What We Know About Medicaid Fraud In Louisiana

In Louisiana, we know lots of things about Medicaid fraud after two years of watching the program explode in the aftermath of Gov. John Bel Edwards’ unilateral decision to expand it here, but not enough.

We don’t know enough about Medicaid fraud because the state government is exceedingly poorly poised to deal with the program – so much so that it’s worth asking whether that lack of preparedness was intentional.

That’s a conclusion reasonable to reach in the aftermath of an audit released last week by Louisiana Legislative Auditor Daryl Purpera’s office which has made waves around the state.

“Louisiana’s chief auditor, who is nonpartisan and calls it like he sees it, described the Louisiana Department of Health’s management of the Medicaid program as completely willy-nilly.  It’s embarrassing,” said Sen. John Kennedy this morning.  “Medicaid consumes nearly half the state budget. I don’t think it’s a matter of whether taxpayer dollars were wasted, it’s a matter of how many were wasted because of LDH’s incompetence.   Someone – preferably not LDH – needs to account for every single penny and demand repayment of any that was misspent.”

What Purpera’s report said was auditors found 41 million paid claims totaling $2.4 billion from October 2015 through December 2017 that didn’t have valid provider identification numbers. They found more than 194,000 claims totaling $13 million where the provider type and a specialty code associated with it didn’t match. They identified $136 million in paid claims where a registry showed that a health provider wasn’t enrolled with the managed care organization making the payment. Another $587 million in paid claims involved health providers not linked to a managed care plan.

That isn’t to say all of those discrepancies are evidence of provider fraud. If something isn’t coded correctly it could well be an honest mistake and in many or most cases it is, and the payments are still correct.

But in other cases, somebody is stealing something. And there isn’t a whole lot being done about it.

Last month Steve Gardes, a CPA in Lafayette, penned an op-ed at VermilionToday.com which circulated quite a bit. It accused Gov. John Bel Edwards’ administration of neglecting the problem in no uncertain terms…

Consider the following facts:
· The federal government breaks down Medicaid fraud into “Provider” and “Recipient” fraud, and will only reimburse states for their efforts to control provider fraud. Federal regulations seem to protect Medicaid recipients (a large voting block).
· At the October 25th Task Force on Coordination of Medicaid Fraud Detection & Prevention Initiatives meeting it was discussed how the Louisiana Department of Health (LDH) has inferior computer systems that “puts them behind the eight ball” in addressing recipient eligibility fraud – how in 2016 LDH only made 18 eligibility referrals to sheriffs — how the State Legislative Auditor (Auditor) has found where approximately 208,000 applicants under Medicaid expansion are possibly not eligible ($1 billion of Medicaid payments may be in error) – how LDH does not appear to be on the same team as the Louisiana Attorney General (AG) and Auditor in fighting Medicaid fraud.
· Our AG, Auditor, Representatives Sherman Mack (R-Albany) and Tony Bacala (R-Prairieville) have collaborated on legislation that would (1) define Medicaid fraud to include recipient fraud (HB 88), (2) allow our AG to create a Medicaid Recipient Fraud Unit that would qualify for 50% reimbursement by the federal government (HB 163), and (3) allow tax data to be shared by the AG, Auditor and LDH in their Medicaid fraud efforts (HB 480).
· The Governor signed into law HB 88 – so everyone agrees Medicaid Recipient Fraud is illegal.
· The House passed both HB 163 and HB 480 to give the AG, Auditor and LDH the weapons to attack Medicaid Recipient fraud. However, Senate President John Alario gave them a death sentence as he sent both bills to Senate Committees (Judiciary B and Revenue & Fiscal Affairs) controlled by Democrats, and where they did in fact die.
· Senator J.P. Morrell (D, New Orleans) then offered a “Compromise bill” (SB 119) that allowed tax data to be used only by LDH in verifying Medicaid eligibility – and denying access to the tax data by the Auditor and AG (the only two agencies that are chomping at the bit to attack Medicaid recipient fraud). Remember, LDH is the agency that even the Governor’s Executive Counsel said “does not appear to be on the same team” when it comes to fighting Medicaid fraud.
· Representative Lance Harris (R-Alexandria) recently sent a letter to the Governor requesting that Medicaid fraud legislation be considered in addition to tax revenue legislation in the upcoming 3rd Special Session on June 18th – and therefore combine spending reduction legislation with tax increases. The Governor denied the request.

