Office of Inspector General Calls MCOs’ Medicaid Reporting Weak

Michael W. Davis, DDS


Corruption continues to plague public health as the Department of Health and Human Services Office of Inspector General (HHS-OIG) issues its detailed report, “Weaknesses Exist in Medicaid Managed Care Organizations’ Efforts to Identify and Address Fraud and Abuse.”

Government relies upon private managed care organizations (MCOs) to handle most of the administration of the Medicaid program. The HHS-OIG was prompted to conduct this review because managed care covers 80% of all Medicaid enrollees as of 2015.

“Although managed care has rapidly expanded, program integrity issues have not received the same attention in managed care as they have in Medicaid fee-for-service. The Office of Inspector General (OIG) and others have ongoing concerns about program integrity in Medicaid managed care,” the report says.

The concerns of the OIG seem well grounded, as presented in its findings. The report’s recommendations to the Centers for Medicare & Medicaid Services (CMS) in working with individual states, which ultimately are charged with program administration and oversight, are as follows:

  • Improve MCO identification and referral of cases of suspected fraud or abuse
  • Increase MCO reporting to the state of corrective actions taken against providers suspected of fraud or abuse
  • Clarify the information MCOs are required to report regarding providers that are terminated or otherwise leave the MCO network
  • Identify and share best practices about payment-retention policies and incentives to increase recoveries
  • Improve coordination between MCOs and other state program integrity entities
  • Standardize reporting of referrals across all MCOs in the state
  • Ensure that MCOs provide complete, accurate, and timely encounter data
  • Monitor encounter data and impose penalties on states for submitting inaccurate or incomplete encounter data 

CMS concurred with all of the recommendations except the one to work with states to standardize the reporting of referrals in each state.

The report highlighted highly troubling examples of MCOs failing to identify and refer cases of Medicaid fraud and abuse. Even when MCOs addressed fraud and abuse, they frequently failed to inform state oversight authorities. Too many MCOs failed to recover government overpayments to healthcare providers, even with clear evidence of fraud and abuse. 

Some MCOs also failed to appropriately submit “encounter data” to the states, as required by statute. Encounter data is essential information for individual states to develop and refine proactive data analysis for their Medicaid oversight efforts. (What are the violators’ specific techniques for scamming or abusing the program, and how does analysis of these metrics red-flag violations?)

Another Band-Aid on a Broken Government Program

The report stressed that MCOs are on the frontline of ensuring the integrity of Medicaid payments. Yet, unlike a true insurance company, money lost by provider fraud or abuses doesn’t belong to the MCO. Money lost is taxpayer funds.

Oversight diligence might be entirely different if it were the MCO’s money flying out the door. Emphasis must be on the front end of oversight and not on the back end of money recovery, a typical toxic policy called “pay-and-chase.”

Further, Medicaid is jointly funded by both the individual states and the federal government. Each state receives from the federal government a matching amount equal to 1:1, 1:2, or 1:3, depending on the state’s poverty level. This can often represent a significant influx of federal dollars into a state.

Federal government dollars may be viewed as supportive of a state “jobs program.” This federal money presents a state with a disincentive to “kill the golden goose” by “over” enforcement of Medicaid violations. A few dishonest Medicaid providers may be challenged, and a handful disbarred from serving the program. However, few state authorities want to truly clamp down on cheats and risk turning off the spigot of federal money flow.

As a result, states may retain MCOs that provide little to no oversight of Medicaid expenditures. This is currently at the heart of litigation between the State of Texas and Xerox. In effect because of federal matching Medicaid funding, every United States taxpayer was defrauded by the dental Medicaid fiasco in Texas.

There exists little incentive for MCOs to chase overpayments to healthcare providers, whether determined to be fraud and abuse or otherwise. In simple fact, it’s not their money. When MCOs were offered a finder’s fee, the report demonstrated a greater effort by MCOs to recover taxpayer money.

The HHS-OIG report also encouraged state government training of MCO staff “for improving identification and referral of fraud and abuse.” One might get into the “blind-leading-the-blind” argument. 

That aside, MCOs are retained for substantial sums of money to do the job at hand. They are expected to employ adequate staffing of licensed healthcare professionals, as well as fully trained and certified healthcare auditors. Unfortunately, that’s not often the case. 

If auditors from the insurance industry routinely reject bogus claims and red-flag suspect providers, Medicaid MCOs should be expected to perform similarly. The fact that Medicaid MCOs routinely fail to engage adequate staffing in numbers and training reflects negatively on the entire administration of the Medicaid program. It seems ludicrous to assume that state government training sessions could “pick up the pieces,” as recommended in the report.

Real Solutions

United States taxpayers truly desire to assist the disadvantaged with adequate healthcare. However, they reasonably expect their funding not to be wasted or defrauded. In pursuit of those goals, the federal HHS-OIG offers a report of purported solutions.

Unfortunately, these “solutions” are seemingly like a Band-Aid on an open gunshot wound. The Medicaid program is far more broken than many admit. Moreover, too many powerful and moneyed entities profit from a broken Medicaid program at the expense of taxpayers and the poor and disabled. 

Oversight of Medicaid expenditures must be overseen by parties with skin in the game. Their firm’s money needs to be on the line. Proper auditing and oversight will more likely occur if those efforts directly impact a company’s fiscal bottom line. Recovery efforts would be far less problematic if unwarranted revenues didn’t get paid in the first place.

The current Medicaid program has squeezed out too many honest and ethical providers. Too many of the remaining dental stakeholders have become expert at gaming the Medicaid program. This limits healthcare options for Medicaid beneficiaries, who must often choose between no healthcare and healthcare that is excessive and/or abusive. Let’s give Medicaid recipients reasonable free choice with their healthcare and provider selection.

One option is to eliminate certain dental services, while elevating fees to 85% to 90% of usual & customary rates for others. This would attract additional dental providers into the program and offer additional provider alternatives for patients. The total dollar expenditure for Medicaid could remain the same. 

A voucher system might be implemented for dental treatment, similar to the Supplemental Nutrition Assistance Program (SNAP), formerly called food stamps. A dental office could swipe a beneficiary card for the delivery of healthcare benefits. With benefit care limited to a specific dollar amount, the patient might be better engaged with the oversight process. 

Certain states like Indiana are currently experimenting with patient copays for Medicaid benefits. The low-dollar copayments (usually under $5) serve to engage patients in the oversight process. This is one main reason why the insurance industry employs mandatory patient copayments.  

Wrist-slap regulation upon Medicaid program violators must end. Criminal indictments must accompany civil indictments. Even when convicted, and Medicaid fraudsters serve correctional time, it’s usually only a few years for millions in defrauding taxpayers. It seems like crime pays.

Further, indictments must go up the chain of management. This includes doctors, clinic directors, corporate management, and the beneficial ownership within private equity firms.

Our nation’s Medicaid program need not continue as welfare for the rich. We can deliver reasonable healthcare services to the disadvantaged if we eliminate the layers that only benefit government bureaucracy, lobbyists, corporate greed-heads, and crooks. We must engage patients in the process and not arrogantly assume that because of their poverty or disabilities they can’t be a vital element in favorable outcomes. Taxpayers deserve no less. 


Dr. Michael W. Davis is a credentialed Medicaid dental provider.

Dr. Davis practices general dentistry in Santa Fe, NM. He assists as an expert witness in dental fraud and malpractice legal cases. He currently chairs the Santa Fe District Dental Society Peer-Review Committee and serves as a state dental association member to its house of delegates. He extensively writes and lectures on related matters. He may be reached at or

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