From The E-Accountability Foundation: New York State institutionalizes corruption so that even the investigators look the other way.

July 18, 2005
New York Medicaid Fraud May Reach Into Billions
By CLIFFORD J. LEVY and MICHAEL LUO, NY TIMES

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It was created 40 years ago to provide health care for the poorest New Yorkers, offering a lifeline to those who could not afford to have a baby or a heart attack. But in the decades since, New York State's Medicaid program has also become a $44.5 billion target for the unscrupulous and the opportunistic.

It has drawn dentists like Dr. Dolly Rosen, who within 12 months somehow built the state's biggest Medicaid dental practice out of a Brooklyn storefront, where she claimed to have performed as many as 991 procedures a day in 2003. After The New York Times discovered her extraordinary billings through a computer analysis and questioned the state about them, Dr. Rosen and two associates were indicted on charges of stealing more than $1 million from the program.

It has drawn van services, intended as medical transportation for patients who cannot walk unaided, that regularly picked up scores of people who walked quite easily when a reporter was watching nearby. In cooperation with medical offices that order these services, the ambulettes typically cost the taxpayers more than $50 a round trip, adding up to $200 million a year. In some cases, the rides that the state paid for may never have taken place.

School officials around the state have enrolled tens of thousands of low-income students in speech therapy without the required evaluation, garnering more than $1 billion in questionable Medicaid payments for their districts. One Buffalo school official sent 4,434 students into speech therapy in a single day without talking to them or reviewing their records, according to federal investigators.

Nursing home operators have received substantial salaries and profits from Medicaid payments, while keeping staffing levels below the national average. One operator took in $1.5 million in salary and profit in the same year he was fined for neglecting the home's residents.

Medicaid has even drawn several criminal rings that duped the program into paying for an expensive muscle-building drug intended for AIDS patients that was then diverted to bodybuilders, at a cost of tens of millions. A single doctor in Brooklyn prescribed $11.5 million worth of the drug, the vast majority of it after the state said it had tightened rules for covering the drug.

New York's Medicaid program, once a beacon of the Great Society era, has become so huge, so complex and so lightly policed that it is easily exploited. Though the program is a vital resource for 4.2 million poor people who rely on it for their health care, a yearlong investigation by The Times found that the program has been misspending billions of dollars annually because of fraud, waste and profiteering. A computer analysis of several million records obtained under the state Freedom of Information Law revealed numerous indications of fraud and abuse that the state had never looked into.

"It's like a honey pot," said John M. Meekins, a former senior Medicaid fraud prosecutor in Albany who said he grew increasingly disillusioned before he retired in 2003. "It truly is. That is what they use it for."

State health officials denied in interviews that Medicaid was easily cheated, saying that they were doing an excellent job of overseeing the program.

"This continues to be an area where we think that we have made substantial progress," said Dennis P. Whalen, executive deputy commissioner of the State Health Department. "But by no means are we sitting back and resting on the accomplishments that we have made."

Nonetheless, after being informed of The Times's findings, the Republican majority in the State Senate began a push recently to overhaul the system intended to protect Medicaid, which has been sharply reduced even as Gov. George E. Pataki and lawmakers have nearly doubled the program's budget over the last decade. The Democratic majority in the Assembly has remained on the sidelines. So has Mr. Pataki.

New York's Medicaid program is by far the most expensive and most generous in the nation. It spends far more - now $44.5 billion annually - than that of any other state, even California, whose Medicaid program covers about 55 percent more people. New York's Medicaid budget is larger than most states' entire budgets, and it spends nearly twice the national average - roughly $10,600, more than any other state - on each of its 4.2 million recipients, one in every five New Yorkers.

That generosity was born of good intentions when Gov. Nelson A. Rockefeller signed the program into law in 1966, following the state's tradition of creating big antipoverty programs. But Medicaid has become far more than the child of that altruism, having morphed into an economic engine that fuels one of the state's biggest industries, leaving fraud and unnecessary spending to grow in its wake.

There are no precise estimates for the cost to the state's program. Officials who have spent their careers chasing unscrupulous doctors and other providers in New York Medicaid say the losses to taxpayers here are probably higher than typical estimates of overall health care fraud. The Government Accountability Office in Washington and others have estimated that 10 percent of all health care spending nationally is lost to "fraud and abuse."

James Mehmet, who retired in 2001 as chief state investigator of Medicaid fraud and abuse in New York City, said he and his colleagues believed that at least 10 percent of state Medicaid dollars were spent on fraudulent claims, while 20 or 30 percent more were siphoned off by what they termed abuse, meaning unnecessary spending that might not be criminal. "So we're talking about 40 percent of all claims are questionable," Mr. Mehmet said - an amount that would approach $18 billion a year.

Despite the debate, and the enormous sums at stake, Albany has never formally studied how much of the huge government investment in Medicaid is lost to criminal activity and abuse.

