California Commits Massive Medicaid Fraud
David Catron
by

California is indeed the Golden State where Medicaid is concerned. The HHS Office of Inspector General (OIG) has found that, by exploiting Obamacare’s expansion of the program, California has enrolled hundreds of thousands of ineligible adults in Medicaid. Consequently, the state has bilked the federal government out of more than $1 billion in funding to which the state was not entitled. Indeed, these figures probably understate the amount of money that California officials have fraudulently extracted from the taxpayers. The OIG sampled a mere six-month period, from October 1, 2014 through March 31, 2015, to arrive at its damning assessment.

If the word “fraud” seems over the top, consider what happens to doctors who filch Medicaid funds to which they aren’t entitled. This case, reported by the Boston Globe, is typical: “A Brookline doctor has been sentenced to 11 months in jail and ordered to pay $9.3 million for running a Medicaid fraud scheme.” Likewise, Michigan CBS affiliate WNEM reports that a Saginaw doctor “was charged with three felony counts of Medicaid fraud.… Each charge is punishable by up to four years in prison and a $50,000 fine.” Such cases are prosecuted every day and the charge pursued by the authorities is “fraud.” So, isn’t the skullduggery described below also fraud?

On the basis of our sample results, we estimated that the State agency made Medicaid payments of $628,838,417 (Federal share) on behalf of 366,078 ineligible beneficiaries and $402,358,529 (Federal share) on behalf of 79,055 potentially ineligible beneficiaries.

Don’t be confused by the vague bureaucratic vernacular used in the above passage. When the OIG says, “the State agency made Medicaid payments (Federal Share),” it means all of the money used to cover these ineligible enrollees was provided by the federal government. For the period of time covered by the OIG audit, the federal Share of the costs for newly eligible, adult enrollees is 100 percent (which isn’t true in the case of low-income beneficiaries for whom the program was originally created). In other words, every dime California ostensibly “paid” for the people described above came straight out of your federal tax bill. As the OIG explains:

Section 2001 of the ACA authorized an FMAP [Federal medical assistance percentage] of 100 percent for the qualified expenditures incurred by newly eligible beneficiaries enrolled in the new adult group. This “newly eligible FMAP” was set to remain at 100 percent through 2016, gradually decreasing to 90 percent by 2020.

Thus, like the doctors who defrauded Medicaid, California asked for and received funds to which it wasn’t entitled — only on a much larger scale. All Medicaid expansion states are required by law to ensure that new enrollees are actually eligible for the program. And the steps they must take are clearly spelled out by HHS: The state must verify that the applicant meets citizenship and residency requirements, have a household income at or below 138 percent of the FPL, be from 19 to 64 years of age, not be eligible for any other mandatory coverage group, not be pregnant, not be entitled to Medicare benefits, and furnish a Social Security number.

California officials made no serious effort to verify any of these data. The OIG sample revealed that 18 percent of enrollees are obviously ineligible, and that another 9 percent are probably ineligible. All of these enrollees failed one or more of the above-noted eligibility requirements. So, what’s the problem? Obamacare removed the incentive to be efficient. At present, 1 in 3 Californians are enrolled in Medicaid. And, as long as the “Affordable Care Act” remains in place, the federal government will pay a minimum of 90 percent of California’s Medicaid costs for new enrollees. Thus, state officials don’t want to get it right. The OIG explains:

If the State agency does not determine Medicaid eligibility according to Federal and State requirements, there is an increased risk that the State agency will make payments on behalf of ineligible beneficiaries. If the State agency makes payments on behalf of ineligible beneficiaries, it may claim unallowable Federal reimbursement for those beneficiaries.

The two most important words in the above passage are “risk” and “unallowable.” For the corrupt politicians who run California, there is no risk to getting eligibility wrong. Indeed, since the advent of Obamacare, inefficiency pays. The more ineligible enrollees they sign up, the more money they get from Washington. As to claiming “unallowable federal reimbursement,” there’s no real penalty for doing so. If a doctor claims “unallowable” Medicaid reimbursement, he goes to jail for fraud. If California does so, HHS sends a check and has the OIG study the situation. That’s how Californication works. And the taxpayers don’t even get a kiss.

David Catron
David Catron
Follow Their Stories:
View More
David Catron is a health care consultant and frequent contributor to The American Spectator. You can follow him on Twitter at @Catronicus.
Sign Up to receive Our Latest Updates! Register

Be a Free Market Loving Patriot. Subscribe Today!