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Review And Analysis Of The Medicaid And Public Assistance Fraud Oversight Task Force
December 2006

Transmittal Letter


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Background

Senate Bill 30, passed in 1997 by the 75th Texas Legislature, established the Texas Medicaid and Public Assistance Fraud Oversight Task Force (Task Force). The Legislature created the Task Force to help the Texas Health and Human Services Commission (HHSC) combat fraud in public assistance programs. Section 531.107 of the Texas Government Code delineates the Task Force’s responsibilities, membership and powers.[1] The Task Force meets on a quarterly basis to provide a forum for members to discuss the recent fraud prevention, detection and prosecution efforts of their agencies, retailer and provider concerns and the latest developments in technology.

In 2003, the 78th Texas Legislature passed House Bill (H.B.) 2292, which consolidated 12 autonomous health and human service agencies into five interconnected agencies. The administrative and policy making infrastructure for these 12 agencies was collapsed into HHSC. In addition, the fraud prevention efforts were consolidated into a single entity, the Office of Inspector General (OIG), which is under the HHSC executive commissioner.

In addition to the health and human service consolidation brought on by H.B. 2292, both OIG and the Office of Attorney General (OAG) gained significant resources for fighting fraud. The OAG’s Criminal Law Enforcement Division includes the Medicaid Fraud Control Unit (MFCU), Cyber Crime Unit, Money Laundering and White Collar Crime Units. According to the director of MFCU, the unit has grown from just under 40 staff to 200 staff since September 1, 2003. MFCU has 200 employees, 50 of whom are commissioned Texas peace officers.[2] HHSC-OIG has more than 500 employees dedicated to the investigation and prevention of Medicaid fraud and sends MFCU leads on Medicaid provider fraud issues.

The consolidation drastically changed the environment in which the Task Force operates and necessitated a thorough review of its structure and mission. To ensure the appropriateness and timeliness of this review, the Texas Comptroller of Public Accounts, as chair of the Task Force, contacted the Association of Certified Fraud Examiners (ACFE). ACFE recommended an independent and certified fraud examiner, to conduct the review.

The independent and certified fraud examiner’s review included analysis of enabling legislation, current membership, organizational structure and recommendations for improvement. The review also included interviews of Task Force members, experts and stakeholders with knowledge of the public assistance process, the creators of the Task Force and regular attendees of the Task Force public meetings.[3]

The Health Care Fraud and Abuse Compliance Manual[4] and the ACFE publication Red Flags of Insurance Fraud [5] were used for this review. Information from the public testimony of the Comptroller General David Walker and Leslie G. Aronovitz of the U.S. Government Accountability Office (GAO) [6] and HHSC Inspector General Brian Flood [7] was also included in this review.

The report that follows represents the information and recommendations of the Task Force members, appropriate shareholders and the certified fraud examiner engaged for this review to make the Texas Medicaid and Public Assistance Fraud Oversight Task Force a more efficient and effective tool in the fight against public assistance fraud and abuse.

Findings

Overall, members of the Texas Medicaid and Public Assistance Fraud Oversight (MPAFO) Task Force view the organization as an effective communication forum rather than an effective fraud solution. The following findings support this theory.

The Task Force Organizational Structure Has Not Changed Since Its Inception

The 1997 legislation creating the Task Force was focused on the coordination of fraud prevention efforts among the Health and Human Service agencies. With the passage of HB 2292 in 2003, many of these agencies that were once on the Task Force no longer exist and their functions were merged into one of the five new agencies. The organizational structure of the Task Force has not kept up with the HHSC consolidation.

The new environment at HHSC changed fraud detection and prevention operations by combining the investigative and audit responsibilities of the original 12 agencies. The only change to the original membership was when the Bureau of Vital Statistics (BVS) was added in 2003. The fraud prevention function for vital statistics once done at BVS is now performed by OIG, making the BVS membership on the Task Force no longer relevant.

Although there are state agencies on the Task Force that are not in the HHSC enterprise, the current membership does not include all state agencies and organizations that could benefit from the collective experience of the Task Force.

The Task Force Does not have Guiding Principles in Place

The Task Force does not have established vision and mission statements to guide them. This dilutes the effectiveness of the organization and supports the overall finding that the Task Force is more of a communication forum rather than an effective fraud solution for the state.

