The truth about fraud.

President Clinton has a simple answer when you ask him how to balance the budget. He looks stern, and in the tone of a small-town newspaper editor declares that: "Something"--dramatic pause here to pound the podium--"must be done about government fraud and abuse."

Increasingly, in the current penny-wise frenzy to balance the budget, politicians are proclaiming that crackdown on fraud and waste in government programs is the answer to their budget-cutting nightmares. Recently Clinton added to the chorus, hailing fraud reduction as the salvation for the endangered Medicare and Medicaid programs. In late March, the President urged Congress to pass the "Medicare and Medicaid Fraud and Abuse Prevention Act," which would allow administrators to bar unscrupulous health care providers from the programs.

On the surface, the plan sounds like a winner After all, no one stands up for fraud--at least in public. Problem is, this simple solution collides head-on with reality. Medicaid regulators are already required to bar fraudulent providers, and a General Accounting Office review of Medicaid fraud and abuse shows they're having enough difficulty dealing with the current case loads. Tough talk is cheap in the era of limited government, and in a mirror-image of the accepted rhetoric, the Medicaid program is currently wasting your tax dollars because of a lack of bureaucracy. Politicians need to acknowledge that the only realistic way to approach the problem of Medicaid fraud is to pay up or shut up.

Speaking before a House subcommittee last September. GAO Associate Director Leslie Aronovitz made the not-so-shocking announcement that Medicaid has a serious problem: Health-care providers who should be out of the program stay in, costing the government millions--maybe even billion--every year. (The full GAO report was due our in late April.

Fiscal horror stories include: A pharmacy expelled for overbilling Medicaid $117,000 remained on the rolls for 15 months without any explanation. The file was lost on a dentist accused of using general anesthesia on patients who did not need it, and, before anyone could locate the file, the dentist racked up another $12,000 in bills at taxpayer expense. "[This failure to quickly oust fraudulent providers from the system] puts at risk the health and safety of beneficiaries and compromises the financial integrity of Medicaid, Medicare, and other federal health programs." Aronowitz told the committee.

The reasons Aronowitz save for such program problems sound suspiciously like typical bureaucratic excuses: inconsistent policies, missing case files, long processing delays. The solutions Aronovitz recommended: Provide more consistent guidance to field offices, prepare more documentation, and explore ways to work quicker. Translated: There are gaps. Fix them.

But in order to do the double- and triple-checking that the GAO recommends, there need to be people to fill those gaps.

Patrick Jennings is the lead prosecutor for the Illinois Medicaid Fraud Control Unit, which investigates and prosecutes fraud. Jennings refers his catches to the federal government for exclusion, but isn't surprised that they are often not handled in, as the GAO delicately put it, a "timely manner."

"One of the problems in dealing with HHS, because of the personnel shortage, is the delay in for low-up," Jennings explains. "This HHS region covers five or six states. I'm nor criticizing the people for the work they do, but the manpower isn't there"

Robb Miller, inspector general for the state's Department of Public Aid faces Medicaid fraud at the Front line. He runs the Illinois Office of the Inspector General (OIG), the agency charged with getting Medicaid freeloaders off the gravy train. Much of Aronovitz's testimony sounds like criticism of his work and that of other state OIGs.

Miller doesn't dispute the holes in the current system: in fact, he provided much of the information Aronovitz cited in her testimony about Illinois. But the GAO's suggestions to improve OIG's effectiveness seem to understate the scope of the problem Miller deals with daily. "In Medicaid fraud, you don't have a single victim," says Miller. "The problem to know about is never all of the problem, and it can change at a moment's notice?' Right now, he says, all his department can do is plug the leaks as they become visible.

Generally speaking, there are two types of Medicaid fraud: fee-for-service and managed-care. In fee-for-service fraud. Miller explains, the idea is to bill Medicaid for as many procedures as possible. `An office visit might be $15, but the provider bills us for a full physical, which might be $40." he says.

In managed-care fraud, the aim is to do the opposite. Providers are paid a flat. "capitation" fee per patient, regardless of how high or low the patient's medical bills run. "To maximize profit, a fraudulent provider tries to devise as many ways as possible to keep patients out of their facilities. This type of fraud is tough to verify. "It can be things like a doctor not having' enough office staff or phone lines, so the client can't get through to make an appointment." Miller say's. "Then, when we ask the provider about it, he can say, `Hey, I never got the call."'

Some managed-care providers also use hard-sell techniques, like recruiting non-English-speaking immigrants, who don't fully understand what they're signing up for, and so never make proper use of the system. "We're even investigating several cases where [managed-care providers] apparently forged the client's signature," Miller says. "The clients didn't even know they were supposed to be in the program."

Sometimes, the so-called providers don't even exist--except on paper. Miller refers to the case of an Illinois facility that steadily billed Medicaid about $2,000 a month through the program's electronic filing system. These small amounts didn't attract attention. so there were never any site visits or audits from program administrators. Suddenly, the company "spiked" its billings went to $1.3 million in four months. State investigators went re the offices and found that the fraudulent filers had been running a shadow corporation: the office doors were locked and the facility was empty. The Medicaid claims staff caught $1 million before it went out the door, but the owners of the facility still got away with over $300,000.

Those losses add up for taxpayers, but exactly how much is anyone's guess. "Nobody knows." Miller says. "The standard figure given is about 10 percent of the total budget, but nobody knows for sure?' Even so. if that rough estimate is accurate, Medicaid fraud cost us about $15.9 billion in fiscal year 1995 alone.

It's easy to see how politicians can look at that number as a potential cash cow What isn't easy is rounding up the offenders and collecting the bill.

Illinois's fraud control unit brought in $1 million in cost recoveries last year, plus $230.000 from a criminal judgement. Prosecutor Jennings would like to do more, but the resources aren't there. "If we had more people, we could bring more prosecutions and more [providers] would he banned," he says. "With tine existing resources, we're doing what we can: We notify the feds and they go on their way. But it takes time?

That's the real dilemma of Medicaid fraud and abuse. If politicians want to recover more of that $159 billion, they're going to have to pony up a down payment on more auditors, more investigators and prosecutors, and more research and planning for fraud prevention. Miller can defend auditors on a cost-benefit basis. "For every $1 we spend on an auditor, we get $6 back," he says. But prosecutors and investigators are nor always cost-effective he concedes, and although research on better ways to operate saves money in the long run, Miller can't quantify it yet.

Regardless of their probable benefits, all three types of enforcement cost money, and Miller isn't holding his breath. Even with the increased funding available in the Kennedy-Kassebaum bill, he knows money is tight in the current political climate. "You can't increase regulations without proportionately increasing staff to deal with them," he says. "Then you get people talking about rising taxes and bureaucrats. I'm sure our investigators and ,auditors don't think of themselves as bureaucrats. I think they're just doing their jobs, slogging against the tide."