State, City Settle Case Alleging Medicaid Fraud

We have posted on a variety of settlements of cases alleging health care fraud, but this one has a new twist, as reported by the NY Times,

New York State and New York City officials agreed this week to repay the federal government for more than half a billion dollars in improper Medicaid claims, averting a potential court battle but adding more red ink to the state’s and city’s finances.

The settlement, which federal officials said was the largest recovery of Medicaid funds in history, ends a lengthy dispute with the federal government over whether school districts around the state improperly sought Medicaid payments for speech therapy and other services dating to the early 1990s.

Under the agreement, which was announced Tuesday, the city will repay about $100 million. The state will pay about $332 million in 10 installments over the next five and a half years and will also give up $107.9 million worth of Medicaid claims now owed by the federal government.

Though neither city nor state officials are required to admit wrongdoing under the agreement, it does require the state’s Department of Education to submit to independent monitoring of its Medicaid-financed programs.

Since the 1980s, Medicaid has helped school districts pay for the cost of services like speech therapy and psychological counseling for schoolchildren, including the cost of transportation to therapists’ offices. School districts in New York have been among the most aggressive in the country in seeking such aid: one federal study found that New York accounted for 44 percent of all student health services.

Those lawsuits, filed under the federal False Claims Act, spurred several audits by the Department of Health and Human Services of city and state programs that finance speech therapy and other programs for disabled children. Those audits found substantial potential for fraud, reporting that a vast majority of the claims submitted did not meet federal requirements, and that in many cases there was no evidence that the services had actually been provided.

This may be the first settlement of health care fraud allegations we have discussed in which all the involved parties were government agencies.

The current fervent debate in the US about health care reform has focused on ever rising health care costs. However, this debate has largely ignored the ethics of health care, and the sorts of leadership of health care organizations that has lead to rampant and costly mischief, of which this case is just the latest example. How can we control costs while so many health care leaders are seeking every angle to make more money, whatever the consequences?