HD13 - Options for Enhancing Fraud and Abuse Deterrence in the Virginia Medicaid Program


Executive Summary:
Fraud and abuse (i.e., fraudulent activities) are defined as the willful misrepresentation of facts or the failure to report facts important to transactions, which result in unnecessary financial costs and damages to other parties relying on the truthfulness of those facts. Many types of fraudulent activities exist. In health care, most fraud is committed by providers (rather than patients) that bill insurance companies for services not performed or for more expensive services than actually performed. The extent to which these criminal activities occur is only limited by the creativity of the perpetrators committing them and the vigilance of the intended victims.

As with any large enterprise, the nation’s health care system is vulnerable to fraud and abuse. This is due partly to the complexity of the health insurance process and the large volume of insurance claims generated each year for medical services. Medicaid and Medicare are especially susceptible because they serve populations that are disproportionately targeted by the perpetrators of fraud. The end result of health care fraud and abuse is increased costs for payers, providers, patients, and other stakeholders. While it is difficult to develop a comprehensive economic impact estimate of these activities because they are not always reported, national annual estimates ranging between $68 and $220 billion have been calculated. Regardless of the estimates, it is clear that fraud and abuse divert already limited resources away from the nation’s health care delivery system.

The Department of Medical Assistance Services (DMAS) is responsible for administering the Virginia Medicaid Program, and the agency uses a multi-faceted approach to prevent fraud and abuse from occurring in the program. The approach involves various components such as the recipient enrollment process, provider participation agreements, the Program Integrity Division, the Virginia Medicaid Fraud Control Unit (at the Office of the Attorney General), and contracts the agency has with five managed care organizations that participate in Virginia Medicaid. Recognizing the importance of deterring fraud and abuse in Virginia Medicaid, the 2010 General Assembly directed DMAS to identify additional options that could be used to strengthen its deterrence efforts. This report fulfills that directive and contains information on external record sources, such as state police criminal history and prescription drug monitoring data, and analytical technologies, such as a state Medicaid Fraud and Abuse Detection System, that could be used to develop a comprehensive fraud deterrence system for Virginia Medicaid.