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POLICY: Fraud in Medi-Cal, by Matt Quinn

Guest contributor Matt Quinn reports from THCB’s Sacramento Bureau.  After reading his article, cogitate on this question. D’you think that a newcomer to the California political scene, elected Governor on a "platform" of cutting government bureaucracy, might find this information the basis for some (assume thick Austrian accent here) "full auditing"?

On Thursday a grand jury indicted two LA residents on Medi-Cal fraud charges totaling $40 million, the largest fraud case ever filed by the U.S. attorney’s office in Sacramento. The couple are charged with "stealing doctors’ and patients’ identities to bill the programs for laboratory tests, drugs and medical supplies that were never provided and for services that were exaggerated or provided by unlicensed personnel from 1996 to 2000. According to the indictment, ‘[a]lthough the patients did not see a doctor or receive any treatment or services,’ the defendants submitted bills ‘as if those individuals had been to an office visit.’ "

While this might seem like a momentous blow against the forces arrayed to defraud Medi-Cal, it hardly amounts to a drop in the bucket.   A recent study conducted by the Orange County Register estimates that 10-35% of the $29.2 billion Medi-Cal budget, which provides coverage to about 6.8 million residents, could be fraudulent.  And that most of the fraud was conducted by providers (or "fake providers") and not beneficiaries.  As in this case, the most common Medi-Cal fraud tactics include "inflated bills, false tests and bills for services not performed", according to the Register article. 

So why is Medi-Cal so easy to defraud…or at least get away with defrauding?  First, there are many, many Medi-Cal providers and not enough people to oversee them.  Within the Department of Justice Bureau of Medi-Cal Fraud and Elder Abuse, an agency that deals with fraud, 411, or 42%, of the current 973 pending fraud probes are not being investigated.  They report that anti-fraud efforts are "underfunded or overwhelmed, or both."

Next, Medi-Cal fraud is often not readily apparent, even with the recently revised enrollment guidelines and routine of provider re-enrollments and on-site reviews by the Department of Health Services, the agency that administers Medi-Cal.  When enrolled Medi-Cal providers correctly bill for services not actually performed on legitimate Medi-Cal enrollees and have the (legitimate looking but fake) purchase records for supplies and (legitimate looking but fake) medical records to back them up, it takes in-depth investigation, interviews with beneficiaries – in other words, plenty of resources – to find most fraud.  A 60 Minutes broadcast a couple of years ago exposed the industry that provides (mostly DME providers) with the fake billing records to back of the millions of dollars for orthotics and braces that they were billing Medi-Cal.  Sophisticated criminals, lots of money and not enough oversight  results in lots of fraud.

Finally, (and perhaps most disturbingly), the report detailing the billions of dollars of taxpayer money being looted by Medi-Cal fraud "went all but unnoticed in the Capitol," according to the Register report.  While I’m sure that the state of California couldn’t use an extra $3 – 10 billion right now (not that Gray Davis did, as I remember, propose to beef up the funding/staffing for investigators), I wonder why this isn’t a bigger issue.  As this case demonstrates, tens (hundreds?) of millions of dollars can be found without even looking into how doctors practice medicine (i.e. the realm of clinical quality, evidence-based medicine, and other touchy subjects).

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