Cutting Medicaid Fraud, Waste, Abuse Likely Won’t Deliver Savings GOP Seeks

Managed Medicaid health plans are an important partner to states for detecting fraud, waste and abuse in Medicaid, according to the panelists of a webinar sponsored by KFF. Yet what exactly constitutes fraud, waste and abuse has become a political flashpoint. House Republicans’ budget resolution calls for the Energy and Commerce Committee, which oversees Medicaid, to cut spending by $880 billion over 10 years — much of which likely will come from Medicaid. House Speaker Mike Johnson (R-La.) asserted in February that “if you eliminate fraud, waste and abuse in Medicaid, you’ve got a huge amount of money that you can spend on real priorities for the country.” However, the KFF webinar speakers are skeptical of that claim. “By most accounts, Medicaid fraud, waste and abuse doesn’t add up to $880 billion,” said Larry Levitt, KFF’s executive vice president for health policy, during the April 25 webinar. “Of course, that depends on your definitions of fraud, waste, and abuse and how cuts are labeled or spun.” The terms “fraud, waste and abuse” are “easily and regularly conflated, particularly in the health care context,” said panelist Timothy Hill, senior vice president for health for the American Institutes for Research and commissioner of the Medicaid and CHIP Payment and Access Commission. Hill defined the terms as follows: Fraud is about intent, such as faking medical records to bill for services that are never provided. Abuse is “on the road to fraud,” Hill said, but lacks intent. “It’s someone taking advantage of perhaps unclear billing rules or confusing guidance to maximize payment or revenue,” such as upcoding on fee-for-service claims or delivering services that are not medically necessary, he said. Waste is “almost a policy issue” that includes overuse of certain services, Hill said. “It’s not intentional, but it does cause unnecessary expenses in the program.” Improper payments are an issue that has been conflated with fraud, the panelists noted. But Hill explained that such payments “are not a measure of fraud, but of compliance.” Around 5% of Medicaid payments were made in error, Hill said. But “the vast majority” are related to documentation issues, such as a physician not appropriately documenting the reason for a code or a home health agency not documenting the length of a visit. “It doesn’t mean that somebody didn’t get care,” he explained. “What it does mean is that the rules the agency has established for getting payment weren’t followed.” Medicaid “is really not the home of fraud,” added Cheryl Roberts, director of the Virginia Department of Medical Assistance Services. Around 80% of Payment Error Rate Measurement (PERM) audits are related to documentation issues, she said. The PERM program measures improper payments in Medicaid and CHIP under both managed care and fee-for-service arrangements. Payers Help Ensure Program Integrity Health plans have played a significant role in fraud detection because they can see larger trends and more deeply analyze the data, Roberts said. Involving health plans in ensuring Medicaid compliance starts at the procurement and contracting stage, Roberts explained. “One of the big things we did was put really strong program integrity terms [in the contract],” she said. “And we have staff that not only ensure that the plans are meeting the terms but also doing the analysis.” Roberts shared that the state expects health plans to ensure they are watching the providers, checking who is entering the program, and watching the claims data for unusual trends. “We want them to do [analysis] on the prepayment side because our goal is to try to see those things happen before [providers] get paid,” Roberts said. “Afterward, we’re looking for them to do some retroactive work and see what the trends are.” Roberts gave an example of how the Virginia Medicaid program tried to think of evidence-based ways to help people experiencing severe behavioral health crises. “We found that some providers used the opportunity to interpret that broadly” and included homelessness as a behavioral health crisis, she said. The health plans were the first to identify the trends and perform site visits with the providers. “And they worked with us and our local police and together, we were able to put a case together,” Roberts said. “It also helped us through the analysis as a state to do the guardrails we needed to do in the front end.” States and health plans have an incentive and “what you’re trying to do is align them,” Roberts added. The idea of having the right data, the analytics and then working with the plans has been successful.” Managed care also adds a layer of complexity, Hill said. Setting payment rates, executing contracts and monitoring health plans for compliance is a far different skill set than reviewing fee-for-service claims. “So you’re not just ensuring the providers are billing plans appropriately and that fraud on that level is being found — but you’re also having to ensure compliance as a payer or a purchaser of a plan, whether it’s [Medicare Advantage] or a Medicaid managed care plan to be sure they’re in compliance,” he said. Then, CMS oversees the state to ensure the state is appropriately monitoring the managed care plans. “It speaks to the complexities of Medicaid relative to Medicare with that state-federal partnership when you start introducing all the levels of delivery from plans to providers and the compliance mechanisms that are needed across that sort of landscape.” Fraud Isn’t Always the Problem Former CMS Inspector General Christi Grimm cautioned that not all data anomalies indicate fraud. “You need those boots on the ground, so to speak, to be able to follow up on those leads,” Grimm said, referring to Medicaid Fraud Control Units and the inspector general’s office. It’s crucial to see what the state plan articulates for the state’s Medicaid waivers and whether the state is following its own rules. “We would find instances where [states] were tucking things in — family planning was a big one we looked at,” Grimm explained. “But you do have to look at what CMS has essentially allowed to go on and what the states had applied for and done.” The first step is to conduct an audit of the data and look at the state’s rules compared to what is happening. “During the course of that, if you see something that might be fraud, bring it to the investigators,” Grimm said. “But just on its face to call it fraud — there are a lot of steps that need to happen to get there.”