DOJ Finds Entire Affordable Care Act Unconstitutional

April 24, 2019

by M&S Staff

DOJ Finds Entire Affordable Care Act Unconstitutional

(Originally published in Law360)

Could This Spell Trouble For False Claims Act Enforcement?

DOJ Finds Entire Affordable Care Act Unconstitutional. Could This Spell Trouble ForFalse Claims Act Enforcement?

The Justice Department left legal minds spinning last month when it announced, via a two-sentence letter to the Fifth Circuit Court of Appeals, that the government’s chief law enforcement officers suddenly found the entire Affordable Care Act unconstitutional. DOJ’s mercurial announcement, an abrupt reversal in the middle of its own litigation on the ACA’s behalf, raised questions as to whether or not the Trump Administration will enforce compliance with the ACA, potentially impacting multiple significant provisions of the law, such as Medicaid expansion and guaranteed health insurance coverage on parents’ plans until age 26.

Less obviously but no less crucially, DOJ’s decision also raised questions about the future of the False Claims Act, the provision by which taxpayers have recovered more than $40 billion in cases alleging healthcare fraud, $2 billion per year since the ACA went into effect in 2010.

The False Claims Act (FCA) is the federal government’s primary whistleblower law and the most effective tool to combat fraud against taxpayer dollars.  Under the FCA, fraudsters are subject to triple damages and stiff civil penalties, while successful whistleblowers are eligible for rewards of up to 30% of the amounts they recover for the Government.

Will DOJ Recognize the ACA’s Amendments to the False Claims Act?

The Affordable Care Act included important amendments to the False Claims Act, which, according to DOJ’s reasoning, cannot be separated from the other provisions of the ACA and which presumably must be struck down.  For instance, the ACA modified the FCA’s “public disclosure” rule, which generally prohibits whistleblower lawsuits that are based on certain types of publicly-disclosed information.  Previously, the rule could be triggered by public disclosures made any Government report, hearing, audit, or investigation.  When a whistleblower’s FCA suit was deemed substantially similar to a public disclosure, the court would determine whether the whistleblower qualified as an “original source” of the allegations made in the suit.  If not, then the court was deprived of subject-matter jurisdiction and the suit was automatically dismissed.

Under the ACA, the public disclosure rule is no longer an issue of subject-matter jurisdiction that can conceivably be brought up at any time.  And in addition to the original source exception, the Justice Department now has the final word on whether a whistleblower’s lawsuit can go forward, despite public disclosure issues.  But DOJ has seldom used this authority in the years since the ACA was passed, and now it seems highly unlikely that the Government will ever do so again, at least until the ACA litigation reaches a final resolution.

Will DOJ Recognize FCA Liability for Fraud Schemes Involving Violations of the ACA?

Violations of the Affordable Care Act can lead to liability under the False Claims Act.

For example, the ACA makes clear that if a medical provider’s claim for payment to Medicare or Medicaid has been tainted by an illegal kickback scheme the provider had with another provider; a pharmaceutical company; a medical device manufacturer; etc., then that claim is automatically “false” for FCA purposes.  In addition, the ACA established the 60-day rule – anyone who receives an overpayment from Medicare or Medicaid has 60 days from the date they know about the overpayment to report and return the funds to the Government.  This rule coincides nicely with the FCA’s provision that prohibits anyone from knowingly – defined broadly under the

FCA – retaining an overpayment from the Government.  There are many other examples.

Although the ACA’s rules are clear, will the Justice Department actually enforce them? Notably, last year, DOJ issued the Rachel “Brand memo,” which outlined DOJ’s policy not to base FCA liability on violations of federal “agency guidance;” instead, pursuant to the memo, DOJ enforcement actions will only be based on statutory and regulatory requirements that underwent a “notice-and comment rulemaking process.”  Certainly, if DOJ won’t enforce agency guidance, then the chances that the Department will enforce laws that it has publicly stated are unconstitutional seem slim.  Of course, DOJ’s views on these issues will inform its decisions regarding whether to intervene and join whistleblowers’ qui tam lawsuits alleging violations of the ACA – or even whether to seek dismissal of such suits.

Next Steps

DOJ’s sudden about-face on the issue of ACA constitutionality raises numerous important questions regarding administration of our healthcare and fraud laws going forward. DOJ must immediately provide some clarity regarding its policies and plans for future enforcement of these laws, while the litigation surrounding the ACA works its way through the courts.  Failure to do so will result in a chilling effect on whistleblowers who have information about fraud on Government contracts and programs, but who lack confidence in the Justice Department’s willingness to support their efforts fully. release/file/1028756/download