The Task Force Cannot Share Confidential Information

The current organizational structure and statutory rules of the Task Force foster the sharing of information between government agencies and the private sector. However, this structure and the rules prevent confidential information sharing between governmental agencies on criminal investigations and broader efforts to target and reduce fraud in Texas.

Texas Government Code Section 551 indicates specific statutory authorizations for closed (executive) sessions as:

  • 551.071 Consultation with Attorney – to seek advice of your attorney about pending or contemplated litigation or a settlement offer;
  • 551.076 Deliberation Regarding Security Device – to deliberate the deployment, or specific implementation, of security personnel or devices;
  • 551.084 Exclusion of Witness during investigation hearing – a governmental body that is investigating a matter may exclude a witness from hearing during the examination of another witness in the investigation; and
  • 551.074 Personnel Matters – Governmental bodies can meet in closed session to hear a complaint or charge against an officer or employee.

Many Task Force members are concerned about sharing confidential information in meetings because they are open to the public. While open public meetings help ensure public awareness and participation, they keep Task Force members from openly discussing fraud or abuse cases. The absence of a “government only” forum limits the Task Force to a quarterly meeting process in which agencies simply report program statistics.

There is No Coordinated Approach to Fighting Fraud

There is no coordinated standards-setting group for state efforts in fighting fraud. Many entities exist that investigate, prevent, detect and prosecute fraud, such as the investigative or audit groups at state agencies. However, there is no current provision for these efforts to be coordinated statewide, outside of the health and human services enterprise, often there is only informal communications between agencies.

The intent of the 1997 legislation that authorized the Task Force was for the member agencies to coordinate fraud prevention and detection. Now that the government landscape has changed in the last nine years, the approach to fighting fraud will need to change along with it.

The Office of the Inspector General is Not Independent

The HHSC Inspector General (IG) reports to the HHSC Commissioner and to the Governor.

An IG, by definition, is created to be independent of management to ensure agency compliance. For example, the IG of the U.S. Postal Service is appointed by and reports directly to the governors of the Postal Service and is independent of postal management. OIG primarily investigates and evaluates programs and operations of the Postal Service to ensure the efficiency and integrity of the postal system. [8]

Because the Texas IG is not independent, he or she must carry out the directives of the management the IG must investigate. This influence, and sometimes conflict of interest, affects the overall quality and effectiveness of the Texas fraud program.

There are 57 autonomous federal OIGs. While these OIGs operate independently, their efforts to detect and prevent fraud, waste, abuse and mismanagement of government programs and operations of their parent organizations, they share information and coordinate their efforts through the President’s Council on Integrity and Efficiency (PCIE) and the Executive Council on Integrity and Efficiency (ECIE). [9]

The Appointment Term of the Inspector General is Too Short

The Governor appoints the Inspector General and approves the term yearly. An appointment term of one year is too short for optimum continuity, effectiveness and efficiency.

The Office of the Inspector General Does Not Employ Commissioned Texas Peace Officers

Investigators at HHSC are not eligible to be commissioned as Texas peace officers limiting their ability to effectively prevent, detect and combat fraud. More than a dozen other state agencies have investigators that are commissioned Texas peace officers, including the Office of the Attorney General Medicaid Fraud Control Unit.

Recommendations

Expand the scope of the Task Force and update the Task Force membership.

Most state agencies operate in a “pay and chase” environment where they have little time or resources to implement methods to prevent fraud. There are also organizations that have fraud issues but have limited or no resources to address them. A state task force that focuses on fraud prevention in all state agency programs would be more effective at preventing fraud than focusing on fraud prevention in only the government assistance programs.

A change of the name of the Texas Medicaid and Public Assistance Fraud Oversight Task Force to the Texas Fraud Task Force would open the scope of the Task Force.

By expanding the scope of the Task Force, the members would provide guidance for all state agencies and their fraud investigators. They would develop more uniform standards and proactive programs targeting fraud investigation and prevention.

The current membership of the Task Force is governed by Section 531.107 (b) of the Texas Government Code. Section 531.107 (b) specifically appoints one member from each of the following state agencies to serve on the task force:

  • Attorney general’s office;
  • Comptroller’s office;
  • Texas Department of Public Safety;
  • State Auditor’s office;
  • Texas Health and Human Services Commission;
  • Texas Health Department’s Bureau of Vital Statistics;
  • Texas Department of Human Services; and
  • Texas Department of Insurance.

