This article is from Cal-Tax Digest, published
by the California Taxpayers' Association.
Cal-Tax Home Page | About Cal-Tax | Subscribe

July 1999

California is under siege by a new type of fraud that is stealing millions of dollars annually. I'm talking about inventing businesses that don't exist, filing claims for services that have never been rendered and creating patient files for people who have never lived. I'm talking about Medi-Cal fraud.

The tragedy is that all Californians and taxpayers across the country pay for the fraudulent bills submitted by these con men, denying adequate funds for the health needs of real people. We all lose. The only winners are the fraud artists who have siphoned hundreds of millions of health-care dollars and have used these illegal payments to finance luxurious lifestyles with mansions and expensive cars. I know because we have attached their assets.

Our auditors recently uncovered a prime example of this crime. In Monterey Park, a company set up as a durable medical goods provider and obtained a Medi-Cal provider number in October 1998. The owners began billing the state in December and by the end of January had submitted invoices totaling more than $900,000. Suspecting that fraud may be involved, our office began to withhold payments in February. The provider shut down his business in March.

As the investigation progressed, it was determined that this particular operation was part of a family-based chain of fraudulent Medi-Cal providers. When we forced one operation to close, the owners obtained a new provider number and started their business again, just a few blocks away. The case is now under investigation by the FBI.

Now let's put this in perspective for taxpayers. In 1997-98, Medi-Cal's total spending was $18.5 billion, approximately $6.8 billion of which came from the state's general fund. Just about one of every eight California tax dollars went into the Medi-Cal program. If one-tenth of this amount is being paid on fraudulent or inappropriate claims, then the citizens of California are being robbed of about $680 million annually - an average of $55 for every taxpayer in California.

My office has commenced an aggressive pursuit of these criminals. Over the first four years of my administration, the efforts of the state Controller's Office auditors have resulted in Medi-Cal program savings averaging $100 million annually. Given the apparent rampant fraud and abuse in the program, I expect the auditors to continue to achieve savings of the same, or perhaps even greater, magnitude in the future.

We have also formed a state inter-agency task force consisting of our office, the U.S. Attorney, the state attorney general and the FBI. The collaborative efforts of this group will result in bringing more of these criminals to justice.

A second means of combating this "epidemic" of fraud is Assembly Bill 784. Assemblywoman Gloria Romero, on behalf of the Controller's Office, introduced this bill. The bill's components provide the Department of Health Services with the authority to deny application provider numbers, based on a history of abusive or fraudulent Medi-Cal billing practices. It gives our auditors legal authority to access all records deemed necessary to validate payments to providers. It requires a $25,000 bond on nearly every California Medi-Cal provider, offering collateral against any overpayments.

But this isn't just about initiating another bill or forming another task force. It's about stopping the theft of money that rightfully belongs to the individuals and families in desperate need of health care. With the money we lose to fraud each year, we could provide health care for every uninsured child in California. And we will not stop our efforts until we reach this goal.