National Association of Medicaid Fraud Control Units

National Association of Medicaid Fraud Control Units

Medicaid Fraud Control Units

About Medicaid Fraud Control Units

Medicaid provider fraud costs American taxpayers hundreds of millions of dollars annually and hinders the very integrity of the Medicaid program. State Medicaid Fraud Control Units (MFCUs) have long been in the forefront of health care fraud enforcement. A Medicaid Fraud Control Unit is a single identifiable entity of state government, annually certified by the Secretary of the U.S. Department of Health and Human Services (HHS) that conducts a statewide program for the investigation and prosecution of health care providers that defraud the Medicaid program. In addition, a MFCU reviews complaints of abuse or neglect in nursing home and board and care facilities. A Unit may review complaints of the misappropriation of patients’ private funds in nursing homes. The Unit is also charged with investigating fraud in the administration of the program and for providing for the collection or referral for collection to the single state agency and overpayments it identifies in carrying on its activities. 

The Ticket to Work and Work Incentives Improvement Act of 1999 extended the jurisdiction of the Units to allow them, with the approval of the Inspector General of the relevant federal agency, to investigate fraud in any federally funded health care program, such as Medicare. This authority is limited to those cases that are primarily related to Medicaid. This law allows the MFCUs the option to investigate complaints of abuse or neglect of those residing in board and care facilities, regardless of the source of payment.

Federal regulations prohibit the Units from pursuing recipient fraud, unless there is a conspiracy with a provider. In 2013, HHS amended the regulation prohibiting the MFCUs from using federal matching funds to identify fraud through scanning and analysis of data, known as data mining. Federal financial participation for data mining is now allowed if certain criteria are satisfied. A Unit must submit an application for approval.

The majority of the 53 MFCUs are located in the Office of the State Attorney General. Five are located in other state agencies. These are; Connecticut, District of Columbia, Illinois, Iowa, Tennessee, and Texas. Puerto Rico and the U.S. Virgin Islands were certified in December 2018. The other territories do not have MFCUs. North Dakota was certified in September 2019.

Each Unit receives a federal grant, annually, from the U.S. Department of Health and Human Services. This federal grant of 75% must be matched by the state for the remaining 25%. Because of this incentive funding, the Units are subject to certain requirements and limitations. The Units must employ attorneys, investigators and auditors who are required to perform full-time duty intended to last a year and work only on Medicaid fraud cases. Temporary or part-time staff that may conduct an occasional investigation or prosecution do not develop the necessary specialized expertise to successfully investigate and prosecute these very complicated criminal cases.  A Unit is intended to operate as a “strike force” using a multi-disciplinary approach, with the team of investigators and auditors directed by an attorney. 

Units must employ attorneys that are experienced with the investigation and prosecution of civil fraud or criminal cases, investigators with substantial experience in commercial or financial investigations and auditors capable of supervising the review of financial records and advising or assisting in the investigation of alleged fraud. A Unit Director, generally an Assistant Attorney General, manages the Unit, although some Units are managed by an investigator.

Each Unit operates under the administrative oversight of the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services and must be recertified annually. As part of this process, the Inspector General reviews a Unit’s application for recertification and conducts on-site visits periodically.

To receive federal certification, a Unit must be separate and distinct from the Medicaid or single state agency. Federal regulations also prohibit any official from the Medicaid agency from having the authority to review or overrule activities of the Unit. Furthermore, a Unit is prohibited from receiving funds from the Medicaid agency.

The Medicaid agency is required to enter into an agreement, known as the Memorandum of Understanding (MOU), with the Unit that outlines each agency’s responsibilities and duties to each other.

The Units employ approximately 2,000 staff nationwide. Units range in size from the largest New York with a total of 308 to the smallest Wyoming with a total staff of four.

History of the Medicaid Fraud Unit Program

During its first decade, Medicaid, which was created in 1965, operated with few controls against fraud and without any specific state or federal law enforcement agencies responsible for monitoring criminal activity within the program. The need for the MFCUs came about when the public and Congress realized that too many nursing home patients were held hostage by the greed of a small number of facility operators and often dishonest health care practitioners who used the Medicaid program as their own private “ATM machine.”

