In North Carolina, fraud detection spending outpaces recoveries


A North Carolina internal oversight committee is calling on the state to restructure its approach to Medicaid fraud detection, indicating that fraud-detection expenditures outpace recoveries more than 7 to 1.

A report (PDF) from North Carolina’s Program Evaluation Division outlined several oversight issues within the state’s program integrity section, including a steep decline in fraud referrals to the state Department of Justice’s Medicaid Investigations Division (MID), which investigates and prosecutes credible allegations of fraud. Between fiscal years 2012-2013 and 2014-2015, fraud referrals from the program integrity unit dropped 84 percent, from 122 to 20. 

Both the MID and the program integrity unit blamed the lack of referrals on the state’s new medical claim processing system, NC TRACKS, which it implemented in July 2013. The agencies indicated that claims data was unreliable and inaccurate, making fraud claims difficult to investigate and rendering data inadmissible in court. The program integrity unit added that MID was understaffed and often lacked the resources to investigate fraud referrals.

Furthermore, North Carolina spent significantly more on contracted services for pre- and post-claims reviews than it recovered. In 2014-2015, the state paid several contractors a total of $3.7 million to perform claims reviews, but recovered just over $500,000.

The report issued several recommendations to the program integrity division and the MID, including implementing a better methodology for identifying fraud, finding new ways to recover additional overpayments, and developing new policies and procedures that cost-effectively identify improper billing.

Recoveries through state Medicaid Fraud Control Units were down 63 percent across the country last year, in part because of a decline in civil settlements. Federal watchdog officials have indicated that subpar provider enrollment screening has left Medicaid vulnerable to fraud, and experts have indicated that a lack of comprehensive data still plagues Medicaid fraud detection efforts.