Lawmaker Seeks Further Crackdown on Medicaid Fraud

Beth Fitzgerald | June 5, 2012 | Health Care
As NJ prepares to add 250,000 patients under the ACA, a state senator urges more screening

New Jersey is making substantial efforts to crackdown on Medicaid fraud — recovering an estimated $310 million in claims in 2011 alone. But at least one legislator believes the state needs to do even more as it moves an estimated additional 250,000 patients into the Medicaid system due to changes ordered by the Affordable Care Act.

“We are not doing such a bad job compared to other states, but I still think until we really do a better job of screening [questionable claims] up front, a lot of fraudulent transactions are not going to be caught,” said Sen. Bob Gordon (D-Bergen) following a hearing Monday by the Senate Legislative Oversight Committee.

The committee heard testimony from state fraud investigators and health insurers, who through managed care contracts, deliver Medicaid services to the majority of New Jersey’s 1.3 million Medicaid members. The state will spend more than $4 billion on Medicaid in fiscal the 2013 budget, he said. When the federal matching dollars are included, Medicaid is about a $10 billion a year program.

With more patients coming, this is a good time for New Jersey to get tough on Medicaid fraud by tightening regulations aimed at preventing overbilling and waste, and by increasing the use of technology to identify fraud before the money goes out the door, Gordon said.

Mark Anderson, director of the Medicaid Fraud Division in the state comptroller’s office, said his division recovered more than $100 million through Medicaid fraud investigations in fiscal year 2011. His office has also reported that it saved another $210 million that year, by refusing to make payments on questionable claims.

Gordon said the state should be recovering several hundred million dollars a year in Medicaid fraud. But several experts discounted national Medicaid fraud estimates, arguing that the healthcare services covered by Medicaid vary from state to state, and some services are more vulnerable to fraud than others.

“We are reporting some of the program integrity activities but probably not reporting all of them, so all of the work that the MCOs [Medicaid managed care organizations] are doing is probably not being comprehensively reported,” said Kathy Runkle, assistant vice president in the fraud investigation unit of Amerigroup, one of the state’s four Medicaid managed care providers.

The state Department of Human Services has been transitioning more of the Medicaid population into managed care, and if a proposal now before the federal government is approved, nearly all of the 1.3 million Medicaid members will get services from one of the MCOs.

Runkle said last year home healthcare services were moved into managed care, and Amerigroup took steps to proactively avoid fraud by reaching out to Anderson’s team. “We asked ‘which home health agencies are on their watch list?’ and we didn’t contract with them.”

The MCOs have regular meetings to review Medicaid fraud issues. “We go around the table and name names and tax ID numbers, and pass around spread sheets with our new cases,” she said.

Runkle cited one case eventually referred for prosecution in which Amerigroup refused to pay a suspicious claim, and the healthcare provider tried to back up the claim with fraudulent documents.

“I was pleased to hear that the MCOs are focusing their attention on filtering out fraudulent transactions,” Gordon said after the hearing. “My sense is we can be doing a better job. The numbers are so large in terms of total expenditures [for Medicaid] and cost recoveries are so low — just intuitively I think we should be doing a better job.”

Anderson testified that his office currently has 200 active investigations and more than 20 ongoing audits, which include a diverse field of Medicaid providers, including pharmaceutical, adult medical day care, laboratory, durable medical equipment, hospitals and transportation providers. His office does investigations to determine if recipients of New Jersey FamilyCare, the state-funded expansion of Medicaid, are eligible for benefits.

Anderson’s staff and the fraud investigators at the managed care companies, all use “data mining” to identify fraudulent patterns of activity in Medicaid claims data, which enables them to flag dishonest providers and halt the payment of claims.

Stephen Eells, state auditor, testified that his staff has identified questionable billings through its audit of Medicaid expenditures. Using data mining, an audit found unusual patterns of billing by hearing aid providers. “One provider actually admitted submitting duplicate claims totaling $53,000.”