HHS Introduces Proposal for Medicaid Fraud Control Unit Program Changes

In September 2016, a new rule was proposed that would codify statutory changes and amend several provisions of the Medicaid Fraud Control Unit (MFCU) program. MFCUs operate in 49 states, as well as the District of Columbia, and are designed to facilitate the integrity of the Medicaid program by combatting fraud and abuse. Only twice in its nearly forty-year history has the program itself been amended.

If passed, the rule would reflect the current federal matching rate of 75 percent, which had previously been increased from 50 percent. Each year, every MFCU receives a federal grant that covers 75 percent of the total cost of operations. However, each grant must be matched by the state for the remaining 25 percent. This amendment would merely codify current practice. The rule change would also allow MFCUs to investigate and prosecute cases involving patient abuse and neglect regardless of whether a facility receives Medicaid payments. Under the current system, MFCUs are only allowed to investigate patient abuse or neglect at facilities receiving Medicaid payments.

Additionally, the proposal includes several definitional changes. For example, “Provider” would now include anyone who is required to enroll in a State Medicaid program, such as ordering and referring physicians. This amendment would expand an MFCU’s authority to investigate and prosecute fraud and abuse, even if the provider did not provide the items or services for which Medicaid reimbursement was sought. Moreover, the definition for “Fraud” would clarify that MFCUs have authority to investigate “any and all aspects of fraud” for which civil or criminal penalties may be imposed under applicable state law.

The rule would also reflect statutory changes to operating requirements. Under the new rule, The Centers for Medicare & Medicaid Services (CMS) would formally require states to maintain an MFCU as part of its Medicaid program, unless such operation would not be cost-effective due to a limited number of fraud cases. It would also require a MFCU director to be a full-time MFCU employee, demand all MFCU staff to report to the director, and force all MFCU employees to be staffed in a single, contiguous space. This provision might meet some resistance, however, because investigators in some states report to a chief investigator who works for a different agency. Further, some MFCU investigators share space with other state and federal investigators and are not grouped with other MFCU attorneys.

Furthermore, state Medicaid programs would now be required to coordinate with MFCUs. As part of this directive, states and MFCUs would have to enter into formal agreements to conduct meetings and maintain regular communication involving investigations and operations, which would have to be renewed every five years. The new rule would also increase collaboration between the MFCUs and the Office of the Inspector General by, similarly, requiring regular meetings and communication with the federal IG.

This rule change is not likely to garner much controversy since many of the amendments merely incorporate prior statutory changes. MFCUs have been incredibly successful at fighting Medicaid fraud and abuse. In 2015 alone, these units were responsible for 1,550 convictions and $744 million in criminal and civil recoveries. Although the amount of civil recoveries had decreased from prior years, in line with the national trend of health care civil recoveries, the number of convictions in 2015 was a five year high.

The proposed rule may be found at https://www.gpo.gov/fdsys/pkg/FR-2016-09-20/pdf/2016-22269.pdf. Comments on this proposed legislation are due by November 21, 2016.