There is a new Medicaid sheriff in town! The Centers for Medicare and Medicaid Services (CMS) announced that it is withholding $259 million in federal Medicaid funds from Minnesota due to ongoing program fraud allegations. In recent months Minnesota – a state with generous welfare benefits – has been rocked by revelations of fraud in multiple programs. These include meals for children, subsidized childcare, housing assistance for the homeless, autism care and Medicaid. The scope of the fraud is staggering, although firm estimates are difficult to measure. Some estimates range into the billions of dollars. The following is from Healthcare Dive:
The CMS said it will withhold over $259 million in Medicaid funds from Minnesota, an effort the Trump administration says is part of a larger crackdown on fraud in federal healthcare programs.
The Trump administration says it’s holding the money due to unsupported or potentially fraudulent Medicaid claims, including claims involving beneficiaries “lacking a satisfactory immigration status,” according to a Wednesday announcement from the CMS.
If Minnesota does not come into compliance with a corrective action plan from the Trump administration, the CMS said it could defer more than $1 billion in federal funds to the state over the next year.
Dr. Oz, who is CMS Administrator, said what previous administrators should have said, “CMS is done paying and chasing.” Medicare and Medicaid have traditionally paid claims easily and only later tried to recoup fraudulent claims in what has become known as a game of pay and chase. You do not get many funds back when you try to chase them down later. Minnesota is home to a large Somali immigrant community, a few of which were implicated in fraud schemes earlier this summer. State officials seized luxury cars, houses, land, and bank accounts. They soon discovered that some of the stolen money had flowed overseas and was used for real estate investments in Kenya, beyond the reach of law enforcement. More from Healthcare Dive:
At the press conference, Oz and Vice President JD Vance said Medicaid funds in Minnesota were paid to bogus centers for autistic children and one behavioral health organization that billed as if doctors were working 24 hours straight for over 450 days.
“How it didn’t get picked up to us is shocking in the CMS,” Oz said.
Dr. Oz’s comments raise an important point. Medicare and Medicaid billing systems should have algorithms to spot such obvious anomalies. Fraud control initiatives by federal and state officials are long overdue. A recent initiative is to put Medicaid payment data online for everyone to view and police, called HHS Open Data.
According to the Kaiser Family Foundation, Medicaid represents nearly one-fifth of all health care spending. Medicaid is a federal-state partnership with different pots of matching funds for different segments of the program. While the average federal match (FMAP) is about 50%, some states are matched at more than 70%. Minnesota’s FMAP is 51.36%. That means that for every dollar that is lost through fraud, $0.51 cents of that is paid by the federal government. That also means that states like Minnesota have only about half of the normal incentive to root out fraud and put a stop to it. Also keep in mind that some of the fraudsters are members of politically powerful constituencies, who are protected by powerful allies. Sometimes fraud is quietly tolerated to avoid ruffling feathers of political elites. For example, Minnesota governor Tim Walz recently dropped his re-election bid due to widespread fraud allegations.
What should be done? A lot! All federal and state programs should aggressively investigate and put a stop to fraud. Researchers from Boston University estimate that for each $1 dollar invested in Medicaid fraud reduction returns $20 to the American people. Their point is: investing in fraud control has a high return on investment. Such a high return on investment illustrates how little is being done compared to what should be done. In economics, the formula for maximizing revenue is to invest $1 dollar of input until the investments yield only $1 back. Fraud control is similar. State officials should invest $1 into fraud prevention until the efforts yield only $1 in return at the margin.
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