Louisiana Lawmakers Seek to Crack Down on Medicaid Fraud after Audit Shows Enrollment Abuse

Published June 25, 2019

House Bill 72, which passed the House and is now in a state senate committee, gives the state auditor general access to tax data for the purpose of auditing state-administered programs such as Medicaid.  Senate Bill 179 requests the legislative auditor to review and report on the 1,692 Medicaid recipients who reported income in excess of $100,000 a year in 2017.

 In February, the Louisiana Department of Health sent 40,000 notices to Medicaid recipients, warning them they would be removed from the program unless they could prove they met the program’s income requirements, after conducting the audit.

An agency spokesman says three-quarters of those receiving the letters (30,500 people) lost their benefits at the end of March. Nearly all of them were non-elderly adults who had enrolled through the Medicaid expansion Gov. John Bel Edwards signed in 2016.

Ninety-Three Percent Were Ineligible

Chris Jacobs, a senior fellow at the Pelican Institute for Public Policy, says there has been a constant stream of stories about waste, fraud, and abuse in Louisiana’s Medicaid program, and in particular with Medicaid expansion.

“The auditor took a small sample audit of 100 individuals, and some 93 of them were ineligible to receive Medicaid benefits at the time they received Medicaid payments,” Jacobs said. “The average income of these individuals was over $67,000 a year, which is over the allowable limit for income. There were at least 1,672 people making six-figure incomes who were on Medicaid. There was at least one person in the sample audit who made $145,000 a year.

“For comparison, the Democratic governor of Louisiana, John Bel Edwards, makes $130,000 a year, so someone making more than the governor is on taxpayer benefits meant for low-income people,” Jacobs said.

Concerned About Crowd-Out

In response to the audit, Louisiana’s Department of Health said it is improving its enrollment process, but Jacobs says it has yet to address a serious problem.

“Crowd-out is when people start dropping private coverage to enroll in Medicaid,” Jacobs said. “Presumably most of those folks meet the income requirements, but again, we are spending taxpayer dollars to subsidize people who already had health insurance, which isn’t exactly efficient.”

Jacobs says he believes some of the data he’s seen from the Department of Health hasn’t been publicly released and indicates the program’s crowd-out rates are approaching one-third, which means for every three people who go onto Medicaid through the expansion program, one of them is dropping private coverage they already had. Jacobs says that is costing the state hundreds of millions of dollars.

“The other point is the data we have is from 2016 to 2017 because when I submitted Public Records Act requests for all data, they told me they stopped compiling it at the end of 2017,” Jacobs said. “They told me the data wasn’t very accurate, so they threw up their hands and stopped compiling it.”

Going Public

Jacobs says the audit had two goals. First, it was about identifying people who were ineligible for Medicaid because they’re making too much money, and second, the crowd-out problem.

“The crowd-out numbers are about people we presume are eligible: They’re low-income folks who are making $20,000 to $30,000 a year and they’re just dropping their employer plan to go onto Medicaid, or their job drops their private coverage to put them onto Medicaid,” Jacobs said.

“This creates moral hazard, it’s inefficient, and it wastes taxpayer money,” Jacobs said.

Jacobs says he has concerns about the state no longer collecting data about crowd-out.

“The fact they stopped compiling the crowd-out data means the Dept. of Health, in response to the audit about the ineligible folks, is saying, ‘We’re being responsible, we’ve updated our eligibility system, we’re throwing these ineligible people off the rolls finally, and we’re being good stewards of taxpayer dollars,’ Jacobs said. “But if you care about being good stewards of taxpayer dollars, you would also be, at a minimum, tracking all these people leaving private coverage in order to go onto Medicaid, and not just tracking it but proposing policies to reduce the moral hazard.”

Potential for Fraud

John Dale Dunn, M.D., J.D., an emergency physician in Brownwood, Texas, says the Medicaid enrollment abuse in Louisiana illustrates the special potential for fraud in a government system.

“The only thing they can do is audit the claims and make sure people are not submitting bills for things that are not done,” Dunn said. “It’s pretty simple, and it’s standard practice for insurance companies to say, ‘You’re claiming your roof got ruined; well, let’s take a look at it.’

The same thing happens in these health care situations where somebody walks into a doctor’s office. The doctor says, ‘OK, we’re going to do this, and we have to do that, and I’m going to submit it to your insurance company.’

“Whether it’s a private company or a government insurance program, there’s still potential for insurance fraud,” Dunn said. “In fact, Medicare is a great program to rip off because it’s run by the government, so why not do Medicare fraud as opposed to holding up somebody with a gun?

“The auditor’s report is a joke,” Dunn said. “What they’re saying is, ‘We have to do a better job of finding fraud and we need more money to be able to identify fraud,'” Dunn said. “It’s also a public relations move. The auditors say, “We can’t trust those doctors in the hospitals, they’re cheaters, and they need to be brought under control. By the way, we’re from the government and we’re here to help.”

Approves of Clean-Up

Merrill Matthews, a senior fellow at The Institute for Policy Innovation in Dallas, Texas, says Louisiana is doing the right thing by trying to clean up its Medicaid rolls, starting with audits.

“Based on their sample, the auditor estimated the state paid between $61.6 million and $85.5 million in Medicaid benefits which should not have been paid,” Matthews said. “That’s real money, especially for a smaller state.”


Kenneth Artz ([email protected])writes from Dallas, Texas.


Internet Info:

Medicaid Eligibility: Wage Verification Process of the Expansion Population, Louisiana Department of Health, November 8, 2018: https://heartland.org/publications-resources/publications/medicaid-eligibility-wage-verification-process-of-the-expansion-population