Medicaid
Fraud and Abuse Related to Controlled Substances Identified in Selected States Gao ID: GAO-09-1004T September 30, 2009This testimony discusses (1) continuing indications of fraud and abuse related to controlled substances paid for by Medicaid; (2) specific case study examples of fraudulent, improper, or abusive controlled substance activity; and (3) the effectiveness of internal controls that the federal government and selected states have in place to prevent and detect fraud and abuse related to controlled substances. To identify whether there are continuing indications of fraud and abuse related to controlled substances paid for by Medicaid, we obtained and analyzed Medicaid claims paid in fiscal years 2006 and 2007 from five states: California, Illinois, New York, North Carolina, and Texas. To identify indications of fraud and abuse related to controlled substances paid for by Medicaid, we obtained and analyzed Medicaid prescription claims data for these five states from the Centers for Medicare & Medicaid Services (CMS). To identify other potential fraud and improper payments, we compared the beneficiary and prescriber shown on the Medicaid claims to the Death Master Files (DMF) from the Social Security Administration (SSA) to identify deceased beneficiaries and prescribers. To identify claims that were improperly processed and paid by the Medicaid program because the federal government banned these prescribers and pharmacies from prescribing or dispensing to Medicaid beneficiaries, we compared the Medicaid prescription claims to the exclusion and debarment files from the Department of Health and Human Services Office of Inspector General (HHS OIG) and the General Services Administration (GSA). To develop specific case study examples in selected states, we identified 25 cases that illustrate the types of fraudulent, improper, or abusive controlled substance activity we found in the Medicaid program. To develop these cases, we interviewed pharmacies, prescribers, law enforcement officials, and beneficiaries, as appropriate, and also obtained and reviewed registration and enforcement action reports from the Drug Enforcement Administration (DEA) and HHS. To identify the effectiveness of internal controls that the federal government and selected states have in place to prevent and detect fraud and abuse related to controlled substances, we interviewed Medicaid officials from the selected state offices and CMS. More details on our scope and methodology can be found in our report that we issued today. We conducted this forensic audit from July 2008 to September 2009, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We conducted our related investigative work in accordance with standards prescribed by the Council of the Inspectors General on Integrity and Efficiency (CIGIE).
We found 65 medical practitioners and pharmacies in the selected states had been barred or excluded from federal health care programs, including Medicaid, when they wrote or filled Medicaid prescriptions for controlled substances during fiscal years 2006 and 2007. Nevertheless, Medicaid approved the claims at a cost of approximately $2.3 million. The offenses that led to their exclusion from federal health programs included Medicaid fraud and illegal diversion of controlled substances. Our analysis of matching Medicaid claims in the selected states with SSA's DMF found that controlled substance prescription claims to over 1,800 beneficiaries were filled after they died. Even though the selected state programs stated that beneficiaries were promptly removed from Medicaid following their deaths based on either SSA DMF matches or third party information, these same state programs paid over $200,000 for controlled substances during fiscal years 2006 and 2007 for postdeath controlled substance prescription claims. In addition, our analysis also found that Medicaid paid about $500,000 in Medicaid claims based on controlled substance prescriptions "written" by over 1,200 doctors after they died. In addition to performing the aggregate-level analysis discussed above, we also performed in-depth investigations for 25 cases of fraudulent or abusive actions related to the prescribing and dispensing of controlled substances through the Medicaid program in the selected states. We have referred certain cases to DEA and the selected states for further investigation. The selected states did not have a comprehensive fraud prevention framework to prevent fraud and abuse of controlled substances paid for by Medicaid. The establishment of effective fraud prevention controls by the selected states is critical because the very nature of a beneficiary's medical need--to quickly obtain controlled substances to alleviate pain or treat a serious medical condition--makes the Medicaid program vulnerable to those attempting to obtain money or drugs they are not entitled to receive. Fraud prevention is the most efficient and effective means to minimize fraud, waste, and abuse. Thus, controls that prevent fraudulent health care providers and individuals from entering the Medicaid program or submitting claims are the most important element in an effective fraud prevention program. Effective fraud prevention controls require that where appropriate, organizations enter into data-sharing arrangements with organizations to perform validation. System edit checks (i.e., built-in electronic controls) are also crucial in identifying and rejecting fraudulent enrollment applications or claims before payments are disbursed.
