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Massive Medicaid Fraud and Texas’ O.I.G Dollar Recovery Strategy

Medicaid and Medicare frauds have been weighing heavily on states’ financial resources in the past years and New York is not an exception.

In the midst of solutions to this inter-state problem, eyes are focused on the Office of Inspector General at Health and Human Services Commission (O.I.G) – charged with investigating fraud among health care providers in Texas- who has revolutionized its method of dealing with frauds. Our New York Medcaid attorneys are intimately familiar with the important role the program plays in the lives of so many local residents.

The O.I.G’s strategy: A Fair Solution to Medicaid Fraud?

The O.I.G’s new strategy, which consists in freezing financing for any health care providers whose activities display indications of fraud, has been fiercely debated:

According to an article in The New York Times, the strategy has won glowing reviews from budget-weary state lawmakers but it has also enraged doctors, dentists and other providers who treat Medicaid patients. Those attacking the plan argue that health care providers are targeted for Medicaid fraud investigations over minor allegations, without even a hearing.

On the one hand, the O.I.G’s dollar-recovery strategy increases the potential monetary returns for the state since it freezes the cash infusion to questionable providers at the first warning, thus avoiding the lengthy process required to retrieve any lost funds.

On the other hand, health care providers are targeted because of minor indicators such as anonymous calls to a fraud hotline or a computer-generated analysis of a handful of billing codes. As a consequence, their finances are halted, their practices jeopardized and their patients left hanging while the allegations against them are verified, without any due process.

However, the O.I.G says it does not target any providers blindly but instead looks at the clear data.

Could such a strategy, which seems to be winning in Texas, be applied in New York?

A recent article on CNN reports that authorities in New York have charged 48 people in a massive fraud that apparently bought HIV medications and other prescriptions drugs from Medicaid recipients and sold them to unsuspecting buyers. According to the report, the FBI said it seized more than $16 million worth of prescriptions drugs -33,000 prescription bottles and more than 250,000 loose pills.

The defendants were charged with buying the medication from New York Medicaid beneficiaries in New York for a low price and selling them to pharmacies and other wholesale prescription drug companies in various states. The prescription drugs were repackaged and sold to the oblivious pharmacies that would in turn sell the prescribed medications to their customers for a high cost.

The U.S attorney for the southern district of New York, Preet Bharara said “these defendants ran a black market in prescription pills involving a double-dip fraud of gigantic proportions”. The entire Medicaid scheme worked a fraud on the entire health care system, starting from pharmaceutical companies and legitimate pharmacies to a fraud on patients who unwittingly bought those second-hand drugs.

Prosecutors said the scheme cost taxpayers $500 million. The defendants made millions off the difference between the often insignificant cost to the Medicaid beneficiaries and the hundreds of dollars they charged the pharmacies that sold the second-hand prescriptions to their unsuspecting users.

The Medicaid fraud not only cost taxpayers millions but it also posed serious health risks “at both the collection and distribution ends” said Janice K. Fedarcyl, FBI assistant director. Medicaid beneficiaries such as AIDS and asthma patients were induced to sell their medications for a small price rather than take them as prescribed, while end-users were getting second-hand drugs that had been mishandled, repackaged, improperly stored and sometimes expired.

See Our Related Blog Posts:

New York Counties Hurt By Nursing Home Medicaid Glitch

New Documentary on Financial Elder Abuse

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