Medicaid Fraud

State Medicaid FraudGeorgetown Health Solutions

1

Purpose

To provide an analysis of Medicaid programs, focusing on selected states,

policies, and service cost areas in order to

determine consulting opportunities for Alvarez & Marsal.

2

Outline

•Why Medicaid?•State Selection•Background•Small State Analysis•Medium State Analysis•Large State Analysis•Conclusion

3

Why Medicaid?

4

Spending• Health care costs have been rising for

several years▫Expenditures on health care surpassed

$2.3 trillion in 2008•Medicaid spending in the US (2007):

$319,676,945,585• Starts are not well-positioned to withstand

the loss of revenue and increased cost of healthcare associated with the economic downturn

• 1% rise in unemployment adds 1 million enrollees in Medicaid and SCHIP

5

Source: KFF: Medicaid, SCHIP, and Economic Downturn: Policy Challenges and Policy Responses

Fraud

•Medicare fraud ranges from 3 to 10 percent of total expenditures▫Between $68 billion and $226 billion

annually.•Takes critical resources out of the health

care system•Causes health care costs to rise•Results in higher premiums for enrollees

6

Source: http://www.medicare.gov/Publications/Pubs/pdf/10050.pdf

http://www.medicare.gov/Publications/Pubs/pdf/10050.pdf

Recoveries• Recoveries to the federal

government amounted to $7.269 billion over the 2000–2004 period▫ Whistleblowers were

paid$627 million during this time period

• Civil health care fraud recoveries in FY 2004 were $1.8 billion

7

Source: http://www.taf.org/FCA-2006report.pdf

State Selection

8

State Selection Process & Criteria1. States were organized according to total

population2. States were categorized by the number

of laws/criteria that were met (FCA, qui tam, and DRA)

3. 11 categorically unique states were selected ranging from large populations meeting all criteria to small populations meeting no criteria

9

State SizeCriteria

Met

Ordinal State Size

Number of Residents

(2007-2008)

Medicaid Enrollment

(2007)

Total Medicaid Spending

(2007)

FMAP (2007)

California Large 3 1 36,408,713 28.93% $35,967,973,808 50.0%

New Jersey

Large 2 11 8,528,286 10.72% $8,917,247,008 50.0%

Ohio Large 0 7 11,328,525 17.97% $13,055,536,533 59.7%

Texas Large 3 2 23,881,064 17.45% $20,590,458,601 60.78%

Florida Large 2 4 18,016,995 16.75% $13,583,925,509 58.76%

Wisconsin Medium 3 20 5,502,934 17.78% $4,937,145,634 57.5%

Minnesota Medium 2 21 5,149,317 14.98% $6,191,584,929 50.0%

Maryland Medium 0 19 5,534,528 13.73% $5,435,635,386 50.0%

Nevada Small 3 35 2,571,148 11.00% $1,243,947,007 54.0%

Delaware Small 2 45 859,761 21.54% $990,917,350 50.0%

Vermont Small 0 49 611,672 25.60% $904,331,790 58.9%

Selected States

10

Sources: Kaiser Family Foundation

Federal Matching Assistance Percentage (FMAP)

11

State Size 2007 2008 2009 2010

California Large 50.0% 50.0% 61.6% 61.6%

New Jersey Large 50.0% 50.0% 58.8% 61.6%

Ohio Large 59.7% 60.8% 70.3% 73.5%

Texas Large 60.78% 60.53% 68.76% 70.94%

Florida Large 58.76% 56.83% 67.64% 67.64%

Wisconsin Medium 57.5% 57.6% 65.6% 70.6%

Minnesota Medium 50.0% 50.0% 60.2% 61.6%

Maryland Medium 50.0% 50.0% 58.8% 61.6%

Nevada Small 54.0% 52.6% 63.9% 63.9%

Delaware Small 50.0% 50.0% 60.2% 61.8%

Vermont Small 58.9% 59.0% 67.7% 70.0%

Sources: Kaiser Family Foundation

Background

12

State Policy and Fraud• False Claims Act (FCA)

▫ Empowers the United States, and private plaintiffs suing on its behalf, to bring lawsuits against individuals and companies suspected of defrauding the government