GAO-09-1004T, Medicaid: Fraud and Abuse Related to Controlled Substances Identified in Selected States
This is the accessible text file for GAO report number GAO-09-1004T
entitled 'Medicaid: Fraud and Abuse Related to Controlled Substances
Identified in Selected States' which was released on October 1, 2009.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Testimony before the Subcommittee on Federal Financial Management,
Government Information, Federal Services, and International Security,
Committee on Homeland Security and Governmental Affairs, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 3:00 p.m. EDT:
Wednesday, September 30, 2009:
Medicaid:
Fraud and Abuse Related to Controlled Substances Identified in Selected
States:
Statement of Gregory D. Kutz, Managing Director:
Forensic Audits and Special Investigations:
GAO-09-1004T:
[End of section]
Mr. Chairman and Members of the Subcommittee:
Prescription drug abuse is a serious and growing public health problem.
According to the Centers for Disease Control and Prevention (CDC), drug
overdoses, including those from prescription drugs, are the second
leading cause of deaths from unintentional injuries in the United
States, exceeded only by motor vehicle fatalities. There are reports
and allegations that criminals and drug abusers are able to
illegitimately acquire controlled substances by filing fraudulent
Medicaid claims, seeking treatment from medical practitioners for
feigned injuries and illnesses, and perpetrating other fraudulent
activities.[Footnote 1] The cost associated with controlled substance
fraud and abuse is more than the cost of prescription drug purchases
since there are related medical services, such as doctor and emergency
room visits, which precede the dispensing of these medications. Several
closed criminal cases highlight Medicaid fraud and abuse related to
controlled substances.
* An Ohio physician was convicted in 2006 for filing $60 million in
fraudulent Medicaid, Medicare, and other insurance claims. The
physician, a pain management specialist, prescribed multiple injections
of controlled substances for his patients. He then billed Medicaid and
other insurance plans for those treatments. The physician was found to
have fostered an addiction to controlled substances in his patients so
that he could profit from their habit and increase the income he
received from their medical claims. Two patients who regularly saw him
died under his care; one from a multiple-drug overdose in the
physician's office and one from an overdose of OxyContin taken on the
same day that the prescription was written. The physician was sentenced
to life imprisonment.
* In 2006, a Florida physician was sentenced to life in prison
following his conviction on multiple charges, including wire fraud,
illegal distribution of controlled substances, and Medicaid fraud. The
physician, a general practitioner, wrote excessive prescriptions to
patients for controlled substances without giving them physical
examinations or additional follow-up treatments. The physician directed
patients to have their prescriptions filled at specific pharmacies and
warned them against filling their prescriptions at pharmacies that
would ask too many questions about the quantity and combination of
controlled substances prescribed. In fact, the physician was found to
have known some of his patients were addicts feeding their drug habits.
Five of his patients died from taking drugs he prescribed.
* During 2004 to 2005, a pharmacist created false telephone
prescriptions for Vicodin, an addictive narcotic pain reliever that
combines hydrocodone and acetaminophen, and provided thousands of the
pills to at least two purported customers. The pharmacist also
submitted false claims for the drugs to Medicaid and other insurance
companies stating that they were prescribed for legitimate patients.
The customers were actually friends of the pharmacist who sold the
drugs and split the profits with him. In 2009, the pharmacist was
convicted of health care fraud, Medicaid fraud, and distribution of
dangerous controlled substances.
My statement summarizes our report issued today to your subcommittee.
[Footnote 2] This testimony discusses (1) continuing indications of
fraud and abuse related to controlled substances paid for by Medicaid;
(2) specific case study examples of fraudulent, improper, or abusive
controlled substance activity; and (3) the effectiveness of internal
controls that the federal government and selected states have in place
to prevent and detect fraud and abuse related to controlled substances.
To identify whether there are continuing indications of fraud and abuse
related to controlled substances paid for by Medicaid, we obtained and
analyzed Medicaid claims paid in fiscal years 2006 and 2007 from five
states: California, Illinois, New York, North Carolina, and Texas. To
identify indications of fraud and abuse related to controlled
substances paid for by Medicaid, we obtained and analyzed Medicaid
prescription claims data for these five states from the Centers for
Medicare & Medicaid Services (CMS). To identify other potential fraud
and improper payments, we compared the beneficiary and prescriber shown
on the Medicaid claims to the Death Master Files (DMF) from the Social
Security Administration (SSA) to identify deceased beneficiaries and
prescribers.[Footnote 3] To identify claims that were improperly
processed and paid by the Medicaid program because the federal
government banned these prescribers and pharmacies from prescribing or
dispensing to Medicaid beneficiaries, we compared the Medicaid
prescription claims to the exclusion and debarment files from the
Department of Health and Human Services Office of Inspector General
(HHS OIG) and the General Services Administration (GSA). To develop
specific case study examples in selected states, we identified 25 cases
that illustrate the types of fraudulent, improper, or abusive
controlled substance activity we found in the Medicaid program. To
develop these cases, we interviewed pharmacies, prescribers, law
enforcement officials, and beneficiaries, as appropriate, and also
obtained and reviewed registration and enforcement action reports from
the Drug Enforcement Administration (DEA) and HHS. To identify the
effectiveness of internal controls that the federal government and
selected states have in place to prevent and detect fraud and abuse
related to controlled substances, we interviewed Medicaid officials
from the selected state offices and CMS. More details on our scope and
methodology can be found in our report that we issued today.[Footnote
4]
We conducted this forensic audit from July 2008 to September 2009, in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. We conducted our related
investigative work in accordance with standards prescribed by the
Council of the Inspectors General on Integrity and Efficiency (CIGIE).
