Potential for Fraud in Medicaid

A recent investigation carried out by the Government Accountability Office (GAO), the investigative branch of Congress, has found that there is a form of Medicaid fraud that is going unnoticed.  According to the report, Medicaid covers more than half of their patients through what is known as Medicaid managed care. That is, states pay private insurance companies a fixed rate to cover Medicaid patients. However, the report from the GAO points out these Medicaid managed care contracts are often less monitored than traditional Medicaid provided care. This provides the opportunity for large amounts of fraud to occur. According to an article from Bloomberg BusinessWeek:

Funded jointly by the federal government and the states, Medicaid provided health insurance to about 72 million low-income Americans at a cost of $431 billion last year, according to the report. By the Medicaid agency’s own reckoning, $14.4 billion of federal spending on Medicaid constituted “improper payments,” which include both overpayments and underpayments. That’s 5.8 percent of what the federal government spends on the program. The $14 billion figure doesn’t tally what states lose to bad payments.

The fraud risk for managed care is twofold. Doctors or other health-care providers could be bilking the managed-care companies, which pass on those fraudulent costs to the government. Or the managed-care companies themselves could be perpetrating schemes that cost taxpayers money and harm patients.

These “bad payments” should be quite alarming to consumers as it appears that a large amount of tax money could be being wasted. As states are not required to audit the payments they are making to Medicaid managed care companies, there is currently little that can be done to stop fraud if it exists. The GAO, and others, recommend that audits start, in order to ensure that consumers are protected against fraud carried out by these Medicaid managed companies. Further, beyond financial harm, there is also the possibility that Medicaid managed care companies who carry out fraudulent practices could be putting their patients at risk as well. Therefore, it appears that this fraud is an issue which needs to be addressed in the near future.

Read More- “The Medicaid Black Hole that Costs Taxpayers Millions” (John Tozzi, Bloomberg BusinessWeek)

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A rising senior at Colgate University, John is currently working as a research fellow with Consumers' Research.

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