National Association of Medicaid Fraud Control Units
Medicaid provider fraud costs American taxpayers hundreds of millions of dollars annually and hinders the very integrity of the Medicaid program. State Medicaid Fraud Control Units (MFCUs) have long been in the forefront of health care fraud enforcement. A Medicaid Fraud Control Unit is a single identifiable entity of state government, annually certified by the Secretary of the U.S. Department of Health and Human Services (HHS) that conducts a statewide program for the investigation and prosecution of health care providers that defraud the Medicaid program. In addition, a MFCU reviews complaints of abuse or neglect of nursing home residents. A Unit may review complaints of the misappropriation of patients’ private funds in these facilities. The Unit is also charged with investigating fraud in the administration of the program and for providing for the collection or referral for collection to the single state agency and overpayments it identifies in carrying on its activities.
The Ticket to Work and Work Incentives Improvement Act of 1999 extended the jurisdiction of the Units to allow them, with the approval of the Inspector General of the relevant federal agency, to investigate fraud in any federally funded health care program, such as Medicare. This authority is limited to those cases that are primarily related to Medicaid. This law allows the MFCUs the option to investigate complaints of abuse or neglect of those residing in board and care facilities, regardless of the source of payment.
Federal regulations prohibit the Units from pursuing recipient fraud, unless there is a conspiracy with a provider. In 2013, HHS amended the regulation prohibiting the MFCUs from using federal matching funds to identify fraud through scanning and analysis of data, known as data mining. Federal financial participation for data mining is now allowed if certain criteria are satisfied. A Unit must submit an application , and must be approved by HHS/OIG.
The majority of the 50 MFCUs are located in the office of the state attorney general. Six are located in other state agencies. These are: Connecticut, District of Columbia, Illinois, Iowa, Tennessee, and West Virginia. North Dakota has received a waiver from the federal government and does not have a Unit. None of the five territories has established a MFCU.
Each Unit receives a federal grant, annually, from the U.S. Department of Health and Human Services. This federal grant of 75% must be matched by the state for the remaining 25%. Because of this incentive funding, the Units are subject to certain requirements and limitations. The Units must employ attorneys, investigators and auditors who are required to perform full-time duty intended to last a year and work only on Medicaid fraud cases. Temporary or part-time staff that may conduct an occasional investigation or prosecution do not develop the necessary specialized expertise to successfully investigate and prosecute these very complicated criminal cases. A Unit is intended to operate as a “strike force” using a multi-disciplinary approach, with the team of investigators and auditors directed by an attorney.
Units must employ attorneys that are experienced with the investigation and prosecution of civil fraud or criminal cases, investigators with substantial experience in commercial or financial investigations and auditors capable of supervising the review of financial records and advising or assisting in the investigation of alleged fraud. A Unit Director, generally an assistant attorney general, manages the Unit, although some Units are managed by an investigator.
Each Unit operates under the administrative oversight of the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services and must be recertified annually. As part of this process, the Inspector General reviews a Unit’s application for recertification and conducts on-site visits periodically.
To receive federal certification, a Unit must be separate and distinct from the Medicaid or single state agency. Federal regulations also prohibit any official from the Medicaid agency from having authority to review or overrule activities of the Unit. Furthermore, a Unit is prohibited from receiving funds from the Medicaid agency.
The Medicaid agency is required to enter into an agreement, known as the Memorandum of Understanding (MOU), with the Unit which outlines each agency’s responsibilities and duties to each other.
The Units employ approximately 2,000 staff nationwide. Units range in size from the largest New York with a total of 299 to the smallest Wyoming with a total staff of four.
During its first decade, Medicaid, which was created in 1965, operated with few controls against fraud and without any specific state or federal law enforcement agencies responsible for monitoring criminal activity within the program. The need for the MFCUs came about when the public and Congress realized that too many nursing home patients were held hostage by the greed of a small number of facility operators and often dishonest health care practitioners who used the Medicaid program as their own private “ATM machine.”
Congressional investigations and hearings about the problem of health care fraud and abuse began in the early l970s. In l975, New York Governor Hugh L. Carey, with the support of Attorney General Louis J. Lefkowitz, appointed Charles J. Hynes as Special State Prosecutor for Nursing Homes, Health and Social Services, in response to a massive scandal in the state’s nursing home industry. This office was the first full scale comprehensive effort in the country to tackle Medicaid fraud. It was Special Prosecutor Hynes who suggested an outline for a proposal to establish state fraud control units, when he testified before Congress in 1976. Congressional Testimony
In 1977, Congress responded by enacting the Medicare-Medicaid Anti-Fraud and Abuse Amendments of l977, P.L. 95-142. The objective of these amendments was to ”strengthen the capability of the government to detect, prosecute, and punish fraudulent activities under the Medicare and Medicaid programs…” On October 27,1977, President Jimmy Carter signed the legislation which provided each state with the opportunity and resources to establish a Medicaid Fraud Control Unit to investigate and prosecute provider fraud and resident abuse. Section 17 provided 90 percent federal funding to the states for three years to establish and operate a Medicaid Fraud Control Unit. In l978, 17 Units were federally certified.
Congressional support of the MFCU program continued when in l980, the Omnibus Reconciliation Act, P.L. 96-499 provided permanent federal funding for the Units beyond the initial three year period. New Units would continue to be funded at rate of 90 percent for the first three years of a Unit’s existence and after that period, a Unit would receive permanent federal funding at a rate of 75 percent.
This funding formula allows the federal government to ensure that each Unit’s activities are devoted exclusively to investigating and prosecuting provider fraud, resident abuse and fraud in the administration of the Medicaid program. Federal financial participation for any one quarter may not exceed the higher of $125,000 or ¼ of one percent of the sums expended by the federal, state and local governments during the previous quarter in carrying out the state Medicaid program.
The MFCU program was voluntary until l995. Federal law now requires each state to have a MFCU unless the state can demonstrate to the satisfaction of the HHS Secretary that it has a minimum amount of Medicaid fraud and Medicaid beneficiaries will be protected from abuse and neglect. North Dakota has been granted a waiver and does not have a MFCU. The territories, while they receive Medicaid funds, do not have MFCUs.