Medicaid: Fraud and Abuse Related to Controlled Substances Identified in Selected States
Published: 2009-09-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: This testimony discusses (1) continuing indications of fraud and abuse related to controlled substances paid for by Medicaid; (2) specific case study examples of fraudulent, improper, or abusive controlled substance activity; and (3) the effectiveness of internal controls that the federal government and selected states have in place to prevent and detect fraud and abuse related to controlled substances. To identify whether there are continuing indications of fraud and abuse related to controlled substances paid for by Medicaid, we obtained and analyzed Medicaid claims paid in fiscal years 2006 and 2007 from five states: California, Illinois, New York, North Carolina, and Texas. To identify indications of fraud and abuse related to controlled substances paid for by Medicaid, we obtained and analyzed Medicaid prescription claims data for these five states from the Centers for Medicare & Medicaid Services (CMS). To identify other potential fraud and improper payments, we compared the beneficiary and prescriber shown on the Medicaid claims to the Death Master Files (DMF) from the Social Security Administration (SSA) to identify deceased beneficiaries and prescribers. To identify claims that were improperly processed and paid by the Medicaid program because the federal government banned these prescribers and pharmacies from prescribing or dispensing to Medicaid beneficiaries, we compared the Medicaid prescription claims to the exclusion and debarment files from the Department of Health and Human Services Office of Inspector General (HHS OIG) and the General Services Administration (GSA). To develop specific case study examples in selected states, we identified 25 cases that illustrate the types of fraudulent, improper, or abusive controlled substance activity we found in the Medicaid program. To develop these cases, we interviewed pharmacies, prescribers, law enforcement officials, and beneficiaries, as appropriate, and also obtained and reviewed registration and enforcement action reports from the Drug Enforcement Administration (DEA) and HHS. To identify the effectiveness of internal controls that the federal government and selected states have in place to prevent and detect fraud and abuse related to controlled substances, we interviewed Medicaid officials from the selected state offices and CMS. More details on our scope and methodology can be found in our report that we issued today. We conducted this forensic audit from July 2008 to September 2009, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We conducted our related investigative work in accordance with standards prescribed by the Council of the Inspectors General on Integrity and Efficiency (CIGIE).
section_title: What GAO Found
paragraphs: We found 65 medical practitioners and pharmacies in the selected states had been barred or excluded from federal health care programs, including Medicaid, when they wrote or filled Medicaid prescriptions for controlled substances during fiscal years 2006 and 2007. Nevertheless, Medicaid approved the claims at a cost of approximately $2.3 million. The offenses that led to their exclusion from federal health programs included Medicaid fraud and illegal diversion of controlled substances. Our analysis of matching Medicaid claims in the selected states with SSA's DMF found that controlled substance prescription claims to over 1,800 beneficiaries were filled after they died. Even though the selected state programs stated that beneficiaries were promptly removed from Medicaid following their deaths based on either SSA DMF matches or third party information, these same state programs paid over $200,000 for controlled substances during fiscal years 2006 and 2007 for postdeath controlled substance prescription claims. In addition, our analysis also found that Medicaid paid about $500,000 in Medicaid claims based on controlled substance prescriptions "written" by over 1,200 doctors after they died. In addition to performing the aggregate-level analysis discussed above, we also performed in-depth investigations for 25 cases of fraudulent or abusive actions related to the prescribing and dispensing of controlled substances through the Medicaid program in the selected states. We have referred certain cases to DEA and the selected states for further investigation. The selected states did not have a comprehensive fraud prevention framework to prevent fraud and abuse of controlled substances paid for by Medicaid. The establishment of effective fraud prevention controls by the selected states is critical because the very nature of a beneficiary's medical need--to quickly obtain controlled substances to alleviate pain or treat a serious medical condition--makes the Medicaid program vulnerable to those attempting to obtain money or drugs they are not entitled to receive. Fraud prevention is the most efficient and effective means to minimize fraud, waste, and abuse. Thus, controls that prevent fraudulent health care providers and individuals from entering the Medicaid program or submitting claims are the most important element in an effective fraud prevention program. Effective fraud prevention controls require that where appropriate, organizations enter into data-sharing arrangements with organizations to perform validation. System edit checks (i.e., built-in electronic controls) are also crucial in identifying and rejecting fraudulent enrollment applications or claims before payments are disbursed.