Tens of Thousands of Medicaid Beneficiaries Visit Multiple Medical
Practitioners to Obtain Controlled Substances:
Approximately 65,000 Medicaid beneficiaries in the five states
investigated visited six or more doctors to acquire prescriptions for
the same type of controlled substances in the selected states during
fiscal years 2006 and 2007.[Footnote 5] These individuals incurred
approximately $63 million in Medicaid costs for these drugs, which act
as painkillers, sedatives, and stimulants.[Footnote 6] In some cases,
beneficiaries may have a justifiable reason for receiving prescriptions
from multiple medical practitioners, such as visiting specialists or
several doctors in the same medical group. However, our analysis of
Medicaid claims found at least 400 of them visited 21 to 112 medical
practitioners and up to 46 different pharmacies for the same controlled
substance. In these situations, Medicaid beneficiaries were likely
seeing several medical practitioners to support and disguise their
addiction or fraudulently selling their drugs.
Our analysis understates the number of instances and dollar amounts
involved in the potential abuse related to multiple medical
practitioners. First, the total we found does not include related costs
associated with obtaining prescriptions, such as visits to the doctor's
office and emergency room. Second, the selected states did not identify
the prescriber for many Medicaid claims submitted to CMS. Without such
identification, we could not always identify and thus include the
number of unique doctors for each beneficiary that received a
prescription. Third, our analysis did not focus on all controlled
substances, but instead targeted 10 types of the most frequently abused
controlled substances. Table 1 shows how many beneficiaries received
controlled substances and the number of medical practitioners that
prescribed them the same type of drug.
Table 1: Number of Beneficiaries That Received 1 of 10 Controlled
Substances from 6 or More Prescribers in Fiscal Year 2006 and Fiscal
Year 2007:
Controlled substance: Amphetamine derivatives (e.g., Adderall);
Number of prescribers in selected states: 6-10: 2,877;
Number of prescribers in selected states: 11-15: 55;
Number of prescribers in selected states: 16-20: [Empty];
Number of prescribers in selected states: 21-50: [Empty];
Number of prescribers in selected states: 51+: [Empty];
Total: 2,932;
Medicaid amount paid: $6,616,000.
Controlled substance: Benzodiazepine (e.g., Valium and Xanax);
Number of prescribers in selected states: 6-10: 14,006;
Number of prescribers in selected states: 11-15: 669;
Number of prescribers in selected states: 16-20: 85;
Number of prescribers in selected states: 21-50: 22;
Number of prescribers in selected states: 51+: [Empty];
Total: 14,782;
Medicaid amount paid: $7,266,000.
Controlled substance : Fentanyl (e.g., Duragesic);
Number of prescribers in selected states: 6-10: 777;
Number of prescribers in selected states: 11-15: 41;
Number of prescribers in selected states: 16-20: 6;
Number of prescribers in selected states: 21-50: 1;
Number of prescribers in selected states: 51+: [Empty];
Total: 825;
Medicaid amount paid: $7,810,000.
Controlled substance: Hydrocodone (e.g., Vicodin and Lortab);
Number of prescribers in selected states: 6-10: 31,364;
Number of prescribers in selected states: 11-15: 3,518;
Number of prescribers in selected states: 16-20: 723;
Number of prescribers in selected states: 21-50: 340;
Number of prescribers in selected states: 51+: 9;
Total: 35,954;
Medicaid amount paid: $9,172,000.
Controlled substance: Hydromorphone (e.g., Dilaudid);
Number of prescribers in selected states: 6-10: 590;
Number of prescribers in selected states: 11-15: 67;
Number of prescribers in selected states: 16-20: 14;
Number of prescribers in selected states: 21-50: 11;
Number of prescribers in selected states: 51+: [Empty];
Total: 682;
Medicaid amount paid: $983,000.