• Qui Tam Action▫ Cases brought about by a private plaintiff

(whistleblower)• Deficit Reduction Act of 2005

▫ Shift costs to beneficiaries and have the effect of limiting health care coverage and access to services for low- income beneficiaries; states meeting regulations increase federal funding for Medicaid by as much at 10%

13

Institutional Long-Term CareFour types of institutional and long-term

inpatient care covered by Medicaid:1. Nursing facility services (NF) for Medicaid

enrollees ages 55 and over2. Intermediate care facilities for mentally

retarded and developmentally disabled individuals (ICF/MR)

3. Mental hospital services for enrollees who are 65 or older (MH Aged)

4. Inpatient psychiatric care for enrollees younger than 21 years of age (IP-Psych <21)

Source: 2007 MAX Chartbook, CMS

14

Other Service Definitions•Durable medical equipment (DME)

▫Includes the cost to rent, purchase, repair, or replace medical equipment, supplies, home improvement, and emergency response systems

•Prescription drugs▫Outpatient prescription drug payments


15

Cost Measures

•States can elect the levels at which they provide ILTC▫Complete, conditional, or none

•As such, the variable nature of their programs is reflected within our statistics

•To help mitigate this issue, average payments were utilized

16


Small State Analysis

17

Spending

Small Delaware Small Nevada Small Vermont

Federal Spending (FY07) 495458 670860 532922

State Spending (FY07) 495458 573086 371409

FMAP (FY07) 0.5 0.54 0.5893

$100,000

$300,000

$500,000

$700,000

$900,000

$1,100,000

$1,300,000

Federal and State Spending(in thousands)

Tota

l Spendin

g (

In T

housa

nds)

18

Source: Kaiser Family Foundation

ILTC Service Costs

FFS MH Aged FFS IP Psych < 21 FFS ICF/MR FFS NF

Delaware 8448.63513509998 58381.8148150005 139495.882019999 44154.69904

Nevada 3249.16666669998 26538.1395939998 126946.151110001 32020.092901

Vermont 1044.08139529999 0 135091.85714 29405.137033

$10,000

$30,000

$50,000

$70,000

$90,000

$110,000

$130,000

$150,000

Average Per ILTC User

19

Differences in IP Psych<21, can be attributed to Nevada having a cost based negotiated rate. Delaware’s IP Psych is per diem based.

Source: MAX 2005, Kaiser Medicaid Database

Other Service Costs

FFS Drugs FFS DME MC ILTC MC Drug

Nevada 2291.81641620004 721.01659772 8.137160257 19.3649049980001

Delaware 2284.61377450002 716.230038510001 22.7000760789999 584.291484640004

Vermont 1491.0789736 447.025575449996 0 0

$250

$750

$1,250

$1,750

$2,250

Average Payment Per User ILTC

20

Further exploration of differences in FFS drug costs, as well as MC costs, may be beneficial . Vermont’s managed care plans only include MCOs, thereby eliminating the need to pay for ILTC and drug costs

individually.Source: MAX FY 2003-2005

Fraud and Recoveries (2007)

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State

Legislative Criteria

Total Expenditure for

Medicaid Integrity Activities

Total Overpayments

Discovered as a Result of

Provider Audits

Total Recoveries

from Provider Audits

Total Recovered from ALL Medicaid Integrity Activities

ROIFCA

Qui Tam

DRA

Delaware Yes Yes No 1,054,000 5,168 N/A 5,302,402 503.1%

Nevada Yes Yes Yes 2,311,606 121,720 1,802,838 1,802,838 78%

Vermont No No No N/A 206,529 206,529 206,529 N/A

The Return On Investment data suggests that the most risk averse Medicaid recovery opportunities exist in Delaware due to a lack of data in Vermont and a poor recovery rate in Nevada.

