Medicaid Fraud: Are Insufficient Resources Allocated by Federal Government?

Health Care Fraud News: Senator Grassley Demands Action from CMS

In a scathing letter sent August 18, 2004 to Tommy Thompson, Secretary of Health and Human Services and Mark McClellan, head of the Centers for Medicare and Medicaid Services (CMS), Senator Charles Grassley lashed out at the less than adequate measures that have been taken by CMS to investigate and pursue Medicaid Fraud. Based upon a study by the General Accounting Office of Medicaid and Medicare enforcement that was performed at the request of Senator Grassley as Chairman of the Senate Finance Committee, Senator Grassley noted that ""[T]he full scope of Medicaid fraud and abuse has not been fully ascertained. However today's GAO report and other reporting support the conclusion that fraud is undeniably a substantial and growing problem in the Medicaid program."

Senator Grassley went on to detail the lack of financial support that the investigation of Medicaid fraud has received from CMS and how that lack of support contributes the ever-widening problem of Medicaid fraud. The GAO report, entitled "Medicaid Program Integrity: State and Federal Efforts to Detect and Prevent Improper Payments" concludes that the sheer size of the Medicaid program makes it vulnerable to improper payments not just from clerical errors but from intentional fraud and abuse. Senator Grassley's letter notes that Medicaid spending in year 2004 is expected to exceed $300 billion dollars, yet oversight of the Medicaid program has not kept pace with oversight of the Medicare program.

The GAO report indicated that the Centers for Medicaid and Medicare Services, which have the ultimate responsibility for administering those vital health care programs, allocated only 8 staff positions and just $26,000 nationally to oversee the states' Medicaid program integrity activities, including the cost of compliance reviews.

Examples of Medicaid fraud cited by Senator Grassley in his August 18th letter include:

Fifteen clinical laboratories in one state that billed Medicaid for $20 million dollars in services that had not been ordered;

A single optical store that made false claims for $3 million dollars for eyeglass replacements;

A medical supply company forced to repay $50 million dollars to the states because of fraudulent billing practices.

While Senator Grassley praised the "noteworthy" efforts of the Medicaid Fraud Control Units, the state-run units funded jointly by the states and the federal government that pursue Medicaid fraud investigations, he concluded that their efforts are not enough and implied that, despite significant recoveries ($268 million in court ordered fines, restitution, penalties and civil settlements along with 1,096 convictions), those units are facing an uphill battle against ever-increasing Medicaid fraud. In response to a survey by Senator Grassley's Finance Committee, the MCFU's reported increasing concerns over fraud in the areas of durable medical equipment, home health care, transportation and drug pricing.

Furthermore, responses to Senator Grassley's MCFU surveys revealed frustration with the resources available to combat fraud, including inadequate administrative rules, lack of jurisdiction and/or law enforcement authority, insufficient staffing and funding, and the absence in many states of state False Claims Acts. (By way of example, Colorado has a state false claims act with no qui tam provision, meaning no recovery or compensation for citizens willing to stick their necks out to report health care fraud, and correspondingly less reporting.)

Senator Grassley indicated that recent large settlements against pharmaceutical companies "represent merely the tip of the proverbial iceberg..." and that, as settlements against drug companies collectively soar well over $2 billion dollars, "more settlements loom on the horizon."

Senator Grassley demanded that the Centers for Medicare and Medicaid Services respond to his letter no later than September 13, 2004.