Medi-Cal Invites Fraud

Medi-Cal, California’s Medicaid program, exists to provide health care for the poor. The program serves 5 million Californians at a cost of $18 billion annually and prides itself on its ability to pay claims quickly. Alas, all too quickly in the case of fake supply companies fraudulently billing Medi-Cal for hundreds of millions of dollars.

The most irritating aspect of this scam, which took root in 1996, was that it multiplied right under the noses of state officials. Why didn’t someone take action?

The deception was all so easy. Rent some office space. Put in a few shelves with a smattering of goods--some crutches and canes and a bedpan or two. Nail up a medical supply store shingle. Meet state standards so lax that only primary suppliers were expected to maintain records. Start billing the state Medi-Cal system for all sorts of fake sales and business and then just sit back and watch the checks come in.

In one case even the neighbors became suspicious that something was awry; they wondered how that new supply store stayed in business without evidence of customers ever entering the door.

Medi-Cal fraud investigations under Gov. Pete Wilson’s regime centered on crime by recipients. By the time Gov. Gray Davis rightly shifted the emphasis, fraud by medical suppliers had soared.

Now, charges of false billing have been levied against 64 businesses, most in Los Angeles County, and an additional 300 businesses are under suspicion, the FBI says.

The California situation mirrors a nationwide problem in which $17 billion in Medicaid is lost annually to fraud and abuse. The blame lies largely with a shortage of investigators, outdated and unreliable computer systems and the fact that the states operate 50 different Medicaid systems, each with differing standards. In California, fraud charges have been brought against an Orange County assistant district attorney accused of helping to create fictional patients and billing to two rural pharmacy owners in Shasta County who were suspected of running a drug trafficking operation with 3,000 customers.

A new law resulting from legislation by Assemblywoman Gloria Romero (D-Los Angeles) could help. It requires record keeping by every medical supplier and a $25,000 collateral bond against potential fraud. Davis has also funded 40 new positions for fraud investigators.

But all this is after the fact. The state still doesn’t know who has the authority to audit Medi-Cal cases, since a federal judge told state Controller Kathleen Connell that she has no such power. It is probably too late to recoup the millions of dollars already lost, but the state can try to ensure that nothing of such magnitude ever happens again.