section_title: Letter
paragraphs: Prescription drug abuse is a serious and growing public health problem.  According to the Centers for Disease Control and Prevention (CDC), drug  overdoses, including those from prescription drugs, are the second leading  cause of deaths from unintentional injuries in the United States, exceeded  only by motor vehicle fatalities. There are reports and allegations that  criminals and drug abusers are able to illegitimately acquire controlled  substances by filing fraudulent Medicaid claims, seeking treatment from  medical practitioners for feigned injuries and illnesses, and perpetrating  other fraudulent activities. The cost associated with controlled substance  fraud and abuse is more than the cost of prescription drug purchases since  there are related medical services, such as doctor and emergency room  visits, which precede the dispensing of these medications. Several closed  criminal cases highlight Medicaid fraud and abuse related to controlled  substances.
An Ohio physician was convicted in 2006 for filing $60 million in  fraudulent Medicaid, Medicare, and other insurance claims. The  physician, a pain management specialist, prescribed multiple injections  of controlled substances for his patients. He then billed Medicaid and  other insurance plans for those treatments. The physician was found to  have fostered an addiction to controlled substances in his patients so  that he could profit from their habit and increase the income he  received from their medical claims. Two patients who regularly saw  him died under his care; one from a multiple-drug overdose in the  physician’s office and one from an overdose of OxyContin taken on the  same day that the prescription was written. The physician was  sentenced to life imprisonment.
In 2006, a Florida physician was sentenced to life in prison following  his conviction on multiple charges, including wire fraud, illegal  distribution of controlled substances, and Medicaid fraud. The  physician, a general practitioner, wrote excessive prescriptions to  patients for controlled substances without giving them physical  examinations or additional follow-up treatments. The physician  directed patients to have their prescriptions filled at specific  pharmacies and warned them against filling their prescriptions at  pharmacies that would ask too many questions about the quantity and  combination of controlled substances prescribed. In fact, the physician  was found to have known some of his patients were addicts feeding  their drug habits. Five of his patients died from taking drugs he  prescribed.
During 2004 to 2005, a pharmacist created false telephone  prescriptions for Vicodin, an addictive narcotic pain reliever that  combines hydrocodone and acetaminophen, and provided thousands  of the pills to at least two purported customers. The pharmacist also  submitted false claims for the drugs to Medicaid and other insurance  companies stating that they were prescribed for legitimate patients.  The customers were actually friends of the pharmacist who sold the  drugs and split the profits with him. In 2009, the pharmacist was  convicted of health care fraud, Medicaid fraud, and distribution of  dangerous controlled substances.
My statement summarizes our report issued today to your subcommittee.  This testimony discusses (1) continuing indications of fraud and abuse  related to controlled substances paid for by Medicaid; (2) specific case  study examples of fraudulent, improper, or abusive controlled substance  activity; and (3) the effectiveness of internal controls that the federal  government and selected states have in place to prevent and detect fraud  and abuse related to controlled substances.
To identify whether there are continuing indications of fraud and abuse  related to controlled substances paid for by Medicaid, we obtained and  analyzed Medicaid claims paid in fiscal years 2006 and 2007 from five  states: California, Illinois, New York, North Carolina, and Texas. To  identify indications of fraud and abuse related to controlled substances  paid for by Medicaid, we obtained and analyzed Medicaid prescription  claims data for these five states from the Centers for Medicare & Medicaid  Services (CMS). To identify other potential fraud and improper payments,  we compared the beneficiary and prescriber shown on the Medicaid  claims to the Death Master Files (DMF) from the Social Security  Administration (SSA) to identify deceased beneficiaries and prescribers.
