How To Catch A Medicaid Fraudfeasor: A Primer

As those of you loyal followers who may already know, and for those who wish to learn,
The U.S. Department of Health and Human Services Office of Inspector General (DHHS OIG) in partnership with the U.S. Department of Justice Attorney General (DOJ AG) has created the Health Care Fraud Enforcement Task Force (H.E.A.T.) to stop Medicare and Medicaid Fraud.

The purpose of H.E.A.T. is to end the annual billions of dollars in fraud, waste and abuse of taxpayer dollars, because, obviously, the states Medicaid Fraud Control Units just were not doing what they were suppose to be doing, and that is stopping Medicare and Medicaid Fraud.

In addition, it seems that the DHHS OIG and the DOJ AG have publicly confessed, with its creation of H.E.A.T., to have been snoring and drooling at the helm as the overseeing admirals of the states Medicaid Fraud Control Units.

But now, since the act of contrition, we need to move forward and get these Strike Forces up and operating, quickly!

Below, is the precursor of my primer on "How To Catch a Medicaid Fraudfeasor."
(Fraudfeasor means simply, "One who commits fraud.")

The following is taken directly from the National Association of Medicaid Fraud Control Units Frequently Asked Questions:

1. What is a Medicaid Fraud Control Unit?

A Medicaid Fraud Control Unit (“Unit” or “MFCU”) is a single identifiable entity of state government, annually certified by the Secretary of the U.S. Department of Health and Human Services. The Unit has either statewide criminal prosecution authority or formal procedures for referring cases to local prosecutorial authorities with respect to the detection, investigation and prosecution of suspected criminal violations of the Medicaid program. See 42 U.S.C. §1396b(q). There are 50 state MFCUs. 43 are currently located in the office of the state Attorney General. Connecticut, D.C., Georgia, Illinois, Iowa, Tennessee and West Virginia have Units which are in other departments of state government. North Dakota received a waiver from the federal government and does not have a Unit.

Since I enjoy using Michigan as my case study, let us begin to examine the deficiencies in this description.

Michigan has a Medicaid Fraud Unit located in the Office of Attorney General, Child and Family Services Bureau, called the Health Care Fraud Division. The duties and responsibilities are to the Department of Human Services through "Medicaid fraud and patient abuse investigations, prosecutions, civil Medicaid recoveries, and vulnerable adult matters."

What is wrong with this picture? The Health Care Fraud Division does not touch "child matters." So, why is this?

Well, the proper response is that the Michigan Office of Attorney General does deal with "child matters." As a matter of fact, there is an entire division dedicated to "child matters" called the Children and Youth Services Division. Oddly enough, the Division only deals with child matters in Wayne County by making the county the only one in the state whereby the Attorney General prosecutes child abuse and neglect matters.

So, how is it that the Attorney General can investigate fraud and protect vulnerable children when the Attorney General is the one advocating for the ones who are the fraudfeasors?

The answer may not be a clear as one would imagine.

At first glance, you see an inherent conflict of interest; this being the Attorney General would have to investigate and advocate, prosecute and defend, or basically, snitch on himself. This is only the first layer.

The next layer is a question of an independent and autonomous authority to investigate and refer Medicaid Fraud for prosecution and recovery. This would be the co-location of authority of the Office of Children's Ombudsman (OCO). The office is, or was, situated in the Department of Management of Budget. Targeted Case Management is a Medicaid funded program for foster care, adoption and juvenile justice. The OCO has the formal authority, through statute and autonomy, to investigate complaints dealing with children in these Medicaid programs, and to make referrals to the counties prosecutors or Attorney General when Medicaid Fraud is suspected. OCO has never made one referral of suspected Medicaid Fraud for prosecution and recovery.

Unfortunately, the DHHS Secretary has certified Michigan's Medicaid Fraud Unit, even though its functions of controlling Medicaid Fraud in child welfare programs are non-existent.

2. Must each state have a MFCU?

Under federal law, each state must have a Unit unless the state demonstrates to the satisfaction of the Secretary of the Department of Health and Human Services that a Unit would not be cost effective because minimal fraud exists in the state's Medicaid program and Medicaid beneficiaries will be protected from abuse and neglect.

3. What is the jurisdiction of a MFCU?

A Unit's function is to conduct a statewide program for the investigation and prosecution of health care providers who defraud the Medicaid program. In addition, a Unit reviews complaints of abuse or neglect against patients in health care facilities receiving Medicaid funding and may review complaints of the misappropriation of patients' private funds in these facilities. The Unit is also charged with investigating fraud in the administration of the Medicaid program. The Ticket to Work and Work Incentives Improvement Act of 1999 authorizes the Units, with the approval of the Inspector General of the relevant federal agency, to investigate fraud in other federally-funded health care programs, if the case is primarily related to Medicaid. This section also authorizes the Units, on an optional basis, to investigate and prosecute resident abuse or neglect in non-Medicaid board and care facilities.