Sources: SPIA 2007, Kaiser Family Foundation

Problem Statement

•Cost of drugs per enrollee in DE differs significantly when compared to other comparable states▫Twice as much as VT in FFS program▫More than 30 times as much as NV in MC

program•Nationwide, drug prices have been on the

rise with brand-name drug prices averaging an increase of 9% while generic drug prices decreased 10.6% between 2008-2009

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Source: MSIS FY 2005, AARP Bulletin Today, 2009

Existing SolutionsDE NV VT

Think DRA will reduce outpatient Medicaid costs

Not likely, but determined N/A Not likely, but

determined

Flexibility given to Medicaid Managed Care organizations to Develop Pharmacy Policies

All drugs carved out of managed care

Data not available and state has MCO-model

Medicaid managed care

No MCO-model Medicaid managed

care

Rx Drug Purchasing Pool Top$ N/A SSDC

Comparative Effectiveness Reviews Useful

Yes N/A Yes

Collection of rebates on Physician-Administered Drugs

Some N/A All

Medicaid Claims Processing Systems that Allow for the Billing of NDCs

Currently working on upgrades N/A Yes, system in

place

Medicaid Medication Management Programs Yes N/A No

Source: National 2006

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Further Analysis

•According to OIG in 2008, the Drug Rebate program had a difference between debits and credits of over $98 million▫Further investigation of this issue with

reporting and record-keeping could reveal fraudulent practices

•Based on the drastic differences in drug costs in similar states, it would be beneficial to investigate the potential for fraud within the state of Delaware

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Source: OIG 2008

A&M Opportunities• Assist in the restructuring of DE’s maximum

allowable limits, particularly for generic drugs and reimbursement formulas

• Provide an analysis on the benefits of enrolling in a different interstate bulk-purchasing program

• Develop a process that will assist Delaware with collecting all rebates from physicians’ offices

• Advise DE regarding the advantages and disadvantages of instituting co-payments for patients purchasing medications

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Medium State Analysis

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Spending

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Source: MAX FY 2003-2005

Medium Maryland Medium Minnesota Medium Wisconsin



FMAP (FY07) 0.5 0.5 0.574700000000001

$500,000

$1,500,000

$2,500,000

$3,500,000

$4,500,000

$5,500,000

$6,500,000

Federal and State Spending(in thousands)

Tota

l Spendin

g (

In T

housa

nds)

ILTC Service Cost


Maryland 114425.42 77397.5663339994 169694.11559 38280.749303

Minnesota 18558.095238 25213.730594 59583.175956 20561.018069

Wisconsin 17792.85443 14148.080835 86625.692164 24557.863188

$10,000

$30,000

$50,000

$70,000

$90,000

$110,000

$130,000

$150,000

$170,000

Average Paid Per ILTC User

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Maryland’s rates are far greater than similar states. Differences between ICF/MR and NF may be attributed to MD’s use of a cost-based

reimbursement method for these services.Sources: MAX 2005, Kaiser Medicaid Database

Other Service Cost


Maryland 3538.60406549996 1033.1977799 82.198525136 223.56006724

Minnesota 3160.7320313 1840.6017514 1245.1880578 64.8873378749988

Wisconsin 2419.7471689 468.34860135 8.78585632 37.704655262

$250

$750

$1,250

$1,750

$2,250

$2,750

$3,250

$3,750

Average Paid Per User

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Differences in MC ILTC costs in Minnesota require further analysis. These differences may be attributed to an increased case mix in their MC

population. Additionally, differences in average cost of DMEs would benefit from further analysis. Sources: MAX 2005, Kaiser Medicaid Database


State


Total Expenditure for Medicaid

Integrity Activities

Total Overpayments Discovered as

a Result of Provider Audits

Total Recoveries



ROIFCA Qui Tam DRA

Wisconsin Yes Yes Yes N/A 6,248,872 N/A 10,353,053 N/A

Minnesota Yes Yes No N/A 7,891,716 9,323,000 N/A N/A

Maryland* No No No 3,989,120 21,228,872 21,228,872 22,936,011 575%

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The Return On Investment data suggests that the most risk averse Medicaid recovery opportunities exist in Maryland due to a

lack of data in Wisconsin and Minnesota.

Sources: SPIA 2007, Kaiser Family Foundation, MD Chamber of Commerce

*Maryland passed a FCA on April 9, 2010 allowing for penalties and damages for false claims, as well as up to 30% of the proceeds to go to the whistleblower.