To identify claims that were improperly processed and paid by the  Medicaid program because the federal government banned these  prescribers and pharmacies from prescribing or dispensing to Medicaid  beneficiaries, we compared the Medicaid prescription claims to the  exclusion and debarment files from the Department of Health and Human  Services Office of Inspector General (HHS OIG) and the General Services  Administration (GSA). To develop specific case study examples in selected  states, we identified 25 cases that illustrate the types of fraudulent,  improper, or abusive controlled substance activity we found in the  Medicaid program. To develop these cases, we interviewed pharmacies,  prescribers, law enforcement officials, and beneficiaries, as appropriate,  and also obtained and reviewed registration and enforcement action  reports from the Drug Enforcement Administration (DEA) and HHS. To  identify the effectiveness of internal controls that the federal government  and selected states have in place to prevent and detect fraud and abuse  related to controlled substances, we interviewed Medicaid officials from  the selected state offices and CMS. More details on our scope and  methodology can be found in our report that we issued today.
We conducted this forensic audit from July 2008 to September 2009, in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives. We conducted our related investigative  work in accordance with standards prescribed by the Council of the  Inspectors General on Integrity and Efficiency (CIGIE).
subsections: section_title: Tens of Thousands of Medicaid Beneficiaries Visit Multiple Medical Practitioners to Obtain Controlled Substances
paragraphs: Approximately 65,000 Medicaid beneficiaries in the five states investigated  visited six or more doctors to acquire prescriptions for the same type of  controlled substances in the selected states during fiscal years 2006 and  2007. These individuals incurred approximately $63 million in Medicaid  costs for these drugs, which act as painkillers, sedatives, and stimulants.  In some cases, beneficiaries may have a justifiable reason for receiving  prescriptions from multiple medical practitioners, such as visiting  specialists or several doctors in the same medical group. However, our  analysis of Medicaid claims found at least 400 of them visited 21 to 112  medical practitioners and up to 46 different pharmacies for the same  controlled substance. In these situations, Medicaid beneficiaries were  likely seeing several medical practitioners to support and disguise their  addiction or fraudulently selling their drugs.
Our analysis understates the number of instances and dollar amounts  involved in the potential abuse related to multiple medical practitioners.  First, the total we found does not include related costs associated with  obtaining prescriptions, such as visits to the doctor’s office and emergency  room. Second, the selected states did not identify the prescriber for many  Medicaid claims submitted to CMS. Without such identification, we could  not always identify and thus include the number of unique doctors for  each beneficiary that received a prescription. Third, our analysis did not  focus on all controlled substances, but instead targeted 10 types of the  most frequently abused controlled substances. Table 1 shows how many  beneficiaries received controlled substances and the number of medical  practitioners that prescribed them the same type of drug.
subsections: section_title: Controlled Substances Prescribed or Filled by Banned Providers
paragraphs: We found 65 medical practitioners and pharmacies in the selected states  had been barred or excluded from federal health care programs, including  Medicaid, when they wrote or filled Medicaid prescriptions for controlled  substances during fiscal years 2006 and 2007. Nevertheless, Medicaid  approved the claims at a cost of approximately $2.3 million. The offenses  that led to their exclusion from federal health programs included Medicaid  fraud and illegal diversion of controlled substances. Our analysis  understates the total number of excluded providers because the selected  states either did not identify the prescribing medical practitioner for many  Medicaid claims (i.e., the field was blank) or did not provide the taxpayer  identification number for the practitioner, which was necessary to  determine if a provider was banned.
section_title: Medicaid Paid for Controlled Substance Prescriptions Filled for Dead Beneficiaries or “Written” by Dead Doctors
paragraphs: Our analysis of matching Medicaid claims in the selected states with SSA’s  DMF found that controlled substance prescription claims to over 1,800  beneficiaries were filled after they died. Even though the selected state  programs stated that beneficiaries were promptly removed from Medicaid  following their deaths based on either SSA DMF matches or third party  information, these same state programs paid over $200,000 for controlled  substances during fiscal years 2006 and 2007 for postdeath controlled  substance prescription claims. In addition, our analysis also found that  Medicaid paid about $500,000 in Medicaid claims based on controlled  substance prescriptions “written” by over 1,200 doctors after they died.