If you’ve watched committee testimony and floor debate on the bills Gardes mentions and others over the past year, what you’ll notice is that Edwards’ bureaucrats and legislative allies are very defensive about recipient fraud. Earlier this year we reported on testimony which surfaced when Purpera appeared in front of a Senate committee hearing about Medicaid, discussing the $500 million in waste arising from some 83,000 people who don’t qualify for Medicaid but are in the program anyway because the state let them lie about income on their applications…

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.

The objection to policing recipient fraud is ideological, when you drill down to the bedrock. This really is socialized medicine through the back door. The Democrats are now out there selling “Medicare For All!” as a campaign pledge, but that isn’t what’s really on offer. It’s Medicaid For All we’re really getting through the Medicaid expansion.

And by the way, the more unqualified people you sign up for Medicaid the more opportunities you get for providers to rip the taxpayer off. Just last week the Louisiana Attorney General’s office put this press release out

Louisiana Attorney General Jeff Landry today announced 18 people have been arrested and two more are wanted by his Medicaid Fraud Control Unit as part of the 2018 National Health Care Fraud Takedown.

This health care fraud and opioid takedown, the largest health care enforcement action taken to date by the joint Department of Justice and HHS Medicare Fraud Strike Force, involved numerous federal and state agencies working together on the front lines in the fight against health care fraud.

“I applaud my Medicaid Fraud Control Unit and our law enforcement partners for their efforts to end criminal activity, especially when it is being perpetuated by people who are supposed to be taking care of our State’s vulnerable,” said General Landry. “This week’s takedown further intensifies our commitment to find, arrest, and prosecute Medicaid welfare fraudsters and those proliferating Louisiana’s opioid epidemic.”

“Dishonest medical providers wreck lives, cheat taxpayers, exploit the most vulnerable among us, and undermine the well-earned reputations of the vast majority of providers who are dedicated, honest, and rightly viewed as especially trustworthy,” said Louisiana [Middle] District U.S. Attorney Brandon Fremin. “I commend the efforts of Attorney General Landry and his Medicaid Fraud Control Unit to root out these criminals from an otherwise honorable profession, and I look forward to continuing the long partnership between our offices.”

The MFCU is really the only entity in the state actively trying to prosecute Medicaid fraud, and they’re only really working on provider fraud. It’s a sore spot among many in the state legislature that LDH is doing absolutely nothing about the problem – again, the suspicion is it’s intentional neglect. LDH’s response? There’s a page on the department website people can use to report fraud. It’s treated similarly to the way Democrats treat voter fraud – not a serious problem and vastly overblown.

Talk to folks at the AG’s office and they’ll tell you catching the fraudsters is hardly difficult – they just don’t have enough investigators and prosecutors to round up all the villains. It would be easier if anybody at LDH actually cared.

Back to recipient fraud and Medicaid For All – the governor’s line is that Medicaid saves the state money because when someone on Medicaid goes to the hospital the federal government pays 90 percent of the cost for their treatment and the state just 10 percent, as opposed to a 60-40 split with respect to indigent patients with no health insurance. So it’s a good thing, under that thinking, if there are people who don’t qualify for Medicaid but get put on the program anyway, because if they can’t pay for medical treatment it’s more the feds’ problem.

Except that doesn’t account for the cost of processing enrollment and paperwork for people on Medicaid – which is the bulk of that $500 per month each enrollee costs. And the feds don’t cover 90 percent of the enrollment costs; they cover 75 percent. So that $498 million in waste from the 83,000 people Purpera found in his partial sample involves a direct $125 million solvable waste in the state’s budget. And nobody in the administration is lifting a finger to solve it.

Not to mention the fact that people who are uninsured tend not to go to the doctor at all unless they have to, because they don’t have the money for treatment of minor ailments. Medicaid enrollees are a different story, because everything is free – they don’t even have co-pays, and when Bacala brought a bill to introduce them the Democrats killed it as fast as they could. But since Medicaid’s reimbursement to doctors is pennies on the dollar compared to private insurance they end up at the emergency room for things like athlete’s foot and sinus issues, with a maximum cost to taxpayers.

That’s why Kennedy popped off this morning, and it’s why the House Republicans spent the whole first half of the year at the Capitol attempting to do something about getting a handle on the shrinkage from Medicaid fraud.

Fremin was right to commend Landry’s office on their hustle to chase down the Medicaid fraudsters they’ve arrested. But the US Attorney in Baton Rouge is going to need to get further involved, and he might consider opening an investigation into LDH to see whether the department is willingly, provably looking the other way if not encouraging abuse in the system.

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