Problem Statement• MD spends 6x more for MH aged, 3x more for IP

Psych<21, and 2x more for ICF/MR than next analyzed state

• State spends 49.6% of its budget for ILTC costs on nursing facilities

• Residents aged 85 and older are projected to nearly double by 2030

• Patients prefer to receive LTC at home, but MD spends almost 90% of the state’s Medicaid funds on institutional care

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Existing Solutions

•Move institutionalized patients into the community

•Home and Community Based Services (HCBS) Waivers (FFS based)▫Offered to older adults, persons with

disabilities, and children with chronic illnesses

▫MD spends 11% of its Medicaid LTC HCBS money for older people and adults with physical disabilities ranking it at 39th in spending on home care services for this population

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Sources: MD DHMH

Existing Solutions cont’d• Managed Care Programs

▫Program for All-Inclusive Care for the Elderly (PACE) Allows them to receive long-term care from home Only for those in the Baltimore area

▫HealthChoice Coordinates care among a variety of services Contractor is responsible for this coordination Offer HCBS

• New Directions▫Allows enrollees to manage their own care

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Further Analysis

•MD is issuing more waivers, but would be beneficial to determine if the number of available beds is decreasing in these institutions

•Determine why cost setting commission does not lower reimbursement rates

•Further investigation on the role fraud is playing on high costs may be warranted

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A&M Opportunities• Further explore who exactly is being left in

institutions and determine ways to assist them in a less expensive manner within those facilities

• Develop solutions that will increase the number of waivers awarded

• Assist in the expansion of managed care programs

• Review rate setting commission practices

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Large State Analysis

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Spending

California New Jersey Ohio



FMAP (FY07) 0.5 0.5 0.5966

$2,500,000

$7,500,000

$12,500,000

$17,500,000

$22,500,000

$27,500,000

$32,500,000

$37,500,000

Federal and State Spending

Tota

l Spendin

g (

In T

housa

nds)

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Spending

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California Florida Texas

Federal Spending (FY 2007) 17983986 12514800 7987348

State Spending (FY 2007) 17983986 8075577 5596577

FMAP (FY 2007) 0.5 0.607800000000001 0.5876

$2,500,000

$7,500,000

$12,500,000

$17,500,000

$22,500,000

$27,500,000

$32,500,000

$37,500,000

Federal and State Spending

Tota

l Spendin

g (

in T

housa

nds)

ILTC Service Cost


California 126827.4 20718.6138609999 78626.127268 29328.415535

New Jersey 57971.122078 78234.0574260001 181632.48005 39765.079847

Ohio 7299.25 5225.0024896 89042.385519 31520.1880050001

$10,000

$30,000

$50,000

$70,000

$90,000

$110,000

$130,000

$150,000

$170,000

$190,000


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Source: MAX 2005

The high costs of ICF/MR in New Jersey requires further analysis.

ILTC Service Cost

MH Aged IP Psych <21 ICF/MR NF

California 126827.4 20718.61386 78626.12727 29328.41554

Florida 35367.17361 0 94972.34975 28847.94816

Texas 13799.89044 8730.36663799996 66774.54953 18755.0312499999

$10,000

$30,000

$50,000

$70,000

$90,000

$110,000

$130,000


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The high costs of MH Aged in CA requires further analysis.Source: MAX 2005

Other Service Cost

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FFS Drug FFS DME MC ILTC MC Drug

California 2574.320835 263.791664299999 62.33996567 73.5690955

Florida 2166.049454 639.435290199997 32.19106888 70.7689604400003

Texas 1116.004225 518.715658099999 10.89507491 351.3119394

$250

$750

$1,250

$1,750

$2,250

$2,750


Source: MAX 2005, Kaiser Medicaid Databse

While the number of enrollees in Florida and Texas are closer in number to California’s enrollees, their per user payments do not contribute an explanation to California’s cost discrepancies. In a FFS Drug cost comparison, California’s high rates in comparison to FL and TX can be explained by their 18% AWP rate and

high dispensing fees.

Other Service Cost


California 2574.3208353 263.79166432 62.339965665 73.5690955

New Jersey 4561.32662670007 696.005570560004 56.350218909 319.70368453

Ohio 2113.6936643 201.808849300002 4.40172039840005 78.6037056079995

$250

$750

$1,250

$1,750

$2,250

$2,750

$3,250

$3,750

$4,250

$4,750


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Source: MAX 2005, Kaiser Medicaid Databse

In regards to the high FFS drug payments in NJ, the high payments may be related to the low percentage of Third Party Liability Payments and lack of required Copays. Since this time, New Jersey has begun to require copays for their

prescription drug coverage, as such, this trend should decrease in coming years.


