Medicaid:

Fraud and Abuse Related to Controlled Substances Identified in Selected States

GAO-09-957: Published: Sep 9, 2009. Publicly Released: Sep 30, 2009.

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One significant cost to Medicaid is prescription drugs, which accounted for over $23 billion in fiscal year (FY) 2008, or about 7 percent of total Medicaid outlays. Many of these drugs are susceptible to abuse and include pain relievers and stimulants that are on the Drug Enforcement Administration's (DEA) Schedule of Controlled Substances. As part of the American Recovery and Reinvestment Act of 2009 (ARRA), the Medicaid program will receive about $87 billion in federal assistance based on a greater federal share of Medicaid spending. GAO was asked to determine (1) whether there are indications of fraud and abuse related to controlled substances paid for by Medicaid; (2) if so, examples of fraudulent, improper, and abusive activity; and (3) the effectiveness of internal controls that the federal government and selected states have in place to prevent fraud and abuse related to controlled substances. To meet these objectives, GAO analyzed Medicaid controlled substance claims for fraud and abuse indications for FY 2006 and 2007 from five selected states. GAO also interviewed federal and state officials and performed investigations.

GAO found tens of thousands of Medicaid beneficiaries and providers involved in potential fraudulent purchases of controlled substances, abusive purchases of controlled substances, or both through the Medicaid program in California, Illinois, New York, North Carolina, and Texas. About 65,000 Medicaid beneficiaries in the five selected states acquired the same type of controlled substances from six or more different medical practitioners during fiscal years 2006 and 2007 with the majority of beneficiaries visiting from 6 to 10 medical practitioners. Such activities, known as doctor shopping, resulted in about $63 million in Medicaid payments and do not include medical costs (e.g., office visits) related to getting the prescriptions. In some cases, beneficiaries may have justifiable reasons for receiving prescriptions from multiple medical practitioners, such as visiting specialists or several doctors in the same medical group. However, GAO found that other beneficiaries obtained these drugs to support their addictions or to sell on the street. In addition, GAO found that Medicaid paid over $2 million in controlled substance prescriptions during fiscal years 2006 and 2007 that were written or filled by 65 medical practitioners and pharmacies barred, excluded, or both from federal health care programs, including Medicaid, for such offenses as illegally selling controlled substances. Finally, GAO found that according to Social Security Administration data, pharmacies filled controlled substance prescriptions of over 1,800 beneficiaries who were dead at that time. GAO performed in-depth investigations on 25 Medicaid cases and found fraudulent, improper, or abusive actions related to the prescribing and dispensing of controlled substances. These investigations uncovered other issues, such as doctors overprescribing medication and writing controlled substance prescriptions without having required DEA authorization. States are primarily responsible for the fight against Medicaid fraud; however, the selected states did not have a comprehensive fraud prevention framework to prevent fraud and abuse of controlled substances. CMS is responsible for overseeing state fraud and abuse control activities but has provided limited guidance to the states to prevent fraud and abuse of controlled substances.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To establish an effective fraud prevention system for the Medicaid program, the Administrator of CMS should evaluate our findings and consider issuing guidance to the state programs to provide assurance that claims processing systems prevent the processing of claims from providers and pharmacies debarred from federal contracts (i.e., on the Excluded Parties List System (EPLS)), excluded from the Medicare and Medicaid programs (i.e., on the List of Excluded Individuals/Entities (LEIE)), or both.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

    Status: Closed - Implemented

    Comments: In February 2011, Centers for Medicare and Medicaid Services (CMS) issued a final rule requiring monthly Excluded Parties List System (EPLS) and List of Excluded Individuals/Entities (LEIE) screening by State Medicaid agencies of all providers and their related agents, enrollment of all ordering and referring physicians in Medicaid, and that claims must have a National Provider Identification (NPI) number for any associated physicians or professionals. This rule will help ensure that Medicaid claims from excluded and debarred providers and pharmacies are not processed.

    Recommendation: To establish an effective fraud prevention system for the Medicaid program, the Administrator of CMS should evaluate our findings and consider issuing guidance to the state programs to provide assurance that Drug Utilization Review (DUR) and restricted recipient program requirements adequately identify and prevent doctor shopping and other abuses of controlled substances;

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

    Status: Closed - Implemented

    Comments: In December 2010, Centers for Medicare and Medicaid Services (CMS) issued guidance to states to enhance their ability to control drug utilization by acquiring and using the Drug Enforcement Administration (DEA) Controlled Substance Registration File. Also, CMS recommended that DEA numbers be required for state Medicaid provider participation and that DEA numbers should be matched to National Provider Identification (NPI) numbers so that the benefits of the DEA Controlled Substance Registration File could be maximized. This will help states ensure all Medicaid controlled substance claims are written by authorized prescribers and thus help prevent fraud and abuse of controlled substances in Medicaid.

    Recommendation: To establish an effective fraud prevention system for the Medicaid program, the Administrator of CMS should evaluate our findings and consider issuing guidance to the state programs to provide assurance that effective claims processing system are in place to periodically identify both duplicate enrollments and deaths of Medicaid beneficiaries and to prevent the approval of claims when appropriate.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

    Status: Closed - Implemented

    Comments: Consistent with the intent of our recommendation, the Centers for Medicare and Medicaid Services (CMS) fiscal year 2011 state program integrity audit questionnaire included questions on post death services as well as duplicate claims. In the resulting June 2011 triennial program integrity review report, CMS issued guidance to states based on best practices from a number of states that have included a review of provider and beneficiary death information in their program integrity initiatives. This guidance will help ensure that Medicaid claims associated with dead and duplicate beneficiaries do not get approved.

    Recommendation: To establish an effective fraud prevention system for the Medicaid program, the Administrator of CMS should evaluate our findings and consider issuing guidance to the state programs to provide assurance that effective claims processing systems are in place to periodically identify deaths of Medicaid providers and prevent the approval of claims when appropriate.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

    Status: Closed - Implemented

    Comments: In February 2011, Centers for Medicare and Medicaid Services (CMS) issued a final rule requiring the screening of Medicaid providers with database checks for the death of an individual practitioner and persons with an ownership or control interest or who are agents or managing employees of the provider. The checks will help ensure that Medicaid claims associated with dead providers do not get approved.

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