New Oversight Report Documents Implications of Persistent Waste and Fraud in Medicaid

April 25, 2012

Texas, Minnesota and New York City Abuse Cited

(WASHINGTON)—The House Committee on Oversight and Government Reform has released a new report documenting shortcomings in the federal Medicaid program leading to billions in wasteful or fraudulent spending. The Committee noted that Medicaid spending had grown by 450 percent over the past two decades, and is projected to more than double over the next decade.  As spending increases, the report said, the likelihood for waste, fraud and abuse also increases.

The Committee report spotlights three state examples where states failed to properly ensure the appropriate use of taxpayer dollars.

In Minnesota, the Committee report points out, the state was intentionally lowering the rates paid to managed care companies for plans outside Medicaid and increasing the rates within the Medicaid managed care program.  The state was using this accounting trick in order to leverage the federal reimbursement of Medicaid spending.

As the report indicates, at the end of 2010, Minnesota’s four non-profit HMSs had a total surplus of $1.6 billion.  Because the firms are non-profits, they took these profits by increasing their reserves and paying large employee bonuses.  The federal Centers for Medicare and Medicaid Services (CMS) was alerted to the problem over a year ago, but has failed to take action to protect this waste of taxpayer dollars.

In Texas, massive fraud was occurring in the state’s Medicaid dental and orthodontics program.  By 2010, the state’s program was spending more on braces than the other 49 state programs combined.  CMS failed to prevent this anomaly and the issue was only brought to light by a Dallas investigative journalist.

A New York Times reporter also pursued allegations of fraud and waste in New York City’s Medicaid program.  It noted that as much as 10% of Medicaid dollars in the city are lost on fraudulent claims, while another 20 or 30% consist of abuse or services that were delivered but that were unnecessary.  A Department of Health and Human Services (HHS) Inspector General audit found that between January 2004 and December 2006, the City improperly claimed over $275 million in federal Medicaid funds for personal care services.  A second audit noted improper claims totaling $207 million for rehabilitative home care services.

“A functioning safety net to protect and provide care for the most needy in our society is essential,” Chairman Darrell Issa (R-CA) said.  “But when the program that delivers these services is fraught with waste and abuse—and lacking in oversight from its federal managers, it does a disservice to its customers and taxpayers.”

A copy of the full report is available here.  A link to a joint Oversight Subcommittee hearing on this subject held today is available here.

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**Updated report published April 27, 2012

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