State


Total Expenditure for Medicaid

Integrity Activities

Total Overpayments

Discovered as a Result of Provider

Audits

Total Recoveries



ROIFCA

Qui Tam

DRA

California Yes Yes Yes 80,869,196 61,551,360 162,455,640 162,455,640 200%

Florida Yes Yes No 7,650,000 17,176,208 35,731,280 84,000,000 1098%

New Jersey Yes Yes No N/A 1,727,481 N/A 4,494,019 N/A

Ohio No No No N/A 7,655,831 320,440 1,152,188 N/A

Texas Yes Yes Yes 2,692,267 125,185,173 N/A 418,079,369 15530%

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Sources: SPIA 2007, Kaiser Family Foundation

The Return On Investment data suggests that the most risk averse Medicaid recovery opportunities exist in Texas and

Florida. ROI data in New Jersey and Ohio were unavailable.

Problem Statements• California MH Aged:

▫ Of the states considered, California has the lowest per claim payment for Medicaid. At the same time, their 2005 MH Aged payments are 55% higher than the other large states.

▫ The population of California residents aged 85 and older is projected to grow 98% over the next 20 years. Furthermore, they still spend 49% of their long term care dollars on institutional care.

• New Jersey ICF/MR: ▫ New Jersey’s ICF/MR per user expenditures are almost twice that of

any other large state. ▫ 40% of 2300 ICF/MR eligible individuals are in continuing placement

status due to a lack of appropriate facilities▫ Prior to 2003 data was skewed due to several ICF/MR facilities

inaccurately reporting recipients

44

Sources: MAX 2005, AARP 2009, Wenzlow 2002, Smith 2007

Existing Solutions: California ILTC

▫ Phase out ILTC and implement Community Based Care.

▫ Encouraging residents to purchase their own ILTC insurance which prevents dependence on Medi-Cal

▫ Created “Medi-Cal Asset Protection” which allows seniors to take out ILTC insurance policies to protect their assets for their heirs. These policies are vetted by the State for proffered benefits.

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Source: Doty 2000, AARP 2009, ca.gov 2009

Existing Solutions: New Jersey ILTC

▫Current Legislation: New Jersey Protection & Advocacy v. Davy NJP&A asserts Department of Human

Services Commissioner has used Conditional Extension Pending Placement (CEPP) status and confine persons to state psychiatric hospitals without creating further plans for placement

▫May 2007 “Path to Progress” plan to transition 1,850 transitional developmental center residents to community over next 8 years

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Source: Smith 2007

Further Analysis• Any major discrepancy in average payments may

indicate fraud. One way to detect these discrepancies is to look for states who have failed to report data.

• Look at the sample size of populations to ensure that these trends are accurate. Due to the phasing out of ILTC, only 10 people are enrolled in MH Aged ILTC in California.

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Source: MAX 2005, Wenzlow 2002

A&M Opportunities• Look at states who have committed to shifting from

ILTC to Community Based care. Evaluate how effective these plans have been in transforming ILTC populations.

• Create evidence based strategies to assist states with ILTC to Community Based care transitions based on a comparative state by state analysis.

• Research Medicaid suits in Texas and Florida to investigate possible patterns that lead to large ROI

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Conclusion

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ConclusionFindings• ILTC

▫ Average payments were higher for service types which were cost based rather than prospective or negotiated

• Drugs▫ Several states with higher than average managed care

drug costs do not require enrollees to pay copayments• DME

▫ Due to the state-by-state differences in coverage, assertions are difficult to make regarding DME trends

▫ Large cost variations between states more closely represent differences between reimbursement regulations and mechanisms rather than the false claims legal climate

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ConclusionAlvarez & Marsal Opportunities