In order to accomplish a broader state effort to prevent and combat fraud, the statute should be changed to allow the membership of the Task Force to include representatives from:

  • the Texas Workforce Commission;
  • the State Agency Internal Audit Forum;
  • the Texas Department of Information Resources;
  • the Employee Retirement System;
  • institutions of higher learning in Texas that specialize in criminal justice programs;
  • the Texas State Board of Public Accountancy;
  • the Texas Board of Medical Examiners;
  • the Texas Medical Association; and
  • the Texas Hospital and Dental Associations.

Create clear guiding principles for the Texas Medicaid and Public Assistance Fraud Oversight Task Force.

The Task Force should be the State’s leading experts in fraud prevention, detection, investigation and prosecution. The organization will operate more effectively with clear vision and mission statements that guide them and focus their efforts.

The vision of the Task Force should be “Eliminate fraud in Texas government through innovative solutions.”

The mission of the task force should be “The Task Force coordinates the expertise and resources of the public and private sectors to analyze state practices and eliminate opportunities for fraud.”

Rename the Medicaid and Public Assistance Fraud Oversight Task Force to the Texas Fraud Oversight Task Force.

The Task Force’s name should reflect its expanded responsibilities and membership.

Enact legislation that allows the Task Force to have closed executive sessions.

Holding executive sessions would allow the government members of the Task Force to discuss ongoing fraud investigations and sensitive fraud prevention strategies. These meetings would allow the state to work in unison to combat fraud. It would allow them to stay one step ahead of would-be criminals instead of one step behind.

Coordinate the state’s fraud prevention efforts.

The approach to fighting fraud is constantly changing. When a fraud prevention or detection measure is put into place, the criminals find another way around them. With increased pressure on the State to do more with less, the fraud prevention measures become even more important in assuring the protection of state assets and tax dollars. Coordination among agencies to prevent, detect, investigate and prosecute fraud is essential.

There are several steps to coordinating the efforts of the multiple state agencies. The initial step is in the first recommendation of the Special Report – “Expand the scope of the Task Force and update the Task Force membership.” Other opportunities exist for the state to improve their fraud prevention efforts.

Pool the expertise across agencies and create subcommittees within the Task Force. A separate subcommittee should exist for prevention, investigation, detection and prosecution. There are a multitude of professional support organizations in the fraud prevention, and the Task Force is not taking advantage of them because it has no formal program for reviewing or sharing the benefits these groups provide. Many Task Force members are involved in or are members of these organizations, and they have a strong working knowledge of the support the specific organization could provide, such as fraud prevention, investigation, detection and prosecution programs, statistical-based studies and other fraud-related best practices. By establishing these subcommittees, each one would define best practices and be a resource to the Task Force members as experts in their respective fields.

Ensure the Task Force members belong to national fraud organizations. Members of the Task Force should learn from professionals in their field by joining national associations that are a repository of experience and knowledge. Membership in these associations would enable the Task Force to engage in national fraud efforts and lead the nation in fraud prevention. At a minimum, the Task Force members should join the:

  • National White Collar Crime Center;
  • Regional Organized Crime Center; and the
  • Association of Certified Fraud Examiners (ACFE).

These groups would provide specific information to help Texas reduce fraud in their many programs.

Grant the Task Force the authority to serve as the fraud standards-setting organization for state agencies. The Task Force should be the state’s fraud direction and standards-setting group.

The Task Force would look for the best fraud prevention strategies and establish best practices and standards. For example, the recently released Comprehensive Medicaid Integrity Plan, from the Center for Medicare and Medicaid Services (CMS), is a new national strategy for detecting and preventing fraud and abuse in these programs. The Task Force would review this plan once the federal government finalizes it and determines how it could benefit specific Texas state agencies.

The Texas OIG has played an important role in the recently released CMS integrity plan and has testified before Congress on fraud prevention efforts in Texas. OIG has placed Texas in the national spotlight for its progressive techniques for fraud detection. Utilizing existing OIG resources and expertise, the Task Force could improve the State’s anti-fraud efforts by establishing standards and moving forward to prevention and deterrence while maintaining successful detection and prosecution practices.