For their part, federal auditors have made New York a leading target for inspection as Washington has begun to crack down on Medicaid spending abuses. The federal government shares the cost of Medicaid with the states. In New York, it pays half the bill; Albany splits the rest of the cost with its counties and New York City.

The lax regulation of the program did not come about by chance. Doctors, hospitals, health care unions and drug companies have long resisted attempts to increase the policing of Medicaid. The pharmaceutical industry, which has spent millions of dollars annually on political contributions and lobbying in Albany, has defeated several attempts to limit the drugs covered by Medicaid; other states have saved hundreds of millions of dollars annually with such restrictions.

Earlier this year, after the Legislature agreed to impose such a limit and steer patients to generic drugs, the industry won a major loophole that allowed any doctor to substitute a higher-priced brand name with a simple phone call to the state.

Governor Pataki would not be interviewed about Medicaid for this article, and his aides referred questions to the State Department of Health, which is part of his administration. The health commissioner, Dr. Antonia C. Novello, also declined to be interviewed.

In defending the department's performance, Mr. Whalen, the executive deputy commissioner, said it had saved $9.3 billion in recent years through investigations of providers, a new computer system and other measures.

Asked repeatedly to provide an in-depth explanation of their claim of major savings or for any state records or other documentation to back up the figures, department officials would not supply any.

The Times investigation drew upon interviews with scores of current and former officials and health-care providers, including several former investigators who say they left the state disillusioned about its commitment to fighting fraud. A review of thousands of pages of state, federal and local records turned up repeated examples of cost savings and waste reduction used by the federal government and other states, but not by New York.

The investigation found audits on Medicaid spending that were brushed aside, and reports on waste that appear to have been shelved. There have been multiple warnings from watchdog agencies in New York and in Washington that indicate that the program is becoming increasingly porous. Prosecutors said state regulators had all but lost interest in bringing Medicaid thieves to justice, preferring instead to focus on recouping money through a few civil cases that have little deterrent value.

The Dentist

On the streets of Downtown Brooklyn, the young men would regularly fan out to drum up business for Fulton Gentle Family Dentistry.

"Got a Medicaid card?" one of the men shouted one day last November. "Come in and get your free CD player right now!"

But inside the office at 575 Fulton Street, Dr. Dolly Rosen seemed to make money whether or not the barkers did their job. She simply invented the dental work she did, according to state prosecutors alerted by The Times, and then billed it to Medicaid. And the breadth of her deception was enormous, the prosecutors said.

In 2003, less than two years after joining Medicaid, Dr. Rosen and an associate reaped $5.4 million, more than the amounts garnered by 98 percent of providers of all types in the entire New York program, according to the analysis of Medicaid billings.

Dr. Rosen claimed to be doing thousands of procedures every month, far more than any group of dentists could possibly perform, according to the analysis and interviews with dental experts.

In September 2003, she charged Medicaid roughly $725,000 for 9,500 individual dental procedures, many of them expensive and complicated, such as filling cavities that had rotted away much of the tooth. On a single day that month, she billed for 991 procedures, or more than 100 an hour in a typical workday.

In criminal complaints, an investigator said that more than 80 percent of the procedures for which the dental office billed were not performed, were unnecessary or were improper.

Dr. Rosen, who is 48 and lives in Manhattan, was licensed in 1995 and joined the Medicaid program in 2002. Since then, she has billed taxpayers more than $7 million.

She and her lawyer, Jeffrey A. Granat, would not comment.

The allegations of fraud in this case involved dentistry, but in the world of New York Medicaid, this kind of scheme is not unusual in any specialty, although it rarely occurs on such a scale. Many doctors, clinics, pharmacists and other providers routinely exaggerate their billings, investigators say, often claiming to do more work than they really performed, or substituting an expensive procedure for a minor one. Others invent visits that never occurred.

"This is an age-old problem in New York," said Professor Malcolm Sparrow of Harvard, who has written extensively on health care fraud.

Albany stood by as Dr. Rosen's Medicaid billings went from zero in 2001 to $4 million in 2003, according to the analysis of her billing records.

Her 2003 billings were by far the highest of the 50,000 dentists or doctors in New York Medicaid - $1 million more than those of the next highest, the records show.

Dr. Rosen had an associate in the Brooklyn office, Dr. Alex Silman, who sent his own bills to Medicaid. His billings showed a similar spike, rising to $1.4 million in 2003 from $115,000 in 2002, records show.

The Department of Health and the state attorney general's office blamed each other for failing to stop Dr. Rosen and Dr. Silman. The department said it had alerted the office that it should investigate possible improprieties with their practices. The office said the department had botched its inquiry.

Last fall, The Times brought its findings on Dr. Rosen and Dr. Silman to the attention of the Medicaid Fraud Control Unit, which is in the state attorney general's office. On March 24, prosecutors in the unit had Dr. Rosen and Dr. Silman arrested.

