida a haven for patients seeking rehabilitation programs and sober-home living, which also, unfortunately, makes Florida a haven for criminals hoping to profit from illegal patient-brokering schemes. Florida officials have expressed concern about the state’s growing patient-brokering problem and have urged their legislators in Washington to take action.
While it is true that Florida has a bigger problem with patient-brokering schemes than other states, Congress is under no obligation to create a new federal criminal law to address Florida’s problem, nor is one necessary should federal investigators decide to get involved. State officials and the federal government already have the necessary tools at their disposal to prosecute those who commit health care fraud (or any other type of fraud) to fund patient-brokering schemes. Whether those tools are being effectively utilized or whether sufficient resources exist to pursue villainous sober home operators and their brokers who prey on the suffering of others in order to reap illicit profits are different matters. But these are problems that would not be solved by the passage of a new federal criminal law geared specifically to address patient brokering.
Overfederalization results from Congress’s attempts to create new criminal laws to solve every problem in our society—often at the behest of political interest groups—or to allow politicians to preen about how they have solved a problem by making something a crime. Criminal laws, arguably above any other type of law, can be used by politicians to gain political support from their constituents because everyone loves a law that promises to throw more bad guys in jail—especially when the bad guys are preying on society’s most vulnerable, such as those with addictions.
The Eliminating Kickbacks in Recovery Act of 2018 is another attempt, perhaps even a laudable one, to address a real problem in our society. But, however well-intentioned, the bill would likely create more problems than it would solve and produce adverse consequences that the public, law enforcement, federal judges, criminal defendants, and taxpayers would be left to bear.
Federal law already prohibits the use of private health care reimbursements to fund patient-brokering schemes, and those laws are already being enforced. One state might have a bigger problem with patient brokering than others, but that reason alone does not justify the creation of more federal criminal laws.
—Jonathan M. Zalewski is Visiting Legal Fellow and Koch Associate in the Edwin Meese III Center for Legal and Judicial Studies, of the Institute for Constitutional Government, at The Heritage Foundation.