Testimony
Before the House Committee on Commerce
Subcommittee on Oversight and Investigations
United States House of Representatives
Medicaid Fraud and Abuse:
Assessing State and Federal Responses
Statement of
John E. Hartwig
Deputy Inspector General for Investigations
November 9, 1999
Office of Inspector General
Department of Health and Human Services
Where State law permits, fraud control units both investigate and prosecute cases statewide. In eight
of the 47 States, the units do not prosecute their own cases but instead refer them to a Federal, State
or County prosecutor. Cases are generated by the units themselves and also come from a variety of
sources including the Office of Inspector General, the Medicaid agency (including the Surveillance
and Utilization Review Subsystem units), other Federal and State agencies (such as Survey and
Certification Units) and the media. In States with fraud control units, the Medicaid agency agrees to
report all suspected cases of provider fraud to the unit. To ensure that Medicaid overpayments
identified by the units through their investigations are recovered, the units are required to either
undertake administrative recovery actions or have procedures to refer them for collection to other
appropriate State agencies.
Although originally managed within HCFA, the oversight responsibilities for the fraud control units
were transferred to the Office of Inspector General in 1979 since the Units' activities were
determined to be more closely related to the OIG investigative function. Federal funds for the
Medicaid fraud control program are included in the Health Care Financing Administration
appropriation. The program reimburses the States for the cost of operating a unit at a rate of 90
percent for the first three years and 75 percent thereafter. Currently, all 47 MFCUs are receiving the
75 percent rate.
Medicaid Fraud Control Unit Accomplishments
Since the inception of the Medicaid fraud control program, the units have recovered hundreds of
millions of program dollars. The following chart represents recoveries to the Medicaid program for
the past five fiscal years for which data are available:
YEAR | Federal Funding Allocated by HCFA | Actual Federal Expenditure | Federal/State Recoveries |
---|---|---|---|
1998 | $ 87,000,000 | $ 85,793,887 | $ 83,625,633 |
1997 | $ 82,000,000 | $ 80,557,146 | $ 147,642,299 |
1996 | $ 79,000,000 | $ 77,453,688 | $ 57,347,248 |
1995 | $ 76,000,000 | $ 73,258,421 | $ 88,560,361 |
1994 | $ 65,600,000 | $ 64,573,926 | $ 42,780,015 |
OIG Oversight of MFCUs
The OIG has responsibility for oversight of the funding and operating standards of the 47 MFCUs,
including coordinating part of their investigative training. During FY 1998, we provided oversight
and administered approximately $85.8 million in funds granted by HCFA to the MFCUs to facilitate
their mission. In FY 1999, HCFA's funding allocation amounted to $92.2 million. For FY 2000,
$97.7 million has been allocated.
The OIG's oversight duties include the initial certification and yearly recertification of the MFCUs.
Regulations require the MFCUs to submit an application to the OIG with an annual report and a
budget request. The MFCU application, annual report, budget and quarterly statistical reports are
reviewed by the OIG to determine if the MFCUs are in conformance with standards issued by the
OIG. The OIG also reviews questionnaire responses from the Medicaid Agency and OIG Field
Offices. On-site inspections and reviews of the MFCUs are conducted by the OIG on an as needed
basis. The OIG maintains ongoing communication with individual State units and the National
Association of Medicaid Fraud Control Units related to the interpretation of program regulations and
other policy issues.
FEDERAL AND STATE PARTNERSHIPS
The OIG has aggressively sought new and innovative ways to stretch our resources and thus
maximize the effectiveness of our anti-fraud efforts. Over the years, we have forged new and
stronger links with other Federal agencies, State governments and the private sector. A major
component of the Health Insurance Portability and Accountability Act of 1996 was the establishment
of a program to coordinate health care anti-fraud efforts. The OIG, MFCUs, and other law
enforcement agencies work together to coordinate anti-fraud efforts. These partnerships have greatly
enhanced our ability to carry out our mission.