This month, the two were indicted on charges of first-degree grand larceny, each accused of stealing more than $1 million from the program. Another associate, David Ibragimov, who handled billing for the office, was also indicted. All three have pleaded not guilty.

The Times found Dr. Rosen's extraordinary billings using a laptop computer and commonly available software after spending a few hours studying New York Medicaid billings. And she was only one of scores of medical providers who turned up in the search with similar spikes in revenues, including three Brooklyn pharmacies, a Manhattan doctor and a Queens medical supply company. None had even been audited by the state.

The AIDS Drug

The woman said her name was Pamela Borden, but it was not. She told the doctor that she had AIDS and had been losing weight rapidly, but she did not have AIDS and was overweight. Yet when she walked out of Dr. Mikhail Makhlin's Brooklyn office in February 2002, she was clutching a prescription for a very expensive synthetic growth hormone intended to treat wasting syndrome, a side effect of AIDS.

The cost of the drug, entirely borne by taxpayers, was $6,400 a month.

The woman's real intention for the synthetic hormone, Serostim, had nothing to do with AIDS. Serostim is highly sought in a thriving black market among bodybuilders, who use it like a steroid to bulk up.

And Dr. Makhlin wrote far more prescriptions for Serostim than any other Medicaid doctor in the state, more than even prominent AIDS specialists with large practices. From 2000 to 2003, Dr. Makhlin prescribed 12 percent of all the Serostim purchased by New York Medicaid, costing the program $11.5 million, according to the Times analysis of Medicaid billings.

Medical records and interviews with state officials suggest that the woman's visit was part of an elaborate series of scams involving Serostim that stole tens of millions of dollars from New York Medicaid, long after other states realized what was going on. In 2000, New York Medicaid paid $7 million for Serostim, but the following year, after the schemes took off, the state spent $50 million on the drug.

The money was spent despite national publicity that had led other states to realize that Serostim was being abused, and to begin reining in their spending on the drug. Florida, for example, put restrictions on Medicaid payments for Serostim in 1997. The same year, federal officials broke up a Medicaid fraud ring that recruited people from Washington Square Park and paid them $20 to $50 to get Serostim illegally.

At the Health Department, Mr. Whalen and his aides described the department's handling of the drug as a success. They said they had detected the increase in Serostim prescriptions and required doctors to get special approval to prescribe the drug after January 2002. But billing records show that Dr. Makhlin wrote 80 percent of his Serostim prescriptions after the restrictions were adopted.

Serostim was approved in the mid-1990's to treat wasting syndrome, a side effect of AIDS. It is injected under the skin and causes a significant increase in lean body mass and weight.

The drug's manufacturer, Serono Laboratories, is the subject of an extensive federal criminal investigation into whether its executives paid kickbacks to doctors to prescribe Serostim. The company said it was cooperating with the inquiry.

Federal authorities would not say whether Dr. Makhlin had been questioned in the federal inquiry. What is clear is that Dr. Makhlin played a pivotal role in the epidemic of Serostim abuse on the East Coast. Even now, he retains his Medicaid privileges and medical license, and has not been a subject of a state criminal inquiry.

Dr. Makhlin, who was educated in Russia and arrived in New York in 1989, maintains that he was unwittingly duped by a parade of patients he tried to help, and that he received no benefit for prescribing a drug he considered necessary. But he and his lawyer, Nathan Dembin, will not explain how he ended up prescribing far more Serostim under Medicaid than any other doctor in the state. Thirty of his patients each received more than $100,000 worth of the drug.

The State Department of Health did not try to discipline Dr. Makhlin until late 2003, seeking to suspend him from the program for five years and fine him $164,000. But Dr. Makhlin has successfully fought the penalties, and retains his Medicaid privileges while an administrative law judge in the department weighs his case.

"I did not intentionally or knowingly violate any Medicaid regulations," Dr. Makhlin said in court papers. "I was simply exercising my best medical, professional judgment."

It was not until 2004 that the amount of Serostim purchased by New York Medicaid returned to where it was before the spike.

The true identity of the woman who received the prescriptions from him in February 2002 will probably never be known. The real Pamela Borden was found in Brooklyn and said her Medicaid card had been stolen in late 2001. She said no one from the state had contacted her about Dr. Makhlin.

The Ambulettes

With an immense public transit system and fleets of taxis and car services, New York is one of the nation's easiest cities to get around in, even for the old and the sick. But instead of reimbursing patients for a $2 bus ride to their doctor's office, or a $10 fare for a car service, Medicaid typically pays $25 or $31 each way for these rides, and it adds up.

New York Medicaid paid far more than any other state to get patients to hospitals and doctor's appointments: $316 million in 2003. The state accounts for about 15 percent of all the nonemergency Medicaid transportation spending in the