Controlled substance: Methadone (e.g., Dolophine and Methadose);
Number of prescribers in selected states: 6-10: 824;
Number of prescribers in selected states: 11-15: 76;
Number of prescribers in selected states: 16-20: 9;
Number of prescribers in selected states: 21-50: 2;
Number of prescribers in selected states: 51+: [Empty];
Total: 911;
Medicaid amount paid: $546,000.
Controlled substance: Methylphenidate (e.g., Ritalin and Concerta);
Number of prescribers in selected states: 6-10: 4,821;
Number of prescribers in selected states: 11-15: 106;
Number of prescribers in selected states: 16-20: 3;
Number of prescribers in selected states: 21-50: 1;
Number of prescribers in selected states: 51+: [Empty];
Total: 4,931;
Medicaid amount paid: $10,866,000.
Controlled substance: Morphine (e.g., MS Contin and AVINZA);
Number of prescribers in selected states: 6-10: 810;
Number of prescribers in selected states: 11-15: 50;
Number of prescribers in selected states: 16-20: 8;
Number of prescribers in selected states: 21-50: 1;
Number of prescribers in selected states: 51+: [Empty];
Total: 869;
Medicaid amount paid: $4,119,000.
Controlled substance: Non-Benzodiazepine sleep aids (e.g., Ambien and
Lunesta);
Number of prescribers in selected states: 6-10: 2,821;
Number of prescribers in selected states: 11-15: 49;
Number of prescribers in selected states: 16-20: 5;
Number of prescribers in selected states: 21-50: [Empty];
Number of prescribers in selected states: 51+: [Empty];
Total: 2,875;
Medicaid amount paid: $5,739,000.
Controlled substance: Oxycodone (e.g., OxyContin and Percocet);
Number of prescribers in selected states: 6-10: 5,349;
Number of prescribers in selected states: 11-15: 435;
Number of prescribers in selected states: 16-20: 73;
Number of prescribers in selected states: 21-50: 18;
Number of prescribers in selected states: 51+: [Empty];
Total: 5,875;
Medicaid amount paid: $10,163,000.
Controlled substance: Total;
Number of prescribers in selected states: 6-10: 64,239;
Number of prescribers in selected states: 11-15: 5,066;
Number of prescribers in selected states: 16-20: 926;
Number of prescribers in selected states: 21-50: 396;
Number of prescribers in selected states: 51+: 9;
Total: 70,636;
Medicaid amount paid: $63,280,000.
Source: GAO.
Note: The numbers in the total columns do not necessarily represent
unique beneficiaries. A single beneficiary could have been prescribed
more than one type of controlled substance by more than one doctor. The
number of unique beneficiaries represented in this table is 64,920. The
maximum number of doctors from which a beneficiary received 1 of the 10
types of controlled substance prescriptions was 112.
[End of table]
Controlled Substances Prescribed or Filled by Banned Providers:
We found 65 medical practitioners and pharmacies in the selected states
had been barred or excluded from federal health care programs,
including Medicaid, when they wrote or filled Medicaid prescriptions
for controlled substances during fiscal years 2006 and 2007.
Nevertheless, Medicaid approved the claims at a cost of approximately
$2.3 million. The offenses that led to their exclusion from federal
health programs included Medicaid fraud and illegal diversion of
controlled substances. Our analysis understates the total number of
excluded providers because the selected states either did not identify
the prescribing medical practitioner for many Medicaid claims (i.e.,
the field was blank) or did not provide the taxpayer identification
number for the practitioner, which was necessary to determine if a
provider was banned.
Medicaid Paid for Controlled Substance Prescriptions Filled for Dead
Beneficiaries or "Written" by Dead Doctors:
Our analysis of matching Medicaid claims in the selected states with
SSA's DMF found that controlled substance prescription claims to over
1,800 beneficiaries were filled after they died. Even though the
selected state programs stated that beneficiaries were promptly removed
from Medicaid following their deaths based on either SSA DMF matches or
third party information, these same state programs paid over $200,000
for controlled substances during fiscal years 2006 and 2007 for
postdeath controlled substance prescription claims. In addition, our
analysis also found that Medicaid paid about $500,000 in Medicaid
claims based on controlled substance prescriptions "written" by over
1,200 doctors after they died.[Footnote 7]
The extent to which these claims were paid due to fraud is not known.
For example, in the course of our work, we found that certain nursing
homes use long-term care pharmacies to fill prescriptions for drugs.