In Michigan, investigations of child resident abuse or neglect falls under the jurisdiction of the Department of Human Services (DHS), the same entity that is procures contracts of residential programs. The Bureau of Children and Adult Licensing (f.k.a. Office of Children and Adult Licensing and was located, independenty, in the Department of Energy, Labor and Growth) has the statutory authority to investigate and protect vulnerable children in receiving care from a licensed facility, particularly under the auspices of the state. This small group of investigators generate findings reports, but are not obligated to refer suspected and substantiated matters of Medicaid Fraud to any law enforcement authority.

4. How are MFCUs funded?

MFCUs receive annual grants (Federal Financial Participation or "FFP") from the U.S. Department of Health and Human Services. Grant amounts must be matched with state funding. Initially, a Unit receives federal funding at a 90 percent level. After its first three years, the FFP is reduced to 75 percent.

The FFP is reduced because the states MFCU are to become sustainable in the prosecution and recovery of Medicaid Fraud. Michigan has finally effectuated (rather semi-effective because there is very little civil incentive for individual referrals of Medicaid Fraud) and enhanced Medicaid False Claims Act. The point of this being the state will aggressively target and capture the recovery funds of Medicaid Fraud. By doing so, the state is allowed to recovery %10 of the FFP.

Alas, in the realms of child welfare, this has never been done.


5. What are the limitations on federal financial participation?

Federal financial participation is authorized for full-time attorneys, investigators and auditors involved in the investigation and prosecution of matters within the jurisdiction of a Unit. Full-time employees are required to be hired to perform full-time duty intended to last at least a year. Federal grant money may also be used for part-time support staff but only to the extent that these part-time employees participate in work activities that further the jurisdictional duties of the Unit. Finally, FFP is available to the Unit's parent agency to cover all indirect costs associated with the operation of the Unit.

Here is a really fun little item: "If the OCO is the co-location of authority to investigate Medicaid Fraud, matters well within the jurisdiction of the Medicaid Fraud Unit, and it never refers suspected and/or substantiated Medicaid Fraud, is FFP being used, and if it is, is being used to cover the state share of the percentage formula?


6. What are MFCU minimal staffing levels?

A Unit is intended to operate using a "strike force" concept of investigators, auditors and attorneys working together full-time to develop Medicaid fraud investigations and prosecutions. The staff of the Unit must include attorneys experienced in the investigation and prosecution of civil fraud or criminal cases, auditors capable of supervising the review of financial records, and investigators with substantial experience in commercial or financial investigations. If a Unit lacks direct prosecutorial authority, it must have a formalized procedure in place for referring cases to the appropriate prosecutorial authority.


Due to the fact that Michigan Medicaid Fraud Unit has never engaged in "strike force" operations, especially in child welfare, H.E.A.T. has stepped up to the plate.

7. What is the extent of federal oversight over a MFCU?

Each Unit operates under the administrative oversight of the Inspector General of the U.S. Department of Health and Human Services and must be recertified annually. As part of the recertification process, the Inspector General reviews a Unit's application for recertification and may conduct on-site visits. Additionally, the MFCUs are required to submit annual reports to the Inspector General. These reports include specific statistical data required by federal legislation on the number and type of cases under investigation, the number of convictions obtained and the number of dollar recoveries to the Medicaid program. The day-to-day supervision of a Unit rests with the parent agency.


8. How do Medicaid fraud cases typically arise?

While specifics may vary from state to state, a primary source of referrals is the agency responsible for auditing and reviewing Medicaid provider claims, the Medicaid agency. Other significant sources of referrals are the MFCUs in other states as well as other law enforcement agencies.

In Michigan, there are multiple "co-locations" to make primary referrals, but nobody does it. The investigative reports fade into the shadows of internet archives, and rather quickly, I must say!

This is one of my favorite examples of the non-existence of referrals in Michigan:

Michigan Office of the Auditor General, Audit Report, Financial Audit Including the Provisions of the Single Audit Act of the Department of Human Services, October 1, 2004 through September 30, 2006, Report #: 431-0100-07, (Pages 101-102). Thomas H. McTavish, C.P.A., Auditor General. (Released August 2007).

“DHS is primarily responsible for the expenditure of Foster Care: Title IV-E Program funds.

