The Maryland General Assembly is poised to get tough on fraud that officials say is sapping hundreds of millions of dollars from the state's health care program for the poor, a crackdown that comes as Maryland braces for an increase in Medicaid patients through the just-passed national health insurance overhaul.
State health and budget officials estimate that between 5 percent and 10 percent of Maryland's $6 billion in Medicaid spending is fraudulent, with companies seeking payment for wheelchairs never delivered and doctors filing claims for patients who never received treatment.
A measure working its way through the legislature would allow anyone with knowledge of false Medicaid claims to file a lawsuit and share a percentage of damages - a concept intended to encourage whistle-blowers. The initiative would allow the state to capture up to three times the amount of the deceptive billing as a civil penalty, and would allow Maryland to join larger multistate federal fraud cases.
"We don't bring nearly the volume [of fraud cases] that are out there because we don't have the right tools," said Lt. Gov. Anthony Brown, who has been pushing the measure on behalf of the O'Malley administration. "We have a little hammer and we have a field of nails out there. If we had a little bit bigger hammer we could get more accomplished with each stroke."
Brown and others say the initiative - similar to a federal program and provisions on the books in 23 other states and the District of Columbia - could yield $20 million yearly.
The need for greater fraud protection comes as the number of patients on Medicaid - a joint federal-state program that provides health care to the poor - is reaching new heights and is expected to grow.
Gov. Martin O'Malley supported broader eligibility requirements for the program, and that change, coupled with a down economy, pushed more people into the low-income health insurance program, adding roughly 160,000 people to the rolls since 2007.
The number of recipients is now 730,000. And another 300,000 could join the program after the health insurance reform plan approved by Congress becomes law. Maryland spends $6 billion yearly on Medicaid payments.
"If we are going to expand Medicaid, it is that much more important that we have the right tools in place," Brown said.
The anti-fraud measure, a top priority of O'Malley's, awaits final approval in the Senate, where it was defeated last year by a single vote. And the House Judiciary Committee has not yet voted on it. But, unlike in earlier attempts, this year's measure has the support of the Maryland Hospital Association, which had successfully fought previous versions out of concern that the bill would unleash an onslaught of meritless lawsuits.
"People see a big building with four walls and see deep pockets there," said Jim Reiter, a spokesman for the hospital association. But in a concession to the hospitals, which account for roughly one-third of state Medicaid claims, administration officials agreed this year to a provision requiring the state to sign off on false claims cases before they go forward.
The legislation requires the state to join fraud lawsuits; if not, judges would dismiss them. "The state does not enter into frivolous lawsuits," said Sen. Brian E. Frosh, a Montgomery County Democrat and chair of the Judicial Proceedings Committee.
The compromise jeopardizes one of the potential revenue-generating aspects of the state bill, and will likely make Maryland ineligible for an enhanced proportion of damages from federal cases enjoyed by 14 states with the toughest whistle-blower provisions.
"That is the trade-off we made," said state health secretary John M. Colmers. "It was a way of trying to listen to the concerns of the hospitals."
Without the compromise, Maryland could have received 60 percent of any damages from a federal fraud case instead of the current 50-50 split.
Hospitals were also nervous that the legislation would make them liable for honest billing mistakes, and insisted on a provision requiring the plaintiffs prove intent. "Hopefully, it will prevent fraud instead of making us a target to go after," Reiter said.
The bill faces stiff opposition from the Maryland Chamber of Commerce, which believes it could drive up the cost of health care. Additionally, doctors worry that the measure doesn't include enough protection from unintentional billing errors.
"Billing in a doctor's office is very complex and the doctors are not typically involved," said Gene Ransom, CEO of MedChi, the state's medical society.
He opposes allowing individuals to sue to recover false billings, saying "we should not create an atmosphere where people are bounty hunting for doctors."
But advocates of the plan say the nation's health care system relies on trust, so it is critical that those with information about false claims come forward.
"Fraud is not self-revealing," said Daniel Miller, a Philadelphia attorney who is past president of the National Association of Medicaid Fraud Control Units. "It is not like you have a house with a broken window or you have a dead body you can see. You can not look at a bill and tell it is false."
Also, he said, "The health care system is so complicated it can take days or weeks to figure out how the system is supposed to work" never mind whether it's been defrauded.
The state attorney general's office has collected more than $70 million in fraudulent billings since 2006. Recent Maryland cases include a psychiatrist who culled a list of Medicaid patients from group homes and then pretended he was treating them, billing the state for $1.2 million over 14 months. In another case, state investigators went after a couple they believe received $1.8 million from a state kidney disease program.
"If we had a real false claims act we could have gotten triple damages," said Thomas V. Russell, Inspector General for the Department of Health and Mental Hygiene.