GAO report: Millions in fraud, drug abuse clogs Medicaid
As Congress debates the government's role in health care, a report out Wednesday finds that state and federal officials failed to detect millions of dollars in Medicaid prescription drug abuse.
An audit of the government program in five large states found about 65,000 instances of beneficiaries improperly obtaining potentially addictive drugs at a cost of about $65 million during 2006 and 2007 — including thousands of prescriptions written for dead patients or by people posing as doctors.
The report, by the Government Accountability Office (GAO), represents "an enormous opportunity to save money," says Sen. Tom Carper, D-Del., who has scheduled a hearing Wednesday on the findings.
When bills for the doctors' visits are added, along with the potential for Medicaid fraud in states not reviewed by the GAO audit, Carper said: "We're talking hundreds of millions of dollars."
That could be good news for President Obama, who argues that a massive expansion of health care coverage can be funded by squeezing waste out of the current system. But as Pres. Obama continues to press for a government-run health insurance plan, the GAO report also reveals shortcomings in how the government manages Medicaid. The program for low-income and disabled Americans, run jointly by states and the federal government, underwrote more than $23 billion in drug costs last year.
The GAO audit focused on 10 types of frequently abused prescription drugs — painkillers and mood-altering medications. Abuse of such medications is "second only to marijuana," Joseph Rannazzisi of the Drug Enforcement Administration says in prepared testimony for the hearing.
A well-known example is the death of pop star Michael Jackson, which was ruled a homicide in August after revelations that the singer had pressed his personal physician to prescribe powerful sedatives to help him sleep.
The states targeted by the GAO — California, Illinois, New York, North Carolina and Texas — accounted for 40% of Medicaid's prescription drug payments in fiscal years 2006 and 2007. They are not fully taking advantage of federal databases or technology that could spot fraud, the report said.
The GAO found:
• About 65,000 cases where Medicaid beneficiaries visited six or more doctors and up to 46 different pharmacies to acquire prescriptions — a practice known as "doctor-shopping" that allows purchasers to exceed the legal limit of drugs.
• Sixty-five doctors or pharmacists writing or filling prescriptions after being banned from Medicaid, some for illegally selling such drugs.
• About 1,800 prescriptions written for dead patients and 1,200 prescriptions "written" by dead physicians.
States are working to prevent Medicaid prescription abuse but there are "significant issues that must be addressed," Ann Kohler, director of the National Association of State Medicaid Directors, says in testimony prepared for the hearing. One obstacle she identified: tight state budgets that are slowing needed information-technology improvements.North Carolina Must Repay Feds $300 Mil For Medicaid "Billing Errors" (Fraud)-It took the state months to notice that one of its Medicaid funds was flush with money, but employees couldn't figure out why.
Now, because of a huge accounting error, North Carolina must repay the federal government about $300 million for taking too much for public hospital services.
The state will pay back $200 million by the end of this month, and will repay the rest during the next 11 months, according to the state Department of Health and Human Services.
Medicaid is the federal government's health insurance program for the poor and disabled. The state received about $7.5 billion in federal Medicaid money last year. Though the federal government pays most of the costs, the state picks up about one-third of the expenses.
The mistake was triggered in November, when a state worker sent the department's controller's office incorrect information on how much money hospitals should take from the federal government and how much they should take from the state account, said Lanier Cansler, DHHS secretary.
State workers noticed the Medicaid account was out of whack about March, but couldn't find the source of the problem, Cansler said. The state discovered the mistake at the end of June as it prepared to make more changes to Medicaid billing formulas, and told the federal government about it.
The $200 million can be repaid almost immediately because the state has unspent money in the account hospitals were supposed to be tapping, Cansler said.
The $300 million mistake comes at a sensitive time for Gov. Beverly Perdue, as she pushes for tax increases to cover a budget that is nearly a month overdue. Earlier this week, the governor upended budget negotiations, saying she could not support a budget with an income tax surcharge and a drop in per pupil education spending.
In a statement, Perdue said she told Cansler and the state's new Medicaid director, Craigan L. Gray, to make correcting the problem a top priority. She said she wants a report on disciplinary actions.
"While this problem may have originated prior to my term as Governor, the circumstances under which it was made and perpetuated are simply unacceptable," she said.
Perdue said Friday she ordered DHHS to tell the state budget office if its Medicaid accounts are more than 2 percent off projections and submit a report explaining the cause.
This isn't the first time the state has lost the handle on Medicaid payments. DHHS was criticized in a recent legislative report for losing track of how much Medicaid money it was spending on a community mental health program that peaked at more than $100 million a month soon after it started.
New computers coming
A key to better monitoring Medicaid money, Cansler said, is a computer system that will be installed in four months that will let users know quickly how much money is being withdrawn from accounts and where it's going. It will replace a system that Cansler called "old and outdated."
The computer system will cost about $500,000, and the federal government will pay about 90 percent, he said.
After discovering the mistake, DHHS and the state budget office checked all of the department's federal accounts and will examine them each month for problems, Cansler said.
"It raises confidence issues in my mind about everything," he said. "We didn't find anything else. We will continue to look at everything like that and how we can strengthen controls."
Not being run very well
Senate Minority Leader Phil Berger, an Eden Republican, said the state should have been taking such care with its accounts all along.
"You would think there would be internal audit procedures and internal review procedures," he said. "This is just one more indication that our state is not being run very well."
In the past, the state has been asked to repay Medicaid because of incorrect payments to hospitals.
In 2006, the state and 51 hospitals had to repay the federal government $151.5 million in excess Medicaid payments made over six years. The hospitals paid $91.5 million and the state was responsible for the rest.
A two-year investigation found that the state mistakenly claimed too much money through a federal program designed to subsidize hospitals for their care of poor patients.View Larger MapSources: USA Today, GAO, Whitehouse.gov, Charlotte Observer, News & Observer, US Dept of HHS Inspector General, DEA, Health Reform.gov, National Association of State Medicaid Directors, Allbusiness.com, Wikipedia, Google Maps
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