One long-term care pharmacy dispensed controlled substances to over 50
beneficiaries after the date of their death because the nursing homes
did not notify the pharmacy of their deaths prior to delivery of the
drugs. The nursing homes that received the controlled substances, which
included morphine, Demerol, and Fentanyl, were not allowed to return
them because, according to DEA officials, the Controlled Substances Act
of 1970 (CSA) does not permit the return of these drugs. Officials at
two selected states said that unused controlled substances at nursing
homes represent a waste of Medicaid funds and also pose risk of
diversion by nursing home staff. In fact, officials from one state said
that the certain nursing homes dispose of these controlled substances
by flushing them "down the toilet," which also poses environmental
risks to our water supply.
Examples of Fraud, Waste, and Abuse of Controlled Substances in
Medicaid:
In addition to performing the aggregate-level analysis discussed above,
we also performed in-depth investigations for 25 cases of fraudulent or
abusive actions related to the prescribing and dispensing of controlled
substances through the Medicaid program in the selected states. We have
referred certain cases to DEA and the selected states for further
investigation. The following provides illustrative detailed information
on four cases we investigated:
* Case 1: The beneficiary used the identity of an individual who was
killed in 1980 to receive Medicaid benefits. According to a state
Medicaid official, he originally applied for Medicaid assistance in a
California county in January 2004. During the application process, the
man provided a Social Security card to a county official.[Footnote 8]
When the county verified the Social Security Number (SSN) with SSA, SSA
responded that the SSN was not valid. The county enrolled the
beneficiary into Medicaid provisionally for 90 days under the condition
that the beneficiary resolve the SSN discrepancy with SSA within that
time frame. Although the beneficiary never resolved the issue, he
remained in the Medicaid program until April 2007. Between 2004 and
2007, the Medicaid program paid over $200,000 in medical services for
this beneficiary, including at least $2,870 for controlled substances
that he received from the pharmacies.[Footnote 9] We attempted to
locate the beneficiary but could not find him.
* Case 2: The physician prescribed controlled substances to the
beneficiary after she died in February 2006. The physician stated that
the beneficiary had been dying of a terminal disease and became unable
to come into the office to be examined. The physician stated that in
instances where a patient is compliant and needs pain medication,
physicians will sometimes prescribe it without requiring an
examination. A pharmacy eventually informed the physician that the
patient had died and the patient's spouse had continued to pick up her
prescriptions for Methadone, Klonopin, and Xanax after her death.
According to the pharmacy staff, the only reason they became aware of
the situation was because an acquaintance of the spouse noticed him
picking up prescriptions for a wife who had died months ago. The
acquaintance informed the pharmacy staff of the situation. They
subsequently contacted the prescribing physician. Since this incident,
the pharmacy informed us that it has not filled another prescription
for the deceased beneficiary.
* Case 3: A mother with a criminal history and Ritalin addiction used
her child as a means to doctor shop for Ritalin and other similar
controlled stimulants used to treat attention-deficit/hyperactivity
disorder (ADHD). Although the child received overlapping prescriptions
of methylphenidate and amphetamine medications during a 2-year period
and was banned (along with his mother) from at least three medical
practices, the Illinois Medicaid program never placed the beneficiary
on a restricted recipient program. Such a move would have restricted
the child to a single primary care physician or pharmacy, thus
preventing him (and his mother) from doctor shopping. Over the course
of 21 months, the Illinois Medicaid program paid for 83 prescriptions
of ADHD controlled stimulants for the beneficiary, which totaled
approximately 90,000 mg and cost $6,600.
* Case 4: Claims indicated that a deceased physician "wrote" controlled
substance prescriptions for several patients in the Houston area. Upon
further analysis, we discovered that the actual prescriptions were
signed by a physician assistant who once worked under the supervision
of the deceased physician. The pharmacy neglected to update its records
and continued filling prescriptions under the name of the deceased
prescriber. The physician assistant has never been a DEA registrant.
The physician assistant told us that the supervising physicians always
signed prescriptions for controlled substances. After informing her
that we had copies of several Medicaid prescriptions that the physician
assistant had signed for Vicodin and lorazepam, the physician assistant
ended the interview.
