Published — November 15, 2012 Updated — May 19, 2014 at 12:19 pm ET

Blistering inspector general report says feds are failing to fight Medicaid home care fraud

Jasmine Norwood/The Center for Public Integrity

IG has repeatedly warned Centers for Medicare and Medicaid Services about personal services program for home care


Like a growing number of disabled Americans on Medicaid, Keith Foreman, a 57-year-old in Metropolis, Ill., qualified for a personal caregiver to help him with daily activities like dressing, shaving, and preparing meals.

Foreman, who prosecutors say suffers from a spinal injury, hired his girlfriend, Sheila McDonald, for the job. In 2011, McDonald received almost $5,000 from Medicaid for six months of care she provided to Foreman.

These personal care services, which are available in all 50 states, are designed to help the sick, elderly, and disabled remain in their homes — and out of expensive nursing facilities. But Foreman was not living at home. During the days marked on McDonald’s timesheets, Foreman was housed in the Massac County jail in Illinois, serving time for forging a stolen debit card signature at a local liquor store.

Like Foreman and McDonald, who both pleaded guilty to charges of making false statements, unscrupulous beneficiaries and home health workers are increasingly targeting personal care services programs for illegal money-making schemes, according to a new federal report. Investigators say lax requirements for both caregivers and patients, along with poor state and federal oversight, has made the rapidly growing programs a lucrative target for fraud. And this isn’t the first time they’ve issued such a warning.

Report faults federal oversight of state programs

A Health and Human Services Office of the Inspector General (OIG) report scheduled to be released today faults the Centers for Medicaid and Medicare Services (CMS) for inadequate oversight of personal care services programs, whose costs are shared by states and the federal government, as is the norm for Medicaid. The report, which brings together six years of OIG investigations and 23 reports on the topic, describes a program hindered by poor claims documentation, insufficient monitoring of claims data for fraud and waste, and a crazy-quilt of varied requirements for personal care workers in different states.

“Historically, CMS has left a lot of the responsibility for overseeing waste, fraud and abuse to the states,” said Christi Grimm, special assistant to the principal deputy inspector general. “As a result, we have 301 different sets of requirements for caregivers across the states.”

Although some states mandate criminal background checks and licensing for home health workers, Grimm said others lack even the most basic requirements, including age minimums, which has led to cases in which juveniles escape prosecution for fraud and abuse. Worker requirements are set by counties in a number of states, she added, which has led to a hodge-podge of rules that are difficult to enforce, and nearly impossible to monitor.

“We are asking CMS to step up to the plate,” Grimm said, and use its authority to regulate and monitor the state programs.

The report includes six previous OIG recommendations to CMS and state agencies which have gone unimplemented. In a 2008 report that found five states may have paid up to $11 million in error for personal care services during one quarter of 2005, OIG recommended that the CMS work with states to stop payments for personal care when patients were receiving care in institutions, not at home. The agency agreed with the recommendation, but according to the OIG, the work has not been completed.

In addition to asking the agency to address previous recommendations, the report offers four new goals for CMS to improve oversight and monitoring of state plans, including standardizing rules for personal care workers to set minimum age and education levels, and require criminal background checks.

The report, however, seems unlikely to spur the agency to follow the OIG’s specific suggestions.. In a written response, CMS — part of the Department of Health and Human Services — explicitly concurred with only one of the OIG recommendations: that it should provide states with claims data to help root out cases in which beneficiaries are simultaneously receiving both institutional care and home health services. In response to the recommendation on establishing federal guidelines for personal care workers, CMS pointed out there is a shortage of care attendants.

“Personal care services are an important part of keeping people in their homes and out of nursing homes, which lowers costs and improves the quality of life of the patient,” said CMS spokesman Brian Cook. “We are working to protect personal care from fraud and abuse by promoting stronger training programs for workers who provide personal care, working with states on background check programs for these workers, and developing new data methods to analyze claims for potential fraud and abuse.”

Grimm called the CMS response to the report unacceptable. “It’s not uncommon for CMS … to identify things on the horizon, or things they hope to do, but not necessarily commit to doing something,” Grimm said, adding that CMS’s efforts so far simply have not worked. “[CMS] has the authority to do what we are asking. It has not done it yet. And it hasn’t committed to doing it after reading our report.”

A wealth of opportunities

According to investigators, most fraud schemes in personal care services involve billing for care that was not provided or was not allowed. Self-directed programs, which allow beneficiaries to hire and manage their helpers, may be particularly vulnerable, but some prosecutions have also involved home health care agencies.

In January, for example, the owner of a Minnesota home health care company outside Minneapolis was sentenced to two years in prison for cheating Medicaid out of more than $650,000 in charges for personal care services. In March, the owner of Families First Home Health Care in Sparta, N.C., pleaded guilty to fraud and money laundering stemming from a scheme in which she billed Medicaid for personal care services she did not perform and split the proceeds with plan members.

“Fraud goes where the money is,” said Barbara Zelner, executive director of the National Association of Medicaid Fraud Units, which represents state law enforcement agencies that investigate Medicaid fraud. After nursing homes, Zelner said, home health represents one of the larger slices of state Medicaid budgets.

Personal care services programs have grown quickly since a 1999 Supreme Court decision held that unjustified segregation of the disabled is a civil rights violation. The ruling led to increased spending for home health services; in 2011, Medicaid paid more than $12 billion for personal care services, up 35 percent since 2005, according to the OIG. Investigators say program fraud has kept pace. In 2010, state Medicaid fraud units investigated more than 1,000 cases involving personal care services, more than any other type of Medicaid service.

Not everyone agrees with the OIG’s views on personal care services. In 2011, an OIG review of Medicaid claims for personal care services in New Jersey found that 40 percent should have been denied. Sherl Brand, president of the Home Care Association of New Jersey, which advocates for home health care providers, questions the OIG’s work, saying the agency often draw broad conclusions from examinations of a limited number of claims. “It is almost a bit ridiculous because of the extrapolation they do,” Brand said.

New Jersey home health workers face criminal background checks and certification and licensure requirements, Brand said. Personal care services programs save money, she said, in addition to helping disabled people live better lives. When New Jersey was faced with budget cuts, Brand said the association determined the average weekly cost for personal care services was $242 dollars a week, only slightly higher than the cost of a single day in a nursing home.

But as funding for the programs increase, fraud follows. Kirk Ogrosky, a former top federal health care fraud prosecutor who is now a partner at the Washington law firm Arnold & Porter, said home health has long been a hotbed of fraud, both in Medicaid and in Medicare. The fraud, he said, is not hard to uncover. Ogrosky recalled that after an extensive analysis of Medicare claims, he sent agents out to interview questionable beneficiaries. When the agents knocked on the doors, they often learned the person they were looking for was at work, Ogrosky recalled. “That’s utterly preposterous,” he said, “since home health requires that you are homebound.”

In other cases, Ogrosky said, agents found that home health care agencies were filing claims for beneficiaries who did not live at the homes indicated on the claims. “One of my favorite stories is about a homeless guy we found,” Ogrosky said. “He didn’t even have a home to be homebound to.”

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