How Can States Eliminate Medicaid Fraud?

The federal government has compiled some best practices to eradicate a problem that costs up to $30 billion annually.
by | January 31, 2013

Eradicating Medicaid fraud has become a central focus for states in recent years, especially as the low-income insurance program has consumed more and more of state budgets. It’s good politics because the public doesn’t like government waste, and it’s good policy because the fiscal pressures mean states could use every extra dollar to fund the program. There are limits to what it can do -- federal estimates place the amount of Medicaid waste in 2012 at $19 billion for federal dollars, while the most recent figures for state spending was $11 billion in 2010. For context: the federal government and state spent more than $450 billion combined in 2012. But these days, every little bit helps.

But how can states actually stop it?

That’s an ongoing question. The Centers for Medicare and Medicaid Services (CMS), which oversees the program from the federal side, recently compiled a list of best practices (dubbed “noteworthy picks”) to disseminate good policies that states had implemented to eliminate fraud. They take on a variety of forms: not doing a business with frequently problematic providers; verifying that services that are being paid for have been performed; using data analysis to detect irregularities; and instituting a greater managed-care approach to ensure an accountable entity is overseeing all of a Medicaid patient’s care.

The Pew Center on the States compiled the CMS review of all state Medicaid fraud practices into a searchable database (available here and highly recommended). Governing searched the information for noteworthy picks only and picked out some of the most interesting examples:

  • In Alabama, the state Medicaid office deactivates a provider’s contract if mail sent to the provider is returned for a problematic address. The office then initiates an effort to locate the provider, but the account remains deactivated until the issue is resolved. This is intended to prevent the state from paying claims to nonexistent or fraudulent providers.
  • Arkansas requires personal care attendants who serve Medicaid patients -- those in need of long-term care, who already consume a disproportionate amount of spending -- to register individually as providers with the state. They must then submit time sheets, showing when they came to and from the beneficiary’s home, to their home company or the state office. The world of in-home care has reportedly become notorious for fraud, so this policy aids in ensuring that only good faith practitioners are paid with government dollars.
  • In California, state officials have instituted Medicaid payment error studies to track data and records to detect patterns that would suggest fraud or waste. Those studies have led to more detailed examinations of payments to pharmacies and adult day care centers. The state has also begun random audits on provider claims every week. Those efforts have resulted in the Medicaid office undertaking new anti-fraud practices.
  • The Florida Medicaid office has made a habit of conducting random, unannounced site visits for a variety of providers -- durable medical equipment manufacturers, community mental health sites and physician groups among them -- before allowing the companies to contract with the state.
  • New Jersey has launched an initiative, called “Operation X”, to guarantee that individuals who have previously been identified as engaging in unethical or fraudulent practices are unable to benefit from Medicaid dollars in the future. The Medicaid office monthly matches Social Security numbers of such people, known as “excluded individuals”, against the state department of wage and labor’s database of health-care workers. If the state finds an excluded individual working for a provider that contracts with Medicaid, an investigation commences to determine if the person is working directly or indirectly on Medicaid cases. If so, the state begins a process to determine if it should reclaim payments and reports its findings to the U.S. Department of Health and Human Services.

There are more great examples in the Pew database, which also allows users to break down by type of activity and by state. As states prepare for the an influx of Medicaid enrollees when the Affordable Care Act’s expansion takes effect next year -- which will result in hundreds of billions more dollars going into the program --fraud enforcement will continue to be emphasized, both at CMS and in the states.

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