Saturday, October 3, 2015

Fraud as Manslaughter

NFL star Tyrann Devine Mathieu was in the news again this week.  You might remember Tyrann; he was an LSU star - affectionately known as 'the Honey Badger' for a video that combined a nature video with a highlight reel.  Eventually, Mathieu ended up getting thrown off of the team and expelled from the school for repeated drug incidents.

And for LSU to take that step with a much-touted, much beloved player, he had to really screw up.

This week, he was in the news, not as an Arizona Cardinal, or for anything he did.  But because his mom was offered a plea deal for her part in a $30M Medicare fraud scheme.   Take a second and scan the article. I'll wait.


I'll wait again while that sinks in.

Since taking an economics course in college, I have been fascinated by the concept of opportunity cost.  In this story, I think that recognizing the place that opportunity cost plays is critical in the sentencing of these people. 

Opportunity cost means that any time you make a decision, it is BOTH a decision to do something, AND a decision not to do something else. So, if I buy a package of M&Ms from a vending machine, then I just spent $1.25.  But the opportunity cost are those things that I gave up, in order to buy the package of M&Ms.  I gave up the chance to purchase a Twix bar.  I also gave up a chance to add that $1.25 to my retirement investments.  I gave up the chance to put more money into my niece's college fund.

That is one expensive treat.

Medicare's decisions are no different.  Assuming limited funds (a mere $505B for 2014), the decision on each medical claim is weighed against the decision against paying for another claim.  And the appeal's process is awful - involving 5 layers of oversight that involves two layers where 'NO' is inked on their rubberstamp.

So even with large sums to play with, there are numerous cases where Medicare passes on the opportunity to help some people in need.  Opportunity cost.

$30M is a lot of opportunity cost.  How many kidney transplants is that?  How many people treated for influenza?  How many immunizations, boosters, and treatments would that be?

How many people died?

What is the real cost of a $30M fraud?

The offenders are facing jail time.  Tyrann's mom is facing a year in prison for her part.  The lead offender, Crinel, faces a maximmum of 97 months in prison.  But if you look at the crime in terms of the opportunity cost, then I would recommend that we revisit those sentencing guidelines.

If the 30 mil could have saved a single life, then they are guilty of manslaughter.  If it costs $3M to save a life, then we are talking ten counts of manslaughter. The sentencing guidelines on multiple cases of manslaughter are considerably stiffer than government fraud.

I see possibilities here.  The economic impact sentencing guidelines could be broadened to include other offenses, as well.  Embezzle money from a school district?  Figure out the economic and social costs of having lesser education opportunity for each student.  Then multiply that by the number of students. 

I guarantee that people will think twice about diverting money from the kids after the first offender gets a $15M fine and 75 years in prison. 

Murder charges for Medicare fraud. 

Corruption in constructing roads?  Every pothole that flattens a tire or kicks an alignment out of kilter is now your responsibility.

Suddenly, the prosecution of white collar crime would have teeth - with penalties that fit the crime. 

Let's take another look at opportunity cost.  These kinds of fraud are not victimless crimes.  Shall we stop treating it as though it is?



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