Texas spent more than $7.3 billion for Medicaid services and another $49.9 million on workers' compensation claims in fiscal 1995. Yet fraud may account for as much as 10 percent of all Medicaid claims and 30 percent of all workers' compensation payments.[1]
If Texas loses only a fraction of these amounts to fraud, the loss still represents a serious, ongoing drain of public resources. Successful fraud control efforts need strong referral and detection programs, an effective investigative function, and appropriate punishments.
Several of TPR's proposals in this chapter concern emerging communications and data technologies that can greatly improve the state's efforts to detect and investigate fraud cases. Based on the success of the comptroller's Medicaid Fraud Detection project, TPR recommends that appropriate agencies use neural network and other intelligent technologies to identify fraud by Medicaid providers and welfare recipients, as well as non-compliant taxpayers.
Technology alone cannot solve the state's fraud problems; agencies need adequate resources to investigate and punish or prosecute perpetrators. TPR recommends consolidating investigative and audit-related functions of the Texas Department of Human Services' Office of the Inspector General, the Texas Department of Health, and other agencies with the Health and Human Services Commission's Sanctions Division. The resultant Investigations and Enforcement Office would bring greater focus and efficiency to the state's fight against Medicaid and Welfare fraud.
TPR also recommends that the Texas Department of Criminal Justice consolidate its fiscal and program audit functions, deposit all its funds in the State Treasury, and install enhanced anti-fraud software. These changes would eliminate duplicative audits while making fraud and abuse easier to detect.
Texas' electronic benefits transfer (EBT) system, created in response to proposals in TPR's first report, Breaking the Mold, has a proven track record in reducing fraud. Recommendations in the present chapter increase the use of EBT-generated information to help prevent welfare fraud.
Much of the state's Medicaid population is being moved to managed health care plans, creating a need for additional fraud prevention efforts focused on the new system. A series of recommendations identify ways to ensure the state establishes effective controls for managed health care.
While Texas' Medicaid Fraud Prevention Act provides the state's Office of the Attorney General with useful tools for prosecuting Medicaid fraud, no such law exists to protect other public programs. TPR recommends the Legislature establish a new false claims act that makes misuse of any state funds a crime.
Other amendments to existing laws proposed in this chapter would broaden enforcement bodies' authority to penalize perpetrators of fraud and recover stolen money. Stiffer punishments are proposed for fraudulent acts that harm children.
TPR's recommendations for fraud prevention would save the state almost $600 million over the next five years.
The following table provides detailed information concerning the fiscal impact of these recommendations.
Fraud Issues
| (In Millions of Dollars) | ||||||||||||
| 1998 | 1999 | |||||||||||
| Issue Number | Recommendation | General Revenue | Other Dedicated Accounts or Funds | All Funds | Additional Federal Funds | Gain in Local Funds | General Revenue | Other Dedicated Accounts or Funds | All Funds | Additional Federal Funds | Gain in Local Funds | Change in FTEs |
| FR 1 | Improve Medicaid and Welfare Enforcement - 1 | 18.3 | 0.0 | 18.3 | 0.0 | 0.0 | 38.9 | 0.0 | 38.9 | 0.0 | 0.0 | 0.0 |
| FR 2 | Ensure Appropriate Use of Medicaid-Funded Services and Equipment - 1 | 2.7 | 0.0 | 2.7 | 0.0 | 0.0 | 2.7 | 0.0 | 2.7 | 0.0 | 0.0 | 0.0 |
| FR 3 | Reduce Medicaid Overpayments - 1 | 12.3 | 0.0 | 12.3 | 0.0 | 0.0 | 12.3 | 0.0 | 12.3 | 0.0 | 0.0 | 0.0 |
| FR 4 | Tighten Provider Enrollment Processes | cbe | ||||||||||
| FR 5 | Measure Fraud | -0.3 | 0.0 | -0.3 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| FR 6 | Improve Medicaid Fraud Referral Procedures | cbe | ||||||||||
| FR 7 | Strengthen State Fraud Laws | cbe | ||||||||||
| FR 8 | Enact a Qui Tam Statute | cbe | ||||||||||
| FR 9 | Prevent Fraud and Abuse in Medicaid Managed Care | cbe | ||||||||||
| FR 10 | Increase Penalties Against Medicaid Providers That Harm Children | cbe | ||||||||||
| FR 11 | Enact False Claims Legislation | cbe | ||||||||||
| FR 12 | Use Technology to Fight Fraud and Abuse in State Programs | cbe | ||||||||||
| FR 13 | Improve Electronic Benefit Transfer Enforcement Efforts | cbe | ||||||||||
| FR 14 | Enhance State Tax Collections | 3.2 | 0.0 | 3.2 | 0.0 | 0.0 | 36.9 | 0.0 | 36.9 | 0.0 | 0.0 | 0.0 |
| FR 15 | Prevent Fraud and Abuse Within the State's Prison System - 1 | 1.2 | 0.0 | 1.2 | 0.0 | 0.0 | 1.2 | 0.0 | 1.2 | 0.0 | 0.0 | -26.0 |
| FR 16 | Improve the Recovery of Erroneously Paid Public Assistance Benefits - 1 | 1.7 | 0.0 | 1.7 | 0.0 | 0.0 | 2.8 | 0.0 | 2.8 | 0.0 | 0.0 | 0.0 |
| Total: Fraud Issues | 39.2 | 0.0 | 39.2 | 0.0 | 0.0 | 94.9 | 0.0 | 94.9 | 0.0 | 0.0 | -26.0 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1998-99 Biennial Total | 134.1 | 0.0 | 134.1 | 0.0 | 0.0 | |||||||
Note: Totals may not add due to rounding.
Savings and revenue gains appear as positive numbers.
cbe - cannot be estimated.
* Other includes gains/losses to accounts in the General Revenue Fund and other funds.
1 Requires reduction in appropriation to achieve savings.
2 Requires Comptroller reduction in agency budget.
Footnotes[1] Texas Comptroller of Public Accounts, The Texas Medicaid System: Fraud and Abuse, by National Bankruptcy Information Bureau, Inc. (Middleton, Wisconsin, September 15, 1996), p. 3. (Consultant's report.)
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