Ten years ago, the OIG helped establish the National Health Care Anti-Fraud Association,
representing both governmental and private third party payers and law enforcement agencies, to
coordinate governmental and private health care fraud enforcement activities. Over the years, this
governmental/private partnership group has been extremely successful in fostering our collaborative
efforts. More recently, the OIG has established with the Department of Justice and other
enforcement agencies an Executive Level Working Group to focus on health care fraud. In addition,
the OIG and MFCUs have joined with other State and Federal law enforcement agencies to organize
health care fraud task forces throughout the country.
We have taken steps to develop partnerships and build a team to combat health care fraud and abuse.
Listed below are examples of cases involving both the OIG and MFCUs:
Federal and State Audit Partnerships
Other cooperative efforts include State Medicaid Audit Partnerships. Five years ago, we began an
initiative to work more closely with State auditors in reviewing the Medicaid program. The
Partnership Plan was created as an effort to provide broader coverage of the Medicaid program by
partnering with State auditors, 11 State Medicaid agencies and two State internal audit groups.
Sixteen State auditor reports have been issued with a financial impact of $163 million.
As health care fraud has become increasingly complex, we have found a greater need to coordinate
with other law enforcement entities, as well as others, with a vested interest in fighting fraud and
abuse. For example, our auditors partner with State auditors, other State groups including
departmental internal auditors, departmental inspectors general, Medicaid agencies, and the Health
Care Financing Administration's financial managers, to conduct joint reviews. The level of
involvement of each partner is flexible and can vary depending upon specific situations and available
resources.
The goal of our Federal and State partnership is not just to identify and recommend recovery of
unallowable costs from State agencies. Rather, it is designed to focus on issues that will result in
program improvements and reduce the cost of providing necessary services to Medicaid recipients.
The Plan provides broader coverage of the Medicaid program and provides a more effective and
efficient use of scarce audit resources by both the Federal and State audit sectors.
Since its inception in 1994, active partnerships have been developed in 22 States on such diverse
issues as:
Joint projects have also identified areas where improvements in program operations could be
achieved, unallowable program expenditures could be recovered and future cost savings could be
recognized.
Clinical Laboratory Services. One Partnership Project was undertaken to review Medicaid payments
for clinical laboratory services. The objective of this review was to determine the adequacy of State
agency procedures and controls over the payment of Medicaid claims for clinical laboratory services.
Audits in 22 States examined pricing of lab tests and system edits and controls to detect and prevent
duplicate payments and identified $33.9 million in Federal and State overpayments. The review also
found that State Medicaid agencies did not have adequate controls to ensure that the Medicaid
program did not pay more than Medicare would have paid for the same clinical laboratory tests.
Dual Eligibles. A unique example of OIG auditors, State Auditors, and Medicaid Fraud Control
Units working together is an ongoing managed care initiative involving dual eligible
Medicare/Medicaid beneficiaries. The objective of this review is to determine the extent of
inappropriate Medicaid fee-for-service payments made on behalf of dually eligible beneficiaries
while enrolled in a Medicare risk HMO. The review began with State Auditor work conducted in
two States, Texas and Florida. The Texas State Auditors found that the State Medicaid claims on
behalf of beneficiaries for prescription drug services should have been covered by the Medicare
HMO. The Florida State Auditor's Office found that the Medicaid fee-for-service program
improperly paid for medical services and drugs that should have been provided by the Medicare
HMOs. The questioned payments amounted to over $15.8 million in Calendar Year 1996. As a
result of the findings for 1996, the review was referred to the Florida Medicaid Fraud Control Unit
which is continuing the review for 1994, 1995, 1997 and 1998.
OPPORTUNITIES FOR CONTINUED IMPROVEMENT
I want to describe some recent and continuing activities that relate to improving anti-fraud and abuse
efforts in the Medicaid program.
Training
The OIG sponsored a program to provide five-day training sessions for MFCU investigators at the
Federal Law Enforcement Training Center (FLETC) in Glynco, Geogia. The training is administered
by the Inspector General Academy in cooperation with the National Association of Medicaid Fraud
Control Units and is intended to improve the effectiveness of the MFCUs in investigating and
prosecuting Medicaid provider fraud and patient abuse and neglect.
The Office of Investigations also sponsors and coordinates training conferences regarding the Federal
grant regulations for MFCU employees and other State administrative and financial staff .