The extent to which these claims were paid due to fraud is not known. For  example, in the course of our work, we found that certain nursing homes  use long-term care pharmacies to fill prescriptions for drugs. One long- term care pharmacy dispensed controlled substances to over 50  beneficiaries after the date of their death because the nursing homes did  not notify the pharmacy of their deaths prior to delivery of the drugs. The  nursing homes that received the controlled substances, which included  morphine, Demerol, and Fentanyl, were not allowed to return them  because, according to DEA officials, the Controlled Substances Act of  1970 (CSA) does not permit the return of these drugs. Officials at two  selected states said that unused controlled substances at nursing homes  represent a waste of Medicaid funds and also pose risk of diversion by  nursing home staff. In fact, officials from one state said that the certain  nursing homes dispose of these controlled substances by flushing them  “down the toilet,” which also poses environmental risks to our water  supply.
section_title: Examples of Fraud, Waste, and Abuse of Controlled Substances in Medicaid
paragraphs: In addition to performing the aggregate-level analysis discussed above, we  also performed in-depth investigations for 25 cases of fraudulent or  abusive actions related to the prescribing and dispensing of controlled  substances through the Medicaid program in the selected states. We have  referred certain cases to DEA and the selected states for further  investigation. The following provides illustrative detailed information on  four cases we investigated:    Case 1: The beneficiary used the identity of an individual who was  killed in 1980 to receive Medicaid benefits. According to a state  Medicaid official, he originally applied for Medicaid assistance in a  California county in January 2004. During the application process, the  man provided a Social Security card to a county official. When the  county verified the Social Security Number (SSN) with SSA, SSA  responded that the SSN was not valid. The county enrolled the  beneficiary into Medicaid provisionally for 90 days under the condition  that the beneficiary resolve the SSN discrepancy with SSA within that  time frame. Although the beneficiary never resolved the issue, he  remained in the Medicaid program until April 2007. Between 2004 and  2007, the Medicaid program paid over $200,000 in medical services for  this beneficiary, including at least $2,870 for controlled substances that  he received from the pharmacies. We attempted to locate the  beneficiary but could not find him.
Case 2: The physician prescribed controlled substances to the  beneficiary after she died in February 2006. The physician stated that  the beneficiary had been dying of a terminal disease and became  unable to come into the office to be examined. The physician stated  that in instances where a patient is compliant and needs pain  medication, physicians will sometimes prescribe it without requiring  an examination. A pharmacy eventually informed the physician that  the patient had died and the patient’s spouse had continued to pick up  her prescriptions for Methadone, Klonopin, and Xanax after her death.  According to the pharmacy staff, the only reason they became aware  of the situation was because an acquaintance of the spouse noticed  him picking up prescriptions for a wife who had died months ago. The  acquaintance informed the pharmacy staff of the situation. They  subsequently contacted the prescribing physician. Since this incident,  the pharmacy informed us that it has not filled another prescription for  the deceased beneficiary.
Case 3: A mother with a criminal history and Ritalin addiction used  her child as a means to doctor shop for Ritalin and other similar  controlled stimulants used to treat attention-deficit/hyperactivity  disorder (ADHD). Although the child received overlapping  prescriptions of methylphenidate and amphetamine medications  during a 2-year period and was banned (along with his mother) from at  least three medical practices, the Illinois Medicaid program never  placed the beneficiary on a restricted recipient program. Such a move  would have restricted the child to a single primary care physician or  pharmacy, thus preventing him (and his mother) from doctor  shopping. Over the course of 21 months, the Illinois Medicaid program  paid for 83 prescriptions of ADHD controlled stimulants for the  beneficiary, which totaled approximately 90,000 mg and cost $6,600.
