Attorney General Lockyer and Legislators Unveil Bi-Partisan, 10-Point Plan to Fight Medi-Cal Fraud

Office of the Attorney General, Department of Justice

OFFICE OF THE AG

April 21, 2004

04-047
FOR IMMEDIATE RELEASE
(916) 324-5500

(SACRAMENTO) – Attorney General Bill Lockyer today was joined by members of the state Senate to unveil a bi-partisan, 10-point plan to improve prosecution, detection and prevention of Medi-Cal fraud, which is believed to siphon as much as $3 billion each year from the state's $30 billion system.

"More than six million Californians depend on Medi-Cal for health care. One in three childbirths and two-thirds of all nursing home care are funded by this important program," Lockyer said. "This bi-partisan,10-point plan will help us more aggressively detect, investigate and prosecute Medi-Cal fraud, protecting the system for the taxpayers who pay for it and the beneficiaries who depend on it for vital health care."

The proposed reforms are the product of five years of experience in the aggressive prosecution of Medi-Cal fraud. Since 1999, criminal prosecutions by the Attorney General's Bureau of Medi-Cal Fraud and Elder Abuse (BMFEA) have increased 199%. BMFEA has obtained judgments for more than $154 million in court-ordered restitution, fines and penalties.

The Attorney General's Medi-Cal fraud prevention and prosecution package is composed of six legislative bills, authored by Senate Minority Leader Jim Brulte, R-Rancho Cucamonga; Senator Martha Escutia, D-Norwalk; Senator Mike Machado, D-Stockton; and Senator Deborah Ortiz, D-Sacramento.

Lockyer also will appoint a multi-disciplinary task force of representatives from academia, health care, high tech and law enforcement. Chaired by Greg Papadopoulos, executive vice president and chief technology officer of Sun Microsystems, Inc., the task force will perform three of the proposals:

Creating a fraud detection system based on "best-business" standards used by industries that are traditionally targeted by fraud;
Building an auditing system to measure the level of fraud and identify areas that suffer the highest losses.
Establishing an electronic clearinghouse so local, state and federal law enforcement, regulatory and licensing agencies can effectively share information and coordinate their activities.

The final piece of the package proposes hiring additional peace officers and prosecutors in the AG's BMFEA to more aggressively investigate and prosecute those who defraud Medi-Cal, with the federal government paying for 75% of all expansions.

"This package represents a bi-partisan push to stop the theft of taxpayers' money by greedy criminals who fraudulently bill Medi-Cal for services that aren't necessary or aren't provided," Brulte said. "The bills I am authoring will increase penalties for individuals who try to obstruct fraud investigations, and enlist beneficiaries to help officials rein in Medi-Cal fraud."

SB 1359 by Brulte will create a program that allows beneficiaries to confirm whether they received treatment and services for which a Medi-Cal provider billed in their name. SB 1360 will create a reward fund for citizens who report information that leads to a successful recovery of stolen funds. A third Brulte bill, SB 1361, will increase penalties for obstructing Medi-Cal fraud investigations.

Sen. Escutia's measure, SB 1358, will give the Attorney General's Office greater authority to conduct onsite inspections of providers' records and facilities. "As a condition of participating in the Medi-Cal program, the provider must agree to allow the Department of Health Services to make unannounced visits and inspect the business premises and records," Escutia said. "My bill expands that authority to the Attorney General's investigators."

Sen. Machado's bill, SB 1850, targets a problem identified in 25 percent of the 700 criminal cases filed by the Attorney General's office. "People are being bribed with money, sneakers for their children and other incentives to be transported hundreds of miles for unnecessary treatment, all so a fraudulent provider can bill Medi-Cal," Machado said. "My measure prohibits the reimbursement of any service supplied to a beneficiary living outside that provider's region, unless the provider receives prior approval by demonstrating that there is an emergency or other valid reason for the remote treatment."

SB 1170 by Sen. Ortiz will improve the ability of state officials to obtain accurate pricing data from drug manufacturers, wholesalers and retailers to establish fair reimbursement rates for the more than 40,000 pharmaceutical products for which Medi-Cal currently reimburses providers.

"This bill would end what is arguably the largest, single-source of Medi-Cal fraud and abuse," Ortiz said. "The government has the right to get the best wholesale price on pharmaceuticals, but under the current system, we can only rely on the manufacturers' stated price. Investigations by Attorney General Lockyer have uncovered numerous situations in which providers are reimbursed at rates that exceed their actual costs by an astounding 1,000 percent. That fraudulent practice is costing the state millions of dollars and must be stopped."

A fact sheet describing the six bills and four proposals in the Attorney General's reform package are attached. The fact sheet may be viewed online by linking to the press release available at http://www.ag.ca.gov./newsalerts.

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