Improved Fraud Controls Could Better Prevent Abuse and Unnecessary
Medicaid Program Expenditures:
CMS Conducts Limited Oversight over Controlled Substances in the
Medicaid Program:
Although states are primarily responsible for the fight against
Medicaid fraud and abuse, CMS is responsible for overseeing state fraud
and abuse control activities. CMS has provided limited guidance to the
states on how to improve the state's control measures to prevent fraud
and abuse of controlled substances in the Medicaid program. Thus, for
the five state programs we reviewed, we found different levels of fraud
prevention controls. For example, the Omnibus Budget Reconciliation Act
(OBRA) of 1990 encourages states to establish a drug utilization review
(DUR) program.[Footnote 10] The main emphasis of the program is to
promote patient safety through an increased review and awareness of
prescribed drugs. States receive increased federal funding if they
design and install a point-of-sale electronic prescription claims
management system to interact with their Medicaid Management
Information Systems (MMIS), each state's Medicaid computer system. Each
state was given considerable flexibility on how to identify
prescription problems, such as therapeutic duplication and
overprescribing by providers,[Footnote 11] and how to use the MMIS
system to prevent such problems. The level of screening, if any, states
perform varies because CMS does not set minimum requirements for the
types of reviews or edits that are to be conducted on controlled
substances. Thus, one state required prior approval when ADHD
treatments like Ritalin and Adderall are prescribed outside age
limitations, while another state had no such controlled substance
requirement at the time of our review.
Under the Deficit Reduction Act (DRA) of 2005,[Footnote 12] CMS is
required to initiate a Medicaid Integrity Program (MIP) to combat
Medicaid fraud, waste, and abuse.[Footnote 13] DRA requires CMS to
enter into contracts with Medicaid Integrity Contractors (MIC) to
review provider actions, audit provider claims and identify
overpayments, and conduct provider education.[Footnote 14] To date, CMS
has awarded umbrella contracts to several contractors to perform the
functions outlined above. According to CMS, these contractors cover 40
states, 5 territories, and the District of Columbia. CMS officials
stated that CMS will award task orders to cover the rest of the country
by the end of fiscal year 2009. CMS officials stated that MIC audits
are currently under way in 19 states. CMS officials stated that most of
the MIP reviews will focus on Medicaid providers and that the state
Medicaid programs handle beneficiary fraud. Because the Medicaid
program covers a full range of health care services and the
prescription costs associated with controlled substances are relatively
small, the extent to which MICs will focus on controlled substances is
likely to be relatively minimal.
Selected States Lack Comprehensive Fraud Prevention Framework for
Controlled Substances:
The selected states did not have a comprehensive fraud prevention
framework to prevent fraud and abuse of controlled substances paid for
by Medicaid. The establishment of effective fraud prevention controls
by the selected states is critical because the very nature of a
beneficiary's medical need--to quickly obtain controlled substances to
alleviate pain or treat a serious medical condition--makes the Medicaid
program vulnerable to those attempting to obtain money or drugs they
are not entitled to receive. Instead of these drugs being used for
legitimate purposes, these drugs may be used to support controlled
substance addictions and sale of the drugs on the street. As shown in
figure 1 below, a well-designed fraud prevention system (which can also
be used to prevent waste and abuse) should consist of three crucial
elements: (1) preventive controls, (2) detection and monitoring, and
(3) investigations and prosecutions. In addition, as shown in figure 1,
the organization should also use "lessons learned" from its detection
and monitoring controls and investigations and prosecutions to design
more effective preventive controls.
Figure 1: Fraud Prevention Model:
[Refer to PDF for image: illustration]
Potential fraud, waste, and abuse:
Prevention controls:
Lessons learned influence future use of preventive controls.
Additional potential fraud, waste, and abuse:
Detection and monitoring:
Lessons learned influence future use of preventive controls.
Additional potential fraud, waste, and abuse:
Investigations and prosecutions:
Lessons learned influence future use of preventive controls.
Source: GAO.
[End of figure]
Preventive Controls: Fraud prevention is the most efficient and
effective means to minimize fraud, waste, and abuse. Thus, controls
that prevent fraudulent health care providers and individuals from
entering the Medicaid program or submitting claims are the most
important element in an effective fraud prevention program. Effective
fraud prevention controls require that where appropriate, organizations
enter into data-sharing arrangements with organizations to perform
validation. System edit checks (i.e., built-in electronic controls) are
also crucial in identifying and rejecting fraudulent enrollment
applications or claims before payments are disbursed. Some of the
preventive controls and their limitations that we observed at the
selected states include the following.
* Federal Debarment and Exclusion: Federal regulation requires states
to ensure that no payments are made for any items or services
furnished, ordered, or prescribed by an individual or entity that has
been debarred from federal contracts or excluded from Medicare and
Medicaid programs. Officials from all five selected states said that
they do not screen prescribing providers or pharmacies against the
federal debarment list, also known as the Excluded Parties List System
(EPLS). Further, officials from four states said when a pharmacy claim
is received, they do not check to see if the prescribing provider was
excluded by HHS OIG from participating in the Medicaid program.