Case 4: Claims indicated that a deceased physician “wrote” controlled  substance prescriptions for several patients in the Houston area. Upon  further analysis, we discovered that the actual prescriptions were  signed by a physician assistant who once worked under the  supervision of the deceased physician. The pharmacy neglected to  update its records and continued filling prescriptions under the name  of the deceased prescriber. The physician assistant has never been a  DEA registrant. The physician assistant told us that the supervising  physicians always signed prescriptions for controlled substances. After  informing her that we had copies of several Medicaid prescriptions  that the physician assistant had signed for Vicodin and lorazepam, the  physician assistant ended the interview.
section_title: Improved Fraud Controls Could Better Prevent Abuse and Unnecessary Medicaid Program Expenditures
subsections: section_title: CMS Conducts Limited Oversight over Controlled Substances in the Medicaid Program
paragraphs: Although states are primarily responsible for the fight against Medicaid  fraud and abuse, CMS is responsible for overseeing state fraud and abuse  control activities. CMS has provided limited guidance to the states on how  to improve the state’s control measures to prevent fraud and abuse of  controlled substances in the Medicaid program. Thus, for the five state  programs we reviewed, we found different levels of fraud prevention  controls. For example, the Omnibus Budget Reconciliation Act (OBRA) of  1990 encourages states to establish a drug utilization review (DUR)  program. The main emphasis of the program is to promote patient safety  through an increased review and awareness of prescribed drugs. States  receive increased federal funding if they design and install a point-of-sale  electronic prescription claims management system to interact with their  Medicaid Management Information Systems (MMIS), each state’s Medicaid  computer system. Each state was given considerable flexibility on how to  identify prescription problems, such as therapeutic duplication and  overprescribing by providers, and how to use the MMIS system to prevent  such problems. The level of screening, if any, states perform varies  because CMS does not set minimum requirements for the types of reviews  or edits that are to be conducted on controlled substances. Thus, one state  required prior approval when ADHD treatments like Ritalin and Adderall  are prescribed outside age limitations, while another state had no such  controlled substance requirement at the time of our review.
Under the Deficit Reduction Act (DRA) of 2005, CMS is required to  initiate a Medicaid Integrity Program (MIP) to combat Medicaid fraud,  waste, and abuse. DRA requires CMS to enter into contracts with  Medicaid Integrity Contractors (MIC) to review provider actions, audit  provider claims and identify overpayments, and conduct provider  education. To date, CMS has awarded umbrella contracts to several  contractors to perform the functions outlined above. According to CMS,  these contractors cover 40 states, 5 territories, and the District of  Columbia. CMS officials stated that CMS will award task orders to cover  the rest of the country by the end of fiscal year 2009. CMS officials stated  that MIC audits are currently under way in 19 states. CMS officials stated  that most of the MIP reviews will focus on Medicaid providers and that the  state Medicaid programs handle beneficiary fraud. Because the Medicaid  program covers a full range of health care services and the prescription  costs associated with controlled substances are relatively small, the extent  to which MICs will focus on controlled substances is likely to be relatively  minimal.
section_title: Selected States Lack Comprehensive Fraud Prevention Framework for Controlled Substances
paragraphs: The selected states did not have a comprehensive fraud prevention  framework to prevent fraud and abuse of controlled substances paid for  by Medicaid. The establishment of effective fraud prevention controls by  the selected states is critical because the very nature of a beneficiary’s  medical need—to quickly obtain controlled substances to alleviate pain or  treat a serious medical condition—makes the Medicaid program  vulnerable to those attempting to obtain money or drugs they are not  entitled to receive. Instead of these drugs being used for legitimate  purposes, these drugs may be used to support controlled substance  addictions and sale of the drugs on the street. As shown in figure 1 below,  a well-designed fraud prevention system (which can also be used to  prevent waste and abuse) should consist of three crucial elements: (1)  preventive controls, (2) detection and monitoring, and (3) investigations  and prosecutions. In addition, as shown in figure 1, the organization  should also use “lessons learned” from its detection and monitoring  controls and investigations and prosecutions to design more effective  preventive controls.
