Focusing on Medicaid Fraud

November 22, 2011

HealthcareIf you haven’t been paying attention to recent reports on Medicaid fraud enforcement, now is the time to start.

In 2010, Medicaid Fraud Recovery Units (MCFUs) recovered more than $1.8 billion.  And, although criminal convictions and plea agreements frequently make the news, the vast majority of this money – more than $1.6 billion – was recovered through civil recoveries.

The Centers for Medicare & Medicaid Services (CMS) recently released the final rule for Medicaid Recovery Audit Contractors (RACs).

Section 6411 of the Affordable Care Act directs states to contract with Medicaid RACs that will review Medicaid claims to identify overpayments and underpayments.

Medicaid RACs are modeled on Medicare RACs.  During a demonstration project in just 6 states, Medicare RACs identified over $1 billion in improper payments from 2005 through 2008.   Most of these improper payments – 96% – were overpayments.  The Medicare RAC program is now nationwide.

Medicare RACs are paid on a contingent fee basis of 9 to 12.5%.  And, under the final rule, states are required to pay Medicaid RACs based a percentage of the overpayments recovered.

CMS is projecting a net savings of $2.13 billion for fiscal years 2012 – 2016 from the Medicaid RAC program.

The Office of Inspector General (OIG) recently proposed changes to the standards it uses to assess the performance of state Medicaid Fraud Control Units (MFCUs). MFCUs were created under federal law to investigate and prosecute Medicaid provider fraud and patient abuse and neglect.

States are reimbursed by the federal government for 75% of their costs to operate a certified MFCU.

Under the proposed certification standards, MFCUs are required to maintain adequate referrals from the Medicaid agencies and “other sources,” maintain a continuous case flow with a mix of cases from “all significant provider types,” and have a method of measuring case outcomes that includes the “dollar amounts of overpayments identified.”

It is easy to anticipate more than a few referrals between the new Medicaid RACs and the MFCUs.

While the federal Super Committee and every state legislature are scouring budgets for ways to trim healthcare spending, federal and state fraud enforcement agencies are focusing on Medicaid fraud as a ready source of funds.  USA Today reported that federal healthcare fraud prosecutions are on pace to increase 85 percent over last year.

And, just in the last few months, millions have been recovered:

  • Maxim Healthcare Services agreed to pay $150 million;
  • Pfizer agreed to pay $14.5 million;
  • Laboratory Corporation of American agreed to pay $49.5 million;
  • Watson Pharmaceuticals agreed to pay $70 million; and
  • Par Pharmaceutical agreed to pay $24.4 million.

A million here and a million there, and soon you’re talking about real money.

As federal and state governments make the tough choices on funding for Medicaid, you can be sure that they will look to increased enforcement and recovery to fund their programs.

Resources to help your company or your clients stay in compliance are available on Thomson Reuters Accelus Compliance Advisor.