Congressional investigations and hearings about the problem of health care fraud and abuse began in the early l970s. In l975, New York Governor Hugh L. Carey, with the support of Attorney General Louis J. Lefkowitz, appointed Charles J. Hynes as Special State Prosecutor for Nursing Homes, Health and Social Services, in response to a massive scandal in the state’s nursing home industry. This office was the first full scale comprehensive effort in the country to tackle Medicaid fraud. It was Special Prosecutor Hynes who suggested an outline for a proposal to establish state fraud control units, when he testified before Congress in 1976.

In 1977, Congress responded by enacting the Medicare-Medicaid Anti-Fraud and Abuse Amendments of l977, P.L. 95-142. The objective of these amendments was to "strengthen the capability of the government to detect, prosecute, and punish fraudulent activities under the Medicare and Medicaid programs." On October 27,1977, President Jimmy Carter signed the legislation which provided each state with the opportunity and resources to establish a Medicaid Fraud Control Unit to investigate and prosecute provider fraud and resident abuse. Section 17 provided 90 percent federal funding to the states for three years to establish and operate a Medicaid Fraud Control Unit. In l978, 17 Units were federally certified. 

Congressional support of the MFCU program continued when in l980, the Omnibus Reconciliation Act, P.L. 96-499 provided permanent federal funding for the Units beyond the initial three year period. New Units would continue to be funded at rate of 90 percent for the first three years of a Unit’s existence and after that period, a Unit would receive permanent federal funding at a rate of 75 percent.

This funding formula allows the federal government to ensure that each Unit’s activities are devoted exclusively to investigating and prosecuting provider fraud, resident abuse and fraud in the administration of the Medicaid program.

What is Medicaid Fraud?

Perpetrators of Medicaid fraud run the gamut from the solo practitioner who submits claims for services never rendered to large institutions that exaggerate the level of care provided to their patients and then alter patient records to conceal the resulting lack of care. Although recipients also commit Medicaid fraud, the jurisdiction of the Medicaid Fraud Control Units (MFCUs) is limited to investigating and prosecuting Medicaid provider fraud. The MFCUs have prosecuted individual providers such as physicians, dentists, and mental health professionals. In addition, the Units have also prosecuted fraud in numerous segments of the health care industry, such as hospitals, nursing homes, home health care agencies, medical transportation companies, pharmacies, durable medical equipment companies, pharmaceutical manufacturers and medical clinics.

The following are typical schemes that providers use to defraud the Medicaid program:

  • Billing for Services Not Provided - A provider bills for services not performed, such as blood tests or x-rays that were not taken, full denture plates when only partial ones are supplied, or a nursing home or hospital that continues to bill for services rendered to a resident who is no longer at the facility.
  • Double Billing - A provider bills both Medicaid and a private insurance company for treatment, or two providers request payment for the same recipient for the same procedure on the same date.
  • Billing for Phantom Visits - A provider falsely bills the Medicaid program for patient visits that never take place.
  • Billing for More Hours than there are in a Day - Inflating the amount of time a provider spends with patients, for example a psychiatrist that bills for more than 24 hours of psychotherapy treatment on a day.
  • Falsifying Credentials - Mispresenting the qualifications of a licensed provider in order to defraud Medicaid. For example, a physician who allows a non-physician to impersonate a licensed doctor who medically treats patients and prescribes drugs and then bills the Medicaid program.
  • Substitution of Generic Drugs - A pharmacy bills Medicaid for the cost of a brand-name prescription when, in fact, a generic substitute was supplied to the recipient at a substantially lower cost to the pharmacy.
  • Billing for Unnecessary Services or Tests - A provider falsifies the diagnosis and symptoms on recipient records and billings to obtain payments for unnecessary laboratory tests or equipment.
  • Billing for More Expensive Procedures than Performed - A provider bills for a comprehensive procedure when only a limited one was administered or billing for expensive equipment and actually furnishing cheap substitutes.
  • Kickbacks - A nursing home owner or operator requires another provider, such as a laboratory, ambulance company, or pharmacy, to pay owner/operator a certain portion of the money received for rendering services to residents in the nursing home. Examples of this type of payment include vacation trips, personal services and merchandise, leased vehicles, and cost payments. This practice usually results in unnecessary services being performed to generate additional income to pay the kickbacks.
  • False Cost Reports - A nursing home owner or operator includes personal expenses in its Medicaid claims. These expenses often include the cost of personal items.

Medicaid Fraud Control Units