Feds Look to Crowdsourcing for Help with Medicaid Fraud

January 20, 2014

Govt Blog 3An article in the New York Times recently reported that several Russian diplomats and their spouses living and working in New York were charged with fraudulently receiving around $1.5 million from the federally funded, state run, Medicaid program.  The article described a federal criminal complaint, filed in United States District Court for the Southern District of New York, which alleged a pattern of fraudulent Medicaid application submissions.

The complaint illustrated gross understatements of household income like Mikhail Kuleshov, a second secretary at the United Nations mission, and his wife, Anna Kuleshova who falsely reported in their Medicaid application that no one in the household had any income.  In reality, Mr. Kuleshov had received about $60,000 from the Russian government that year.   The complaint further alleged between 2004 and 2013, 92 percent of births for Russian diplomats and their spouses in New York City occurred in families who received Medicaid benefits.

Similarly, in the Nation’s capital, federal investigators are examining nearly $2 million in Medicaid reimbursements from June 2012 to June 2013 provided to a District of Columbia charter school for at-risk youth.  The Washington Post reported in December that the District’s Options Public Charter School may have engaged in fraudulent activities such as overstating the needs of its disabled students and paying students with gift cards to ride school buses to artificially inflate its Medicaid transportation claims.

Medicaid programs have long grappled with fraud and abuse issues.  As states expand coverage under the Affordable Care Act, the potential for fraud and abuse also increases.  Medicaid programs have employed a variety of strategies to reduce fraud such as disenrolling frequently problematic providers from the Medicaid program; verifying that services that are being paid for have actually been performed; using data analysis to discover irregularities; and establishing a stronger managed-care approach to the supervision all of Medicaid patients’ care.  Despite these safeguards, Medicaid fraud remains a serious issue.

Budget restrictions, more complex policy problems, and the abundance of digital technology has made the federal government receptive to new approaches to problem-solving such as crowd sourcing and open innovation.  Recently, the Centers for Medicare and Medicaid Services (CMS), the federal agency which oversees state Medicaid programs, sought help from “the crowd” and launched an online competition for software developers. Through a series of crowd sourced “challenge” contests, participants developed prototype solutions to assist States with screening providers for fraud to compete for $500,000 to $600,0 00 in prizes.

The prototype solutions included more detailed screening data, such as the results of site visits, criminal background checks, and provider identity verification.  The prototypes also had the capacity to scan provider licensing information and financial data to more easily identify and stop fraudulent provider behavior.

In addition to the developing innovative solutions for combating Medicaid fraud, the competition also allowed the procurement of software without vendor contracts, the traditional route for government software solutions; and made the products of the competition open source, authorizing any state to download and alter the software.

The competition was conducted through partnership involving CMS, the National Aeronautics and Space Administration (NASA), Harvard Business School, the State of Minnesota, and TopCoder, an online company that connects its clients with a virtual community of more than 400,000 programmers around the world.