Medicaid plans can expect more fraud, overpayments scrutiny

By: Mary Mosquera, senior editor

Medicaid health plans will need to pay more attention to waste, abuse and fraud as federal and state agencies step up scrutiny to cut incorrect payments and reduce costs.

Medicaid plans can expect to increase screening of hired or contracted professionals brought into their healthcare networks, inspect for overpayments and recoveries, and work with new fraud investigations by the states.

“State fines and penalties have concentrated on Medicaid contract compliance but not regulatory compliance,” said Stuart Freedman, compliance director of Molina Healthcare of Washington, at a Sept. 15 conference sponsored by America’s Health Insurance Plans.

The health reform law also makes provisions for more anti-fraud activities related to Medicaid. As part of that, the Health and Human Services Department released Sept. 14 its final rule to develop a Medicaid recovery audit contractor (RAC) program, similar to one for Medicare, which will rely on states to procure contracts to establish a system to detect fraud and handle overpayments.

Nobody knows how much fraud is in the healthcare system, said Louis Saccoccio, executive director of National Health Care Anti-Fraud Association and a former prosecutor. In 2010, HHS estimated $70 billion in improper payments, including fraud, in Medicare and Medicaid.

“If you’re in the fraud business and you’re looking for an area where you can potentially make a lot of money, health care has it. There are organized crime or enterprise crime groups, not just Mafia, that want to get in on it,” he said.

Earlier this month, an interagency fraud strike force under HHS and the Justice departments broke up Medicare scam operations in eight cities, resulting in charges against 91 individuals, including physicians, whose schemes involved $295 million in false billing.

Saccoccio said it’s important for Medicaid managed care plans to develop a relationship with their state Medicaid fraud control units to go after fraud and share information.

Information sharing and data analysis are especially important because there is not an all-claims database for health care like in the property and casualty lines of insurance.

“You need to be sharing data with investigators, and the investigators need to be talking with you. Data analytics is critical, and once you get information from the tools you are using, you need to share that information,” Saccoccio said.

Among anti-fraud tools, he recommended using:

• Predictive modeling, which is more effective than fraud detection systems because the perpetrators are becoming more sophisticated


• Geographic data to identify members who travel often and great distances to see particular providers


• Social networking sites to help with investigations


• Subscriber pictures and thumbprints on Medicaid cards for identification, better security around enrollees’ identity

The Centers for Medicare & Medicaid Services is continually intensifying its efforts to reduce incorrect payments througha varied of initiatives including increasing law enforcement efforts against fraud, applying sophisticated methods and technology to root out suspicious activities before payments go out the door and sharing information with states, other federal agencies and healthcare fraud units.

While most of these tools have been targeted at rooting out Medicare fraud, CMS will now also target Medicaid fraud, said Dr. Peter Budetti, CMS deputy administrator and director for the Center for Program Integrity.

“We will always be doing pay and chase. Our law enforcement colleagues say we can’t prosecute our way out of this. We have to prevent this. We want to get those guys when they’re at $30,000, not $300 million,” he said.

Freedman offered a number of controls that managed care plans should establish, measure and report to reduce the risk of fraud, including:

1. standards or code of conduct and policies in place about how the organization conducts business and communicate it with partners, contractors and employees.


2. governing authority or board of directors that tackles issues, with a committee that deals with compliance, and an organization compliance officer with a direct line to the president or CEO.


3. training and education, including basic employee training, ongoing and advanced training as rules change, and specialized training for those who handle claims and provider network areas.


4. audit and monitoring of compliance plan, including reporting audits to board and re-audit after correcting any problems. Engage leadership about what keeps them up at night and what might reduce the risk and monitor that.


5. discipline and screening-Even with credentialing process, frequently check employees, network providers and contractors. Establish policies to address fraudulent activity.


6. detection and corrective action. Employ investigative log to track detection through correction. Build rules-based edits into the front end of the system to assure claims accuracy before payment.