Is Medicaid Fraud Up? Or Is the State Getting More Vigilant?

The quickest way to cut the state's reeling Medicaid costs? Eliminating fraud and recovering funds, state officials said at a morning hearing. “I just don’t think people out there have any idea how much money is being scammed,” said Sen. Jane Nelson, R-Grapevine, who has filed a bill to reduce Medicaid fraud and reform how payments are made in Texas' Medicaid and Children's Health Insurance Program. “The public needs to know. They should be outraged.”

Lawmakers heard testimony this morning that the Legislature's investment in past sessions to battle Medicaid fraud has paid off — but fraudulent cases are increasing. David Morales, deputy first assistant to the attorney general, told the committee that fraud takes many forms, from billing for services not provided, to up-coding. He said some providers have even billed for diluted or Mexican pharmaceuticals. 

Douglas Wilson, interim inspector general for health and human services, said his division works Medicaid fraud from two directions: by recovering money that shouldn’t have been paid out, and preventing undue payments in the first place. "That, of course, is the preference,” he said. 

Billy Millwee, associate commissioner of Medicaid and CHIP, said investigators also look for patterns “that tell us about fraud and the newest thing in town” so they can intercept it before the costs add up. One form of fraud that’s increasing is in home health and nursing services. “The same health agency that [performs the] service assesses the hours, and then the physician approves that,” Millwee said, leaving no accountability. 

On the criminal side, Morales said the AG's office targets doctors, psychologists and psychiatrists who engage in Medicaid fraud in order to deter them and hold them accountable. The cash cow, he said, "is on the civil side, where we can go and really hammer the larger folks who engage in fraud.” In the last year, the state paid $5 million to operate the Medicaid fraud unit, which brought in $60 million in recovered costs.

Sometimes, the small dollars add up — like when someone bills for an expensive electric wheelchair but really bought a scooter. But cases against large pharmaceutical companies can bring in millions. Take the state’s case against Actavis Mid-Atlantic earlier this month, which received a jury verdict of $170 million. 

Morales says the Legislature’s expansion of the attorney general’s Medicaid fraud unit has helped bring in more cases. Since 2003, when the number of lawyers working these cases increased from five to 30, the number of open criminal cases has increased from 165 to 815, and convictions have increased from 68 to 337. "We're recovering tremendous amounts of money," he said. 

But Sen. Judith Zaffirini, D-Laredo, questioned whether Medicaid fraud is really increasing, or if the state is simply doing a "better job of detecting it.”

Wilson said it's hard to tell. The Medicaid fraud hotline receives more than 800 calls daily, he said, the majority of which are about Medicaid recipients. "Sometimes they see neighbors driving a nice car and they know they’re getting benefits,” he said. Wilson estimates only 10 to 15 percent of these accusations are valid, but he still believes it’s a cost-effective strategy and has helped identify fraudulent cases.