Change Texas statute to make the Office of Inspector General an independent entity reporting solely to the Governor.

The Association of Inspector Generals states the Inspector General’s (IG) independence should be protected. [10] The report indicates that the best way to protect the independence of the IG is to limit its direct report responsibility to one person. The Office of Inspector General should therefore report only to the governor.

A model for this reporting structure was established by legislation in the state of New York, which adopted an independent office of Medicaid inspector general, reporting directly to the secretary for the governor for a five-year term. Numerous Medicaid-related audit responsibilities were also transferred to this new Medicaid inspector general.

This recommendation is important because the IG is a key member of the Task Force. At a minimum, the IG should be independent of the HHSC commissioner.

Lengthen the term of the IG.

The term of the IG should be lengthened from one year to between five and seven years as recommended by the Association of Inspector Generals. According to the Association of Inspector Generals, the term of Inspector Generals should be long enough to make them immune to political pressure and to provide consistency and stability to the fraud detection, investigation and prosecution process. The Association of Inspector Generals recommends appointment terms of five to seven years, for optimum efficiency and effectiveness. [11] It is not unusual for investigations to take several years and leadership continuity is important in preventing fraud.

Commission investigators at the Texas Health and Human Services Commission as Texas peace officers.

Investigators at HHSC are not eligible to be commissioned as Texas peace officers. More than a dozen other state agencies have investigators that are commissioned Texas peace officers, including MFCU at the OAG.

By commissioning HHSC investigators as Texas peace officers they would have:

  • the authorization to draft criminal subpoena requests for judicial approval to gain information;
  • extensive training in de-escalation of potentially violent situations;
  • access to more criminal data bases such as the FBI’s National Crime Information Center and the financial crimes data base hosted by the OAG;
  • better standing in the law enforcement community, which could lead to more assistance and support during investigations and put them on par with the commissioned investigators at the other state agencies;
  • more and better training opportunities, including cultural diversity, special investigations and crisis intervention training; and
  • access to other states’ law enforcement groups and national law enforcement associations, for example the Regional Organized Crime Information Center, which provides extensive investigation and litigation support for investigators.

Investigators commissioned as Texas peace officers will have to maintain the standards of the Texas Commission on Law Enforcement Officers Standards and Education.

The recommendations in this Special Report are designed to improve the current Task Force and bring overall enhancement to the State’s fraud prevention efforts.

End Notes

[1] Texas Government Code §531.017 Medicaid and Public Assistance Fraud Oversight Task Force, 1997.

[2]See attached list of people interviewed for this study.

[3]Fleps, Christina W., (2005) Health Care Fraud and Abuse Compliance Manual New York, New York: Aspen Publishers.

[4]Morehead, Juliana, (2006, April) Red Flags of Insurance Fraud. Association of Certified Fraud Examiners. Retrieved April 6, 2006 from http://acfe.com/fraud/view.asp?ArticleID=572.

[5]Testimony by Leslie G. Aronovitz, Director, Health Care, United States Government Accountability Office, for the Subcommittee on Federal Financial Management, Government Information, and International Security, Committee on Homeland Security and Governmental Affairs, U.S. Senate, March 28, 2006.

[6]Testimony by Brian Flood, Inspector General, Texas Health and Human Services Commission, for the Subcommittee on Federal Financial Management, Government Information, and International Security, Committee on Homeland Security and Governmental Affairs, U.S. Senate, March 28, 2006.

[7]Association of Inspector Generals, Principals and Standards for Office of Inspector General May 16, 2001. Available at http://www.inspectorsgeneral.org/docs/IGStandards.pdf.

[8]Association of Certified Fraud Examiners (2004) Report to the Nation, available at http://www.acfe.com/fraud/report.asp.

[9]Attached copy of letter dated October 28, 2005, provided by Texas Comptroller of Public Accounts.

[10]Pennsylvania Association of Certified Public Accountants, January 2003, Fraud Detection: SAS 99 Increases Auditors’ Responsibilities.

[11]Morehead, Juliana, (2006, April) Red Flags of Insurance Fraud. Association of Certified Fraud Examiners. Retrieved April 6, 2006 from http://acfe.com/fraud/view.asp?ArticleID=572.

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