DHS has a contract with Wayne County to provide funding to Wayne County for eligible juvenile justice children. DHS considers Wayne County to be a subrecipient.

In order to be reimbursed, Wayne County submits a billing, which lists the Wayne County juvenile justice children for whom they are requesting reimbursement. DHS does not verify the eligibility of the children for whom they are paying. We were informed by DHS that the documentation would be retained by Wayne County because it was Wayne County that was responsible for continued eligibility determination. However, in our discussions with Wayne County, we were informed that it was DHS who was responsible for the continued eligibility determinations. The contract between Wayne County and DHS was silent on who was responsible for the continued determination.

As the grantor of the federal funds, OMB Circular A-133 requires DHS to monitor the program to ensure that the funds are expended for only eligible children. Because of the lack of understanding between the two parties and the lack of documentation for the items we reviewed, we have questioned all of the amounts provided to Wayne County for the two years ended September 30, 2006.” (Emphasis added)

The Audit Report continues to say in part:

“If DHS did not improve, it faced a possible penalty of $22 million”…. “The U.S. Department of Health and Human Services conducted the second eligibility review of DHS’s case files for foster care maintenance payments issued between April 1, 2006 and September 30, 2006. Prior to the review, DHS conducted an extensive case file review to identify cases that did not meet Foster Care: Title IV-E Program eligibility requirements. For cases that DHS determined did not meet the Foster Care: Title IV-E Program eligibility requirements, DHS changed the funding source on the cases to a funding source other than Foster Care: Title IV-E Program before April 1, 2006… As a result, those cases were not in the population reviewed during the federal review…The federal review concluded that DHS was in substantial compliance with federal eligibility requirements for the period April 1, 2006 through September 30, 2006.

We issued a qualified opinion on the Foster Care: Title IV-E Program. Our conclusion is different from the federal review because our sample included cases from the entire audit period.

RECOMMENDAITONS
FOR THE THIRD CONSECUTIVE AUDIT, WE RECOMMEND THAT DHS IMPROVE ITS INTERNAL CONTROL OVER THE FOSTER CARE: TITLE IV-E PROGRAM TO ENSURE ITS COMPLIANCE WITH FEDERAL LAWS AND REGULATIONS REGARDING ACTIVITIES ALLOWED OR UNALLOWED, ALLOWABLE COSTS/COST PRINCIPLES, AND ELIGIBILITY.

We also recommend that DHS improve its internal control to ensure compliance with federal laws and regulations regarding subrecipient monitoring.”

TRANSLATION: "TAG, YOU'RE IT!"


9. How do the multi-state/federal global settlements arise and how are they handled?

Medicaid fraud global settlements generally arise in connection with a U.S. Department of Justice investigation against a Medicare provider. When resolving these Medicare cases, the federal government, often at the request of defense counsel, turns to the state MFCUs because it cannot settle the Medicaid portion of the case without the Units. Moreover, defense attorneys are unlikely to settle the case without the affected states because each state has the authority to exclude a convicted provider from its health care programs. The Department of Justice typically contacts the National Association of Medicaid Fraud Control Units about a potential settlement, and the President of the Association appoints a settlement team which usually consists of three to four members.

Michigan has no exclusionary database because Medicaid Fraud in child welfare programming is never referred for prosecution. In the Michigan Auditor General Annual Report 2008, the imperative was revisited for a fourth time, for Department of Human Services to engage in contractual debarment and assessing sanctions for questionable and improper payments, and lack of internal controls.

10. What federal consequences follow a felony conviction for Medicaid fraud?

Under federal regulations, providers who are convicted of a program related offense are excluded for a minimum of five years from receiving funds from any federally funded health care program, either as a health care provider or employee. Often, this sanction has a greater impact on the convicted individual and the provider community at large than the criminal penalties assessed in the case.

The world eagerly awaits the first felony conviction in Michigan.

11. What is the National Association of Medicaid Fraud Control Units (NAMFCU)?

The National Association of Medicaid Fraud Control Units (NAMFCU) was founded in 1978 to provide a forum for a nationwide sharing of information concerning the problems of Medicaid fraud, to improve the quality of Medicaid prosecutions by conducting training programs, to provide technical assistance to Association members and to provide the public with information about the MFCU program. All 50 MFCUs are members of the Association. NAMFCU is headquartered in Washington, D.C. and is staffed by a Counsel, an Association Administrator and a part-time Association Assistant.

Here is my take on the National Association of Medicaid Fraud Control Units:

SQUAMULOUS LAGS.

I submit that NAMFCU needs to be put on the H.E.A.T. "laundry list."