Preventive Controls: Fraud prevention is the most efficient and effective  means to minimize fraud, waste, and abuse. Thus, controls that prevent  fraudulent health care providers and individuals from entering the  Medicaid program or submitting claims are the most important element in  an effective fraud prevention program. Effective fraud prevention controls  require that where appropriate, organizations enter into data-sharing  arrangements with organizations to perform validation. System edit  checks (i.e., built-in electronic controls) are also crucial in identifying and  rejecting fraudulent enrollment applications or claims before payments  are disbursed. Some of the preventive controls and their limitations that  we observed at the selected states include the following.
Federal Debarment and Exclusion: Federal regulation requires  states to ensure that no payments are made for any items or services  furnished, ordered, or prescribed by an individual or entity that has  been debarred from federal contracts or excluded from Medicare and  Medicaid programs. Officials from all five selected states said that they  do not screen prescribing providers or pharmacies against the federal  debarment list, also known as the Excluded Parties List System  (EPLS). Further, officials from four states said when a pharmacy claim  is received, they do not check to see if the prescribing provider was  excluded by HHS OIG from participating in the Medicaid program.
Drug Utilization Review: As mentioned earlier, states perform drug  utilization reviews (DUR) and other controls during the prescription  claims process to promote patient safety, reduce costs, and prevent  fraud and abuse. The drug utilization reviews include prospective  screening and edits for potentially inappropriate drug therapies, such  as over-utilization, drug-drug interaction, or therapeutic duplication.  In addition, selected states also require health care providers to submit  prior authorization forms for certain drug prescriptions because those  medications have public health concerns or are considered high risk  for fraud and abuse. Each state has developed its DUR differently and  some of the differences that we saw from the selected states include  the following.
Officials from certain states stated that they use the  prospective screening (e.g., over-utilization or overlapping  controlled substance prescriptions) as an automatic denial  of the prescription, while other states generally use the  prospective screening as more of an advisory tool for  pharmacies.
The types of drugs that require prior authorization vary  greatly between the selected states. In states where it is  used, health care providers may be required to obtain prior  authorization if a specific brand name is prescribed (e.g.,  OxyContin) or if a dosage exceeds a predetermined amount  for a therapeutic class of controlled substances (e.g.,  hypnotics, narcotics).
Detection and Monitoring: Even with effective preventive controls,  there is risk that fraud and abuse will occur in Medicaid regarding  controlled substances. States must continue their efforts to monitor the  execution of the prescription program, including periodically matching  their beneficiary files to third-party databases to determine continued  eligibility, monitor controlled substance prescriptions to identify abuse,  and make necessary corrective actions, including the following:    Checking Death Files: After enrolling beneficiaries, Medicaid offices  in the selected states generally did not periodically compare their  information against death records.
Increasing the Use of the Restricted Recipient Program: In the  course of drug utilization reviews or audits, the State Medicaid offices  may identify beneficiaries who have abused or defrauded the Medicaid  prescription drug program and restrict them to one health care  provider or one pharmacy to receive the prescriptions. This program  only applies to those beneficiaries in a fee-for-service arrangement.  Thus, a significant portion of the Medicaid recipients (those in  managed care programs) for some of the selected states are not  subject to this program.
Fully Utilizing the Prescription Drug Monitoring Program:  Beginning in fiscal year 2002, Congress appropriated funding to the  U.S. Department of Justice to support Prescription Drug Monitoring  Programs (PDMP). These programs help prevent and detect the  diversion and abuse of pharmaceutical controlled substances,  particularly at the retail level where no other automated information  collection system exists. If used properly, PDMPs are an effective way  to identify and prevent diversion of the drugs by health care providers,  pharmacies, and patients. Some of the limitations of PDMPs at the  selected states include the following:
Officials from the five selected states said that physician  participation in PDMP is not widespread and not required.  In fact, one state did not have a Web-based PDMP; the  health care provider has to put in a manual request to the  agency to have a controlled substance report generated.
