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Research Letters | Health Care Reform

Enforcement Actions Involving Medicaid Fraud and Abuse, 1996-2009 FREE

Zaina P. Qureshi, PhD, MPH; Ying Liu, PhD; Oliver Sartor, MD; Yong H. Chu, MPH; Charles L. Bennett, MD, PhD, MPP
[+] Author Affiliations

Author Affiliations: South Carolina Center of Economic Excellence for Medication Safety and Efficacy and the Southern Network on Adverse Reactions (SONAR), Department of Clinical Pharmacy and Outcome Sciences, South Carolina College of Pharmacy (Drs Qureshi and Bennett) and Department of Health Promotion, Education and Behavior, Arnold School of Public Health (Mr Chu), University of South Carolina, Columbia; Department of Microbiology and Immunology, Indiana University School of Medicine, Indianapolis (Dr Liu); Tulane Cancer Center and Departments of Medicine and Urology, Tulane Medical School, New Orleans, Louisiana (Dr Sartor); and Hollings Cancer Center, Medical University of South Carolina, Charleston (Dr Bennett).


Arch Intern Med. 2011;171(8):782-790. doi:10.1001/archinternmed.2011.142.
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Medicaid expenditures in 2008 were $321 billion, accounting for 16% of domestic health care spending and coverage of 60 million individuals.1 Overall, Medicaid accounts for the second largest state budgetary expenditures (17%). In recent years, state officials have focused on identifying fraud in an effort to control Medicaid expenditures. Twenty-three states and the District of Columbia adopted state False Claims Act (FCA) legislation to facilitate fraud investigations.2 This legislation, modeled after federal legislation, allows private citizens, termed qui tam relators, to file lawsuits alleging fraud by Medicaid contractors and to be awarded part of the recoveries. Historically, 90% of Medicare fraud has involved qui tam relators, resulting in financial recoveries of $9.3 billion between 1996 and 2005.3 No study has reported similar data for Medicaid. We report on Medicaid FCA investigations from 1996 through 2009.

Data sources included Web sites maintained by state attorneys general and the Lexis/Nexis News database (1996 through 2009) (search terms False Claims Act AND Medicaid and individual state names). Data on industry, date, violation, and recovery amount were abstracted.

Between 1996 and 2000, no concluded Medicaid fraud FCA cases were found. Between 2001 and 2005, total recoveries for the 12 concluded cases were $99 million. All of these cases had been initiated by qui tam relators. Between 2006 and 2009, 44 state-led FCA health care cases were concluded, and $5.4 billion was recovered. Only one-third of these cases were initiated by qui tam relators. The types of Medicaid fraud varied according to industry (Table). Pharmaceutical manufacturers accounted for the largest number and the greatest amount of financial recoveries: $4.6 billion (85% of all Medicaid FCA recoveries) for 24 cases (43% of Medicaid FCA cases). The 2 largest recoveries (in dollars) involved pharmaceutical manufacturers. Eli Lilly paid $ 1.4 billion to resolve allegations of fraudulent marketing of pharmaceuticals. Purdue Pharma paid $634.5 million and pleaded guilty to misbranding charges that sales representatives had misled Medicaid providers to believe that oxycodone was nonaddictive. Hospitals and hospital networks accounted for the second largest percentage of financial recoveries, $490 million (9% of the total Medicaid FCA recoveries), resolving 9 cases. The largest recovery from a single hospital network ($225 million) was received from a settlement with a Medicaid Health Maintenance Organization, resolving allegations that it discouraged participation of pregnant women in a Medicaid program. Settlements with pharmacy chains accounted for $221 million and 6 cases. Three cases resolved allegations of switching prescriptions for Medicaid beneficiaries to more expensive capsule (vs tablet) formulations or billing for pharmaceuticals not received by patients.

Table Graphic Jump LocationTable. State-Initiated False Claims Act Case Settlements Involving Medicaid Fraud by Industry and Type of Fraud, 1996-2009

We identified 56 successfully concluded Medicaid FCA investigations associated with $5.5 billion in financial recoveries, with almost all of the recoveries occurring since 2006. The most pervasive allegations involved billing fraud and off-label marketing by pharmaceutical manufacturers. While all of the initial Medicaid FCA settlements involved qui tam realtors, as was the case with 90% of Medicare FCA settlements in this period, two-thirds of the more recent Medicaid settlements did not involve qui tam relators. These investigations were frequently initiated by state attorneys general or Medicaid officials and conducted jointly with federal investigators and other state attorneys general. The investigations have primarily involved pharmaceutical manufacturers, who account for $4.7 billion in financial recoveries and 43% of successfully concluded Medicaid FCA investigations.

Our analysis has some limitations. Our data consist of publicly disseminated information. However, there are no public databases containing information on health care fraud. With continuing Medicaid growth, the number of fraud investigations initiated by state officials will increase. The consequences of these efforts have the potential to reduce costs and improve the quality of care received by Medicaid enrollees.

Correspondence: Dr Bennett, South Carolina College of Pharmacy, 715 Sumter St, Ste 311, Columbia, SC 29208 (charlesleebennett@gmail.com).

Author Contributions:Study concept and design: Qureshi, Sartor, and Bennett. Acquisition of data: Qureshi, Sartor, Chu, and Bennett. Analysis and interpretation of data: Qureshi, Liu, Sartor, Chu, and Bennett. Drafting of the manuscript: Qureshi, Chu, and Bennett. Critical revision of the manuscript for important intellectual content: Qureshi, Liu, Sartor, Chu, and Bennett. Statistical analysis: Qureshi, Chu, and Bennett. Obtained funding: Bennett. Administrative, technical, and material support: Bennett. Study supervision: Qureshi, Sartor, and Bennett.

Financial Disclosure: None reported.

This article was corrected for an error in the Author Affiliations on April 25, 2011.

Smith  VKGifford  KEllis  ERudowitz  RO’Malley Watts  MMarks  C Kaiser commission on Medicaid and the uninsured. 2009;http://www.kff.org/medicaid/upload/7985.pdf. Accessed November 7, 2010
Fraud  TA State False Claims Act. http://www.taf.org/statefca.htm. Accessed November 7, 2010
Kesselheim  ASStuddert  DM Whistleblower-initiated enforcement actions against health care fraud and abuse in the United States, 1996 to 2005. Ann Intern Med 2008;149342- 349
PubMed

Figures

Tables

Table Graphic Jump LocationTable. State-Initiated False Claims Act Case Settlements Involving Medicaid Fraud by Industry and Type of Fraud, 1996-2009

References

Smith  VKGifford  KEllis  ERudowitz  RO’Malley Watts  MMarks  C Kaiser commission on Medicaid and the uninsured. 2009;http://www.kff.org/medicaid/upload/7985.pdf. Accessed November 7, 2010
Fraud  TA State False Claims Act. http://www.taf.org/statefca.htm. Accessed November 7, 2010
Kesselheim  ASStuddert  DM Whistleblower-initiated enforcement actions against health care fraud and abuse in the United States, 1996 to 2005. Ann Intern Med 2008;149342- 349
PubMed

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