Medicaid: Fraud and Abuse Related to Controlled Substances Identified in Selected States

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. 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).