VIDEO: Did You See Louisiana’s Department Of Health Admit Medicaid Fraud Might Cost Us As Much As $500 Million?

This will likely blow your mind. It’s testimony in the Louisiana Senate Finance Committee yesterday amid the discussion of a bill, HB 88 by Rep. Sherman Mack, which would create the crime of Government Benefits Fraud – something which is already illegal under other statutes but should the bill pass it would become easier for the Attorney General’s office’s Medicaid Fraud Unit, for example, to prosecute people ripping us off.

Louisiana expanded Medicaid under the terms of the federal Affordable Care Act, and in doing so put some half-million new people on the government dole. Essentially those joining the Medicaid rolls are able-bodied adults, but many of them were people who had private health insurance. One effect of the ACA, or Obamacare as it’s perhaps better known, was to make private employer-based health insurance far more expensive – and with the Medicaid expansion it then became very easy for employers, and particularly the small businesses who employ some 53 percent of Louisiana’s workforce, to jettison employees from the company health insurance plan on to Medicaid.

As such, Louisiana’s budget has swelled to nearly $30 billion, with a $3 billion or so increase in the budget of the Louisiana Department of Health (a figure which would grow a lot larger if the tax increases the governor is demanding were to become law). With that kind of willy-nilly increase it starts to become very foreseeable that waste and fraud enter into the picture as a massive cost inflation factor – something the Medicaid Fraud Unit’s frenetic workload is becoming evidence of.

That’s why Mack’s bill can be seen as a potential asset to the state in terms of reining in some of the runaway cost inherent in that increased risk of fraud.

And during the testimony in Senate Finance, Sen. Sharon Hewitt started asking questions not just about the providers, who are the major targets of the Attorney General’s office attempting to rein in the fraud, but the recipients – and specifically what it’s costing Louisiana to provide Medicaid coverage to people who are not eligible for it and have lied on their applications to get it anyway.

And here’s the video…

So it’s now in evidence based on the testimony by Daryl Purpera, the state’s legislative auditor, and LDH undersecretary Jeff Reynolds, that there are some 83,000 Louisianans whose tax information differs from what’s on their Medicaid application by more than $20,000 a year, which is a spread that would make the vast majority of them ineligible to go on the state’s dole, and on average each of these people costs the state some $500 per month in Medicaid services. We were told in a separate conversation with a member of the House Appropriations Committee that some $400 per month of that $500 is from the mere paper being pushed around before any health care services are rendered to these people.

In any event, $500 per month is $6,000 per year – multiplied by 83,000 people, if all of them turned out to be ineligible for Medicaid, equals $498 million.

The House thinks the state’s “budget shortfall,” which doesn’t actually exist since the current budget that was sent to the Senate is balanced without the need for tax increases but would in any event amount to the figure needed to make the state government “whole” as to its funding priorities, is around $495 million.

But that $498 million figure is actually quite conservative. In the testimony in the video, LDH admits only 39 percent of the adults on Medicaid in Louisiana filed a federal tax return – meaning there could well be quite a lot more who make incomes which would disqualify them as Medicaid recipients, either because they’re in the cash economy or because they’re cheating on their taxes. Most of those non-filers are welfare recipients whose incomes are low enough to qualify for Medicaid, but nevertheless it can’t be assumed the savings which could be attained by restricting the Medicaid rolls to those people who actually qualify for the program would be negligible.

In fact, those savings – and Louisiana’s current recognizable waste in Medicaid – are likely at least a half-billion dollars a year. It’s just money flying out of the door because the state was so insistent in signing up as many Medicaid recipients as it could without any fiscal discipline at all.

Will Mack’s bill be a silver bullet in helping to catch and prosecute Medicaid fraudsters, and will it more importantly serve as a powerful enough disincentive to that fraud as to bend the state’s Medicaid cost curve downward? It’s difficult to say. One reason the bill was put forward to next week’s Senate Finance committee meeting was to get a better line on the fiscal effect of its passage, for which it looks like Mack has the votes to achieve.

But the fact that the state expanded Medicaid in the first place without a plan in place to catch, punish and disincentivize fraud is a decision which has probably already needlessly cost Louisiana taxpayers well over a billion dollars. That’s one more reason to recognize the colossal mistake it was to elect John Bel Edwards as the governor.

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