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How Whistleblowers came to Regulate Federal Healthcare

— April 29, 2015


The two most recent scandals involving government healthcare that Legal Reader has been following have been unearthed by whistleblowers, former employees who have brought systematic abuses to the public even in the face of retaliation. First, last year’s nationwide Veterans Affairs (VA) wait-time scandal dominated news headlines and forced the resignation of then-Secretary Eric Shinseki. Also, in a series of ongoing lawsuits, several former and current health workers are suing on behalf of the government in what appears to be a systematic price-inflation scheme for health plans using the private Medicare Advantage program for seniors. Although many within the government praise such efforts for transparency publicly, the level of actual support that these whistleblowers have received does not appear to match the rhetoric. An April 13th Congressional hearing unveiled systematic retaliation towards the VA whistleblowers and despite the fact the government has the ability to intervene in the Medicare Advantage lawsuits, increasing the credibility of the claims, they have failed to do so as of now even though it is their coffers that are accused of being bilked.

VA Employees Richard Tremaine (Right) and  Dr. Christian Head (Middle) testify before  Congress during an April 13th hearing (Photo Courtesy of Heath Druzin, Stars and Stripes)
VA Employees Richard Tremaine (Right) and Dr. Christian Head (Middle) testify before Congress during an April 13th hearing
(Photo Courtesy of Heath Druzin, Stars and Stripes)

In both cases, representatives from government and the legal profession have explained the importance of the whistleblowers’ efforts; however these efforts seem to be coming in the absence of actual governmental oversight. I highlighted in a previous post last week, that despite a multitude of whistleblower allegations throughout the country, the national fury over the issue, and aggressive statements made by new VA Secretary, Bob McDonald, only 8 people have been disciplined for the scandal, 3 have been removed from employment, with only one having actually been fired, not for the wait time scandal, but for “receiving improper gifts.” Congressman Mike Coffman (R-CO), who has been quite outspoken about the VA’s lack of whistleblower protection, noted in the April 13th hearing that, “the truth of the matter is the Congress needs whistleblowers within federal agencies to help identify problems on the ground in order to remain properly informed for the development of effective legislation.” Malcom Sparrow, a health care fraud expert at Harvard’s John F. Kennedy School of Government also notes how the Medicare Advantage lawsuits illustrate the need for whistleblowers stating, “It shows the incentives provided for whistleblowers are working well, and all the other controls and detection systems are failing miserably.”

While both of the aforementioned statements are probably accurate, it brings to question as to why whistleblowers have been the catalyst for both of these systemic issues. Where is the official oversight? Although usually conducted to correct injustices, whistleblower laws offer lucrative financial rewards for individuals who sue on behalf of the government. If they are able to achieve a successful verdict or settlement, they can receive from 15 percent to 30 percent of any money the government collects. The government has the option on whether or not to become a member of the lawsuit as well, which dramatically helps the odds of achieving a successful verdict given the high standards required to prove such a claim. The government’s reluctance to join the Medicare lawsuits may be related to the fact that federal officials were notified of the price-inflation dangers as early as 2009 in an unpublished study commissioned by the Centers for Medicare and Medicaid Services (CMS), and the Government Accountability Office (GAO) has been noting disparities between regular Medicare and Medicare Advantage for several years as well. These lawsuits may uncover some uncomfortable truths about the program’s oversight that regulators would prefer not to address.

Much like the Medicare Advantage cases, those in charge of the VA scandal have also been accused of absentee oversight. Although he technically resigned amidst pressure, most people would conclude that former Secretary Shinseki lost his position due to his ignorance of the issues leading to the wait-time scandal. Shinseki, who was previously known best as a highly respected general who foresaw the logistical difficulties in stabilizing post-war Iraq, drawing much ire from the Bush administration, said that he was “mad at himself,” for the ignorance, blaming the lack of ethics among his subordinates for the scandal during his resignation statement. For McDonald, the scandal after the scandal has members of congress questioning his ability to effectively promote change in the wake of the April 13th whistleblower testimony. He defends his handling of wait time scandal, claiming that strong cases need to be built up in order to fire those responsible due to a generous appeals process for federal employees.

New legislation introduced by another strong congressional advocate of whistleblowers. Representative Jeff Miller (R-FL) has introduced a bill that has passed its subcommittee review, legislating strong penalties for whistleblower retaliation, including a 14 day suspension for a first offense and immediate termination for a second. The bill also reduces appeals under these guidelines to a 7-day limit and gives transfer preferences to whistleblowers. In a statement however, the VA called the bill “unworkable.” It may be because the culture within the federal healthcare system is just not amenable to strong oversight, or it is a matter of placing excessive trust in mid-level managers, or the fact that senior executives would prefer to not risk embarrassment of disclosing improprieties, but it appears that most parties in government seem to be okay with placing the burden of responsibility on whistleblowers. This comes even though they are often risking their professional futures to do the job that executives and regulators are paid to do.


Center for Public Integrity – Fred Schulte

Stars and Stripes – Heath Druzin

Washington Post – Emily Wax-Thibodeaux

Washington Post – Joe Davidson










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