Additional training for MFCU investigators is available through the Health Care Fraud Investigations
Training Program provided at the FLETC. The OIG, in cooperation with the Financial Fraud
Institute at the FLETC, developed this two week training program. Course topics include health care
fraud schemes, interviewing techniques, evidence gathering, case preparation and financial
investigative techniques.
Increased Auditing Partnerships
Additional Federal and State partnerships will be developed with the States to strengthen the
capability to detect, prosecute and punish fraudulent or abusive reimbursement activities. Potential
audits and developing issue areas include:
Surveillance and Utilization Review Subsystem (SURS)
In 1972, Congress enacted Public Law 92-603 that provided funding to States
to foster development and implementation of the Medicaid Management Information
System (MMIS). One of the subcomponents of the MMIS is the Surveillance and
Utilization Review Subsystem (SURS). These units were designed to serve as major
contacts and analysis points for detection and referral of potential fraud and
provider abuse cases to assigned components within the States that pursue investigation
of alleged criminal fraud within the Medicaid Program, usually the Medicaid
Fraud Control Units.
As part of the Medicaid Management Information System, the SURS applies automated
post-payment screens to Medicaid claims adjudication to identify aberrant billing
patterns that may indicate fraud or provider abuse. The SURS staff reviews systems
output and conducts preliminary reviews of providers to determine whether they
can substantiate a pattern of fraud. In such cases, they must refer the matter
to the States' fraud control unit for investigation.
Based on a review we conducted in November 1996, we determined that the number
and percentage of suspected fraud referrals from SURS had declined in the previous
10 years. Officials at the State fraud control units were divided in their opinions
as to the extent and quality of SURS development of fraud allegations and edits.
Based, in part, on our recommendation, HCFA established a Program Integrity
Group to address fraud and abuse issues within the Medicaid and Medicare programs.
This group was charged with monitoring many projects that would increase the
effectiveness of fraud unit activities.
Managed Care Fraud
Last summer, we released a report describing the manner in which Medicaid Section
1115 Waiver States detect, review, and refer for investigation fraud and abuse
cases in managed care programs. This emerging area is of great importance as
an increasing number of Medicaid beneficiaries receive health care services
under managed care. In our review of 10 States we found variation in the intensity
and nature of States' oversight activities for managed care fraud and that there
is no general agreement about specific roles and responsibilities for fraud
detection and referral in managed care. We recommended a series of actions for
HCFA to undertake and work with us collaboratively, including establishing guidelines
for States and managed care organizations to follow in developing and carrying
out fraud and abuse detection and referral activities. Also, we recommended
that HCFA ensure that States monitor managed care organizations' fraud and abuse
programs for compliance with its guidelines. Finally, we encouraged HCFA to
continue in developing and sponsoring training in managed care fraud and abuse
referral and detection techniques for the States and Medicaid managed care organizations.
Medicaid Payment Safeguard Activities
We are in the process of conducting a study that will assess Medicaid program
safeguards used in a sample of States and will provide information on the state
of developing safeguards in the areas of provider enrollment, prepayment and
claims processing and post payment review. We are finding several States are
employing new safeguards in provider enrollment that show promising results
in reducing the number of abusive providers within the program. States are now
beginning to employ claims processing edits and other systems improvements similar
to those used by Medicare that should reduce program vulnerabilities. Finally,
we are seeing States begin to target their post payment activities to more accurately
target fraud and abuse activities. All of these developments and new strategies
suggest promising approaches that may be adopted by all of the State agencies
and further strengthen the Medicaid program.
CONCLUSION
We appreciate the opportunity to come before you today and share with you the
continuing improvements that we are witnessing in the ongoing fight against
fraud and abuse in the Medicaid program. We will continue to work for further
improvements that will strengthen the program through our investigations, financial
audits and evaluations of program effectiveness. Perhaps most importantly, we
look forward to continuing our active partnerships with other Federal and State
agencies and to providing oversight and guidance in investigating fraud and
abuse in health care. My thanks to you and the committee for highlighting this
important issue and allowing us to share our continuing efforts. This concludes
my testimony. I welcome your questions.