Posts Tagged ‘cy pres’

December 10 roundup

West Virginia Attorney General Involved in Medicaid Fraud?

One of the tricks states have used in recent years to raise money without raising taxes is to sue companies for the products they manufacture, on the legal theory that the use of those products lead to increased state health care spending. (The most prominent example, obviously, is the tobacco Master Settlement Agreement.) Not surprisingly, it often turns out that this legal theory is more of a pretext by state attorney generals to get their names in the paper than it is to actually remedy the alleged harms caused by the companies.

In 2004, West Virginia settled with Purdue Pharma, the manufacturer of Oxycontin, over the increased Medicaid costs allegedly caused by addiction to the drug. The settlement was worth $10 million. Logically, then, that $10 million should have gone to the state’s Department of Health and Human Resources to defray Medicaid costs. But there was a problem. Two problems, actually. The first was that giving the money to the DHHR wouldn’t allow Darrell McGraw, the state Attorney General, to dole out money as he saw fit. The second was that the state shares its Medicaid expenses with the federal government, so giving money to the DHHR would enable the federal government to recover part of the settlement.

The first issue has caused political controversy in West Virginia, because McGraw has given out the settlement proceeds to pretty much everybody except the underfunded DHHR, including private law firms that he hired to work on the case. But even the money that the state actually kept was handed out by McGraw based on his personal whims ($500,000 to establish a state pharmacy school (!) at the University of Charleston) rather than by the state legislature, which is constitutionally tasked with making spending decisions about state money.

But the second issue may be causing legal controversy. Legalnewsline reports that the federal government is now investigating the state’s handling of the funds, trying to find out why it hasn’t been credited for its share of the Medicaid funds. But it’s not as if it’s a secret; the deputy attorney general recently testified as to their thinking:

“We have arranged a methodology that has prevented the federal government from coming back and seizing money,” Hughes said.

Or maybe not. If you’re going to try to cheat the federal government, you should probably be a little more subtle about it. No formal charges have been filed, to be sure, and the federal government may simply resolve the problem by withholding future federal payments to the state. But that certainly won’t fix the problem caused by McGraw’s behavior; it will leave a large hole in the state’s budget which could make them worse off than if he hadn’t sued Purdue in the first place.

Outsourcing enforcement in Mass

Massachusetts consumer protection law includes “item pricing” regulations.” A shopper who picks up an item marked $3.19, but is charged $3.59 at the checkout, has been the victim of a violation of these rules. If a state wishes to address such incidents, a practical question arises: how to enforce legal rules when they involve such trifling amounts of money per incident? Enter class action lawyers, naturally. According to the Boston Globe, Massachusetts Attorney General Thomas Reilly has farmed out the enforcement of these rules to a group of private attorneys — who are doing quite well for themselves. Cases against Home Depot and Wal-Mart have been settled; a settlement with Walgreen is pending. If the Walgreen settlement is finalized, the outcome of all this acitivity will be the payment of $3.2 million to the private attorneys, $3.9 million to “an eclectic group of charitable, consumer, and nonprofit groups,” and $425,000 to the AG’s Office. The list of favored groups includes, among others, the Roscoe Pound Institute and Public Citizen. The Globe points out that “it would be impossible to identify consumers hurt by item-pricing failures”; one of the private attorneys claims in the story that the payments to the favored groups will benefit Massachusetts residents, with most being used to “spur greater awareness of consumer rights.” Cases against other retailers (in addition to Walgreen) are pending. (Bruce Mohl, “Reilly turns to private enforcement of item pricing,” Boston Globe, June 27)