• Assist in the restructuring of prescription drug maximum allowable limits

• Conduct performance assessments of ILTC to HCBS programs

• Develop strategies that will allow states to expand HCBS programs

• Determine solutions to de-institutionalize long-term care

• Assist in the expansion of managed care programs

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References

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Sources: All States

•2003-2007 MAX DataThe Medicaid Analytic eXtract (MAX) data system produced by Centers for Medicare & Medicaid Services enables much more detailed analyses of long-term care utilization and expenditures at the person level. http://www.cms.hhs.gov/medicaiddatasourcesgeninfo/downloads/MAXVal_2003_2005.zip

•2007 SPIA DataThe State Program Integrity Data. (SPIA) represents the first CMS approach to annually collect standardized, national data on State Medicaid program integrity activities for the purposes of program evaluation and technical assistance support. http://www.cms.hhs.gov/FraudAbuseforProfs/Downloads/spiaffy2007reports.zip

•Kaiser Family Foundation: State Facts Databasehttp://www.statehealthfacts.org/

•Kaiser Family Foundation: Medicaid Databasehttp://medicaidbenefits.kff.org/

• KFF: Medicaid, SCHIP, and Economic Downturn: Policy Challenges and Policy Responses

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http://www.cms.hhs.gov/medicaiddatasourcesgeninfo/downloads/MAXVal_2003_2005.zip

http://www.statehealthfacts.org/

http://medicaidbenefits.kff.org/

Sources: Small States• Arbamson, Richard G., et al. Generic drug cost containment in Medicaid:

lessons from five State MAC programs• Basler, Barbara. “Drug prices soar.” AARP Bulletin Today. 16 Apr 2009.• Medicaid prescription reimbursement rates by state. Retrieved from:

http://drugtopics.modernmedicine.com/drugtopics/data/articlestandard/drugtopics/142005/154195/article.pdf.

• National Association of State Medicaid Directors. State Perspectives on Emerging Medicaid Pharmacy Policies and Practices, November 2006

• Office of the Inspector General. Follow-up Audit of the Medicaid Drug Rebate Program in Delaware. Jul 2008.

• Qualters, Sheri. Pharmacy groups sue Delaware over Medicaid drug reimbursement rate cuts. National Law Journal: 13 Jul 2009.

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http://drugtopics.modernmedicine.com/drugtopics/data/articlestandard/drugtopics/142005/154195/article.pdf

http://drugtopics.modernmedicine.com/drugtopics/data/articlestandard/drugtopics/142005/154195/article.pdf

Sources: Medium States• http://dhmh.maryland.gov/mma/longtermcare/pdf/2009/2009_2010_HCBS

_booklet.pdf• http://www.hscrc.state.md.us/index.cfm• AARP Long-Term Care in MD (2009)

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http://dhmh.maryland.gov/mma/longtermcare/pdf/2009/2009_2010_HCBS_booklet.pdf

http://dhmh.maryland.gov/mma/longtermcare/pdf/2009/2009_2010_HCBS_booklet.pdf

http://www.hscrc.state.md.us/index.cfm

Sources: Large States• AARP. “Long Term Care in California” 2009.

http://assets.aarp.org/rgcenter/health/state_ltcb_09_ca.pdf• Ca.gov . California Partnership for Long Term Care. 2009.

http://www.dhcs.ca.gov/services/ltc/Pages/CPLTC.aspx• Doty, P. “Cost-Effectiveness of Home and Community-Based Long-Term

Care Services” HHS. 2000. http://aspe.hhs.gov/daltcp/reports/costeff.htm• Smith, G. “Home and Community Services Litigation Report.” 2007.

Human Services Research Institute. http://www.hsri.org/docs/litigation052307.DOC

• Wenzlow, A. “A Profile of Medicaid Institutional and Community-Based Long-Term Care Service Use and Expenditures Among the Aged and Disabled Using MAX 2002: Final Report.” HHS, 2008. http://aspe.hhs.gov/daltcp/reports/2008/profileMAX.htm#data

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http://assets.aarp.org/rgcenter/health/state_ltcb_09_ca.pdf

http://www.dhcs.ca.gov/services/ltc/Pages/CPLTC.aspx

http://aspe.hhs.gov/daltcp/reports/costeff.htm

http://www.hsri.org/docs/litigation052307.DOC

http://aspe.hhs.gov/daltcp/reports/2008/profileMAX.htm

Medicaid Fraud

Health & Medicine

Transcript of Medicaid Fraud