MEDI-CAL: State to Lose $1 Billion Due to Fraud
Federal investigators announced that California's losses to Medi-Cal fraud may surpass $1 billion, making the case one of the largest frauds against a state in American history. Gov. Gray Davis established the joint federal and state task force to investigate the program after the number of medical supply stores skyrocketed and payments for supplies jumped almost 50% between 1996 and 1998, from $173.4 million to $258.4 million. Much of the investigation centers in the San Fernando Valley -- specifically in the Los Angeles area -- with only two other fraud cases reported in Westminster in Orange County. Charges have been filed against 64 businesses and their owners, 35 of whom have pleaded guilty and have been fined or are serving sentences ranging from 10 months to 3 years. An additional 300 businesses are currently under investigation. A majority of the people charged are from the Armenian community, causing many to accuse the government of conducting a "witch hunt." But officials contend that "fraud is driving the investigation; not ethnicity." Loose government regulations of the Medi-Cal program -- the state's version of Medicaid that services 5 million Californians at a cost of $18 billion each year -- have made it relatively easy for fraud rings to operate. Having received a Medi-Cal provider number, the scam operations begin billing electronically for non-existent supplies and services. But the proliferation of medical supply stores tipped-off investigators, who then " ... simply follow[ed] the money." The FBI's success has created major backlash in the Armenian community, which feels unfairly targeted by the investigation. One investigator said, however, that the prosecutors are taking down all fraud discoveries, regardless of race or nationality, and noted, "I don't care if you're a five-headed Martian; we're going to prosecute" (Ellis/Mozingo, Los Angeles Times, 11/29).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.