* Drug Utilization Review: As mentioned earlier, states perform drug
utilization reviews (DUR) and other controls during the prescription
claims process to promote patient safety, reduce costs, and prevent
fraud and abuse. The drug utilization reviews include prospective
screening and edits for potentially inappropriate drug therapies, such
as over-utilization, drug-drug interaction, or therapeutic
duplication.[Footnote 15] In addition, selected states also require
health care providers to submit prior authorization forms for certain
drug prescriptions because those medications have public health
concerns or are considered high risk for fraud and abuse. Each state
has developed its DUR differently and some of the differences that we
saw from the selected states include the following.
- Officials from certain states stated that they use the prospective
screening (e.g., over-utilization or overlapping controlled substance
prescriptions) as an automatic denial of the prescription, while other
states generally use the prospective screening as more of an advisory
tool for pharmacies.
- The types of drugs that require prior authorization vary greatly
between the selected states. In states where it is used, health care
providers may be required to obtain prior authorization if a specific
brand name is prescribed (e.g., OxyContin) or if a dosage exceeds a
predetermined amount for a therapeutic class of controlled substances
(e.g., hypnotics, narcotics).
Detection and Monitoring: Even with effective preventive controls,
there is risk that fraud and abuse will occur in Medicaid regarding
controlled substances. States must continue their efforts to monitor
the execution of the prescription program, including periodically
matching their beneficiary files to third-party databases to determine
continued eligibility, monitor controlled substance prescriptions to
identify abuse, and make necessary corrective actions, including the
following:
* Checking Death Files: After enrolling beneficiaries, Medicaid offices
in the selected states generally did not periodically compare their
information against death records.
* Increasing the Use of the Restricted Recipient Program: In the course
of drug utilization reviews or audits, the State Medicaid offices may
identify beneficiaries who have abused or defrauded the Medicaid
prescription drug program and restrict them to one health care provider
or one pharmacy to receive the prescriptions. This program only applies
to those beneficiaries in a fee-for-service arrangement. Thus, a
significant portion of the Medicaid recipients (those in managed care
programs) for some of the selected states are not subject to this
program.
* Fully Utilizing the Prescription Drug Monitoring Program: Beginning
in fiscal year 2002, Congress appropriated funding to the U.S.
Department of Justice to support Prescription Drug Monitoring Programs
(PDMP). These programs help prevent and detect the diversion and abuse
of pharmaceutical controlled substances, particularly at the retail
level where no other automated information collection system exists. If
used properly, PDMPs are an effective way to identify and prevent
diversion of the drugs by health care providers, pharmacies, and
patients. Some of the limitations of PDMPs at the selected states
include the following:
- Officials from the five selected states said that physician
participation in PDMP is not widespread and not required. In fact, one
state did not have a Web-based PDMP; the health care provider has to
put in a manual request to the agency to have a controlled substance
report generated.
- No nationwide PDMP exists, and only 33 states had operational
prescription drug monitoring programs as of June 2009. According to a
selected state official, people would sometimes cross state borders to
obtain prescription drugs in a state without a program.
Investigations and prosecutions: Another element of a fraud prevention
program is the aggressive investigation and prosecution of individuals
who defraud the federal government. Prosecuting perpetrators sends the
message that the government will not tolerate individuals stealing
money and serves as a preventive measure. Schemes identified through
investigations and prosecution also can be used to improve the fraud
prevention program. The Medicaid Fraud Control Unit (MFCU) serves as
the single identifiable entity within state government that
investigates and prosecutes health care providers that defraud the
Medicaid program. In the course of our investigation however, we found
several factors that may limit its effectiveness.
* Federal regulations generally limit MFCUs from pursuing beneficiary
fraud. According to MFCU officials at one selected state, this
limitation impedes investigations because agents cannot use the threat
of prosecution as leverage to persuade beneficiaries to cooperate in
criminal probes of Medicaid providers. In addition, the MFCU officials
at this selected state said that this limitation restricts the agency's
ability to investigate organized crime related to controlled substances
when the fraud is perpetrated by the beneficiaries.
* Federal regulations do not permit federal funding for MFCUs to engage
in routine computer screening activities that are the usual monitoring
function of the Medicaid agency. According to MFCU officials at one
selected state, this issue has caused a strained working relationship
with the state's Medicaid OIG, on whom they rely to get claims
information. The MFCU official stated that on the basis of fraud trends
in other states, they wanted the Medicaid OIG to provide claims
information on providers that had similar trends in their state. The
Medicaid OIG cited this prohibition on routine computer screening
activities when refusing to provide these data. In addition, this MFCU
official also stated that its state Medicaid office and its OIG did not
promptly incorporate improvements that it suggested pertaining to the
abuse of controlled substances.
