Medicaid Fraud Enforcement Trends: Fewer Cases, Higher Penalties

A new report from the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) details Medicaid Fraud Control Unit (MFCU) enforcement activity in fiscal year (FY) 2021. Bottom Line: MFCU enforcement activity has rebounded from recent declines but still hasn’t reached pre-pandemic levels. But while volume is down, recoveries are way up, meaning that the penalties for committing Medicaid fraud and/or patient abuse are increasing. Meanwhile, labs remain a prominent target for Medicaid civil actions. Here’s a breakdown of the numbers and the enforcement trends they reveal.

What MFCUs Are

MFCUs are state government agencies that investigate and prosecute Medicaid provider fraud and patient abuse or neglect within the particular state. MFCU staff review referrals of possible wrongdoing to determine the potential for criminal prosecution and/or civil action. Under the Social Security Act (SSA), each state is required to operate a MFCU unless it meets specific exemption criteria. MFCUs are jointly funded by the federal and state governments. In FY 2021, combined funding for MCFUs totaled approximately $314 million, of which approximately $236 million were federal funds. Here are the key numbers for FY 2021:

• 1,105: Total convictions, including;
  • 780: Convictions due to fraud; and
  • 325: Convictions due to patient abuse or neglect;
• 540: Individuals or entities excluded from federally funded health programs;
• 716: Civil settlements and judgments;
• $1.7 billion: Total amount recovered by MFCUs, including;
  • $856.6 million: Criminal recoveries; and
  • $826.2 million: Civil recoveries
• $5.36: How much MFCUs recovered for every $1.00 spent.

MFCU Convictions Trends

While convictions have declined since the start of the COVID-19 pandemic in FY 2020, totals recovered slightly this year, from 1,017 to 1,105. As in previous years, fraud convictions have accounted for approximately 70 percent of all convictions in FY 2021.

Exhibit A: MFCU Medicaid Convictions, 2017 to 2021

Source: Recreated from U.S. Department of Health and Human Services, Office of Inspector General analysis of Annual Statistical Reports for FYs 2017-2021.

Continuing a pattern that began in FY 2017, convictions of personal care service (PCS) attendants and agencies for fraud were significantly higher than for any other provider type in FY 2021: 329 convictions, or 42 percent of the total.

Exhibit B: Fraud Convictions Involving PCS Attendants and Agencies, 2017 to 2021

Source: Recreated from OIG analysis of Annual Statistical Reports for FYs 2017-2021.

MFCU convictions related to drug diversion increased slightly from 146 in FY 2020 to 155 in FY 2021, and associated criminal recoveries totaled $1.87 million in FY 2021. In a Medicaid context, drug diversion cases generally involve the fraudulent billing of Medicaid for drugs diverted from legal and medically necessary uses, or the fraudulent activities by Medicaid providers related to drug diversion regardless of whether the Medicaid program was billed.

Exhibit C: Fraud Convictions Involving Drug Diversions, 2017 to 2021

Source: Recreated from OIG analysis of Annual Statistical Reports for FYs 2017-2021.

Civil Settlements & Judgments

MFCU actions against labs are more likely to involve civil settlements and judgments. There were 716 such actions in FY 2021, down from 786 the year before.

Exhibit D: MFCU Civil Settlements & Judgments, 2017 to 2021

Source: Recreated from OIG analysis of Annual Statistical Reports for FYs 2017-2021.

Continuing recent patterns, pharmaceutical manufacturers accounted for more of these actions than any other provider type in 2021, 257 of the 716 civil settlements and judgments (36 percent). As illustrated by Exhibit E, labs were fourth on the list, behind manufacturers, suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) and medical device manufacturers.

Exhibit E: MFCU Civil Settlements & Judgments by Provider Type, 2017 to 2021

Source: Recreated from OIG analysis of Annual Statistical Reports for FYs 2017-2021