No nationwide PDMP exists, and only 33 states had  operational prescription drug monitoring programs as of  June 2009. According to a selected state official, people  would sometimes cross state borders to obtain prescription  drugs in a state without a program.
Investigations and prosecutions: Another element of a fraud  prevention program is the aggressive investigation and prosecution of  individuals who defraud the federal government. Prosecuting perpetrators  sends the message that the government will not tolerate individuals  stealing money and serves as a preventive measure. Schemes identified  through investigations and prosecution also can be used to improve the  fraud prevention program. The Medicaid Fraud Control Unit (MFCU)  serves as the single identifiable entity within state government that  investigates and prosecutes health care providers that defraud the  Medicaid program. In the course of our investigation however, we found  several factors that may limit its effectiveness.
Federal regulations generally limit MFCUs from pursuing beneficiary  fraud. According to MFCU officials at one selected state, this limitation  impedes investigations because agents cannot use the threat of  prosecution as leverage to persuade beneficiaries to cooperate in  criminal probes of Medicaid providers. In addition, the MFCU officials  at this selected state said that this limitation restricts the agency’s  ability to investigate organized crime related to controlled substances  when the fraud is perpetrated by the beneficiaries.
Federal regulations do not permit federal funding for MFCUs to engage  in routine computer screening activities that are the usual monitoring  function of the Medicaid agency. According to MFCU officials at one  selected state, this issue has caused a strained working relationship  with the state’s Medicaid OIG, on whom they rely to get claims  information. The MFCU official stated that on the basis of fraud trends  in other states, they wanted the Medicaid OIG to provide claims  information on providers that had similar trends in their state. The  Medicaid OIG cited this prohibition on routine computer screening  activities when refusing to provide these data. In addition, this MFCU  official also stated that its state Medicaid office and its OIG did not  promptly incorporate improvements that it suggested pertaining to the  abuse of controlled substances.
section_title: Monitoring of Pharmacy and Physician Prescription Practices by DEA Related to Controlled Substances
paragraphs: DEA officials stated that although purchases of certain schedules II and III  controlled substances by pharmacies are reported to and monitored by  DEA, they do not routinely receive information on written or dispensed  controlled substance prescriptions. In states with a PDMP, data on  dispensed controlled substance prescriptions are collected and maintained  by a state agency. In the course of an investigation on the diversion or  abuse of controlled substances, information may be requested by DEA  from a PDMP. In those states without a PDMP, DEA may obtain controlled  substance prescription information during the course of an inspection or  investigation from an individual pharmacy’s records.
section_title: GAO Recommendations and Agency Response
paragraphs: To address the concerns that I have just summarized, we made four  recommendations to the Administrator of CMS in establishing an effective  fraud prevention system for the Medicaid program. Specifically, we  recommended that the Administrator evaluate our findings and consider  issuing guidance to the state programs to provide assurance on the  following: (1) effective claims processing systems prevent the processing  of claims of all prescribing providers and dispensing pharmacies debarred  from federal contracts (i.e., EPLS) or excluded from the Medicare and  Medicaid programs (LEIE); (2) DUR and restricted recipient program  requirements adequately identify and prevent doctor shopping and other  abuses of controlled substances; (3) effective claims processing system  are in place to periodically identify both duplicate enrollments and deaths  of Medicaid beneficiaries and prevent the approval of claims when  appropriate; and (4) effective claims processing systems are in place to  periodically identify deaths of Medicaid providers and prevent the  approval of claims when appropriate. CMS stated that they generally agree  with the four recommendations and that it will continue to evaluate its  programs and will work to develop methods to address the identified  issues found in the accompanying report.
Mr. Chairman, this concludes my prepared statement. Thank you for the  opportunity to testify before the Subcommittee on some of the issues  addressed in our report on continuing indications of fraud and abuse  related to controlled substances paid for by Medicaid. I would be happy to  answer any questions from you or other members of the Subcommittee.
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