Medicaid Fraud Audits Cost Five Times Amount U.S. Found

A program to fight fraud in the Medicaid health system for the poor has cost the U.S. at least $102 million in auditing fees since 2008 while identifying less than $20 million in overpayments, investigators found.

The majority of the audits conducted by 10 companies were discontinued, produced “low or no findings” or were “put on hold,” the Government Accountability Office, the nonpartisan investigative arm of Congress, said today in a report. Three companies won’t have their contracts renewed, and two others will be reassigned, said Peter Budetti, the director of program integrity at the Centers for Medicare and Medicaid Services.

“The results were extremely disappointing, way below what the expectations had been,” Budetti said in a telephone interview. He declined to name the companies terminated because he wasn’t sure whether the actions have been made public.

Medicaid and Medicare, the U.S. insurance program for the elderly and disabled, are plagued by $60 billion in fraud a year, the Justice Department estimates. The Medicaid audit program, which was supposed to identify erroneous payments to doctors and hospitals, has produced “a negative return on investment,” aides to Senator Tom Carper, a Delaware Democrat, said in a staff memo to the Senate Homeland Security and Governmental Affairs committee.

A subcommittee headed by Carper is holding a hearing today in Washington where the GAO report will be released.

‘Trickling Out’

“These programs resemble a funnel through which significant federal and state resources are being poured in and limited results are trickling out,” Ann Maxwell, a regional inspector general for the Department of Health and Human Services, said in prepared testimony for the hearing.

Reducing fraud and waste in government health programs “will help us as we work to curb our federal debt and, in the case of Medicaid, it will help states as they grapple with their own budget problems,” Carper said in an e-mail from a spokeswoman, Emily Spain.

While Medicaid is run by states, more than half its bills are paid by the federal government, which spent about $270 billion in 2011. Anti-fraud efforts in Medicaid were left to states until 2005, when a federal law aimed at reducing the deficit created the Medicaid Integrity Group.

The government then hired 10 companies to conduct Medicaid audits -- five to analyze state data to identify audit targets, and five to audit targeted health providers, Budetti said. More than two-thirds of 1,550 audits of state records since fiscal 2008 were deemed “unproductive” by the GAO after they identified $7.4 million in possible Medicaid overpayments.

Twenty-six audits of health providers turned up $8.1 million in overpayments. Audits conducted in partnership with states, found $4.4 million, according to the GAO.

Audits of state Medicaid records were stopped in February 2011. Budetti’s office plans to assign the auditors to work with states on “collaborative” audits, in which state Medicaid officials select health providers or industries they think federal auditors should target. There are 137 such audits already in progress, he said.