Medi-Cal May Lose $80 Million to Fraud; 20 Firms Probed

California’s medical program for the poor may lose up to $80 million this year to fraudulent billings by companies that take advantage of the state’s system of paying for incontinence products for the elderly, according to the state’s chief prosecutor of Medi-Cal fraud.

The state attorney general’s office is investigating at least 12 Los Angeles-area firms allegedly involved in the scheme, in which hustlers go door-to-door persuading elderly residents to turn over the monthly stickers that Medi-Cal gives them to pay for various health care services and supplies, said Steven V. Adler, chief of the attorney general’s Medi-Cal fraud bureau.

Another eight firms elsewhere in the state may also be involved, he said. Thousands of elderly Southern Californians have been touched by the fraud, he said.

The stickers are intended to be used when a recipient goes to a doctor’s office or buys medical supplies or other services, and they are supposed to be attached to billing forms and turned in to Medi-Cal. Medi-Cal recipients get five stickers per month.

Hustlers usually approach recipients by offering them small gifts, such as soap and mouthwash. Once in the door, they often persuade elderly people to sign order forms for adult diapers, bed-liners and similar products, demanding their stickers as payment, Adler said.

The stickers are then sold, for up to $300 apiece, to unscrupulous medical supply firms that specialize in incontinence products. The companies use the stickers to bill Medi-Cal, charging for items never delivered or sharply inflating the amounts delivered, Adler said.

State prosecutors said they expect to file charges in the next few weeks against one Southern California firm that has billed Medi-Cal for $8 million worth of supplies over the last 18 months. About 80% of the firm’s bills may be fraudulent, said Adler, who declined to reveal further details of the case.

Adler said Medi-Cal may lose up to two-thirds of its projected $120-million budget for incontinence supplies this fiscal year to fraudulent billings. In the last three years, Medi-Cal payments for such items have quadrupled, largely to cover rising numbers of falsified bills, he said.

“To get the kind of billings we get, you have to be picking up thousands of stickers, if not hundreds of thousands,” he said. “This is sort of a new cottage industry in Southern California.”

Although authorities have been aware of the scam for several years, the latest version--with hustlers going door-to-door in senior citizens complexes, housing projects and nursing homes--has appeared only in the last few months, Adler said.

Among those recently contacted by hustlers are residents of a federally subsidized housing complex for senior citizens and handicapped people in Panorama City, where a middle-aged woman and a man handed out toiletries and collected Medi-Cal stickers last month.

“I gave her the sticker like a damn fool,” said Alice Brophy, a 74-year-old diabetes sufferer who lives at the complex.

“We thought she was selling lipstick and cosmetics, but she said she was from Medicaid,” said another resident, Fay Wilson.

“I think they’re rotten, whoever they are,” Brophy said.

Medi-Cal spokeswoman Shirley Deasy said recipients who give away their stickers and suddenly need medical care can get extra stickers, in one day if necessary. But they must travel to a county welfare office to do so, which can be difficult for some elderly people, she said.

Adler said the fraud has escalated rapidly in recent months, perhaps as hustlers race to beat a pending state law that makes it illegal to buy or sell Medi-Cal stickers. The law is scheduled to take effect Jan. 1.

While most unscrupulous firms bill for products not delivered, others deliver large amounts in order to take advantage of Medi-Cal pricing policies, which reimburse suppliers for the wholesale cost of their products plus 50%, Adler said.

In some instances, supply firms have left several cases of adult diapers at the homes of unsuspecting seniors, later inflating wholesale costs on their bills and adding 50%, he said.

State Assemblyman Richard Katz (D-Sylmar), who has received a number of constituent complaints about the scam, said that although hustlers often hit government-subsidized apartment buildings, which are relatively easy to locate, he is aware of cases where Medi-Cal recipients have been contacted at private homes.

“Someone is selling lists of names out there,” Katz said. “It may be a doctor or a pharmacist or a supplier or someone inside Medi-Cal.”

Katz said Medi-Cal officials plan to include letters warning of the scam when they mail out stickers for the month of December.