Monitoring of Pharmacy and Physician Prescription Practices by DEA
Related to Controlled Substances:
DEA officials stated that although purchases of certain schedules II
and III controlled substances by pharmacies are reported to and
monitored by DEA, they do not routinely receive information on written
or dispensed controlled substance prescriptions. In states with a PDMP,
data on dispensed controlled substance prescriptions are collected and
maintained by a state agency. In the course of an investigation on the
diversion or abuse of controlled substances, information may be
requested by DEA from a PDMP. In those states without a PDMP, DEA may
obtain controlled substance prescription information during the course
of an inspection or investigation from an individual pharmacy's
records.
GAO Recommendations and Agency Response:
To address the concerns that I have just summarized, we made four
recommendations to the Administrator of CMS in establishing an
effective fraud prevention system for the Medicaid program.
Specifically, we recommended that the Administrator evaluate our
findings and consider issuing guidance to the state programs to provide
assurance on the following: (1) effective claims processing systems
prevent the processing of claims of all prescribing providers and
dispensing pharmacies debarred from federal contracts (i.e., EPLS) or
excluded from the Medicare and Medicaid programs (LEIE); (2) DUR and
restricted recipient program requirements adequately identify and
prevent doctor shopping and other abuses of controlled substances; (3)
effective claims processing system are in place to periodically
identify both duplicate enrollments and deaths of Medicaid
beneficiaries and prevent the approval of claims when appropriate; and
(4) effective claims processing systems are in place to periodically
identify deaths of Medicaid providers and prevent the approval of
claims when appropriate. CMS stated that they generally agree with the
four recommendations and that it will continue to evaluate its programs
and will work to develop methods to address the identified issues found
in the accompanying report.
Mr. Chairman, this concludes my prepared statement. Thank you for the
opportunity to testify before the Subcommittee on some of the issues
addressed in our report on continuing indications of fraud and abuse
related to controlled substances paid for by Medicaid. I would be happy
to answer any questions from you or other members of the Subcommittee.
[End of section]
Footnotes:
[1] For purposes of this report, "controlled substance abuse" refers
only to abuse related to drugs or substances that are regulated by the
Drug Enforcement Administration (DEA).
[2] GAO, Medicaid: Fraud and Abuse Related to Controlled Substances
Identified in Selected States, [hyperlink,
http://www.gao.gov/products/GAO-09-957] (Washington, D.C.: Sept. 9,
2009).
[3] Certain Medicaid claims did not capture the date of the
prescription. If the prescribing date was unknown, we based our
calculations on the 6 month period prior to the order being filled.
This proxy was used as a reasonable estimate to be consistent with the
6 month period allowed for valid refills and partial filling of
prescriptions for certain controlled substances.
[4] [hyperlink, http://www.gao.gov/products/GAO-09-957].
[5] The approximately 65,000 Medicaid beneficiaries comprise less than
1 percent of the total number of Medicaid beneficiaries in these five
states.
[6] The $63 million makes up about 6 percent of the 10 controlled
substances that we analyzed in these five states.
[7] If the prescribing date was unknown, we based our calculations on
the 6 month period prior to the order being filled. This proxy was used
as a reasonable estimate to be consistent with the 6 month period
allowed for valid refills and partial filling of prescriptions for
certain controlled substances.
[8] In California, Medicaid applications are submitted to the county,
which are then forwarded to the state following a review.
[9] The controlled substance amount is for fiscal years 2006 and 2007.
[10] Omnibus Budget Reconciliation Act of 1990, Pub L. No. 101-508, 104
Stat. 1388(1990).
[11] Therapeutic duplication is the prescribing and dispensing of the
same drug or two or more drugs from the same therapeutic class when
overlapping time periods of drug administration are involved and when
the prescribing or dispensing is not medically indicated.
[12] Deficit Reduction Act of 2005, Pub. L. No. 109-171, 120 Stat.
4(2005).
[13] Although individual states are responsible for the integrity of
their respective Medicaid programs, MIP represents CMS's first national
strategy to detect and prevent Medicaid fraud and abuse.
[14] In addition, CMS is required to provide effective support and
assistance to states in their efforts to combat Medicaid provider fraud
and abuse.
[15] In addition, state Medicaid offices also perform retrospective
analysis to identify patterns of potential waste and abuse of drugs so
that pharmacies and Medicaid providers are notified of this potential
problem.
[End of section]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Phone:
The price of each GAO publication reflects GAO‘s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO‘s Web site,
[hyperlink, http://www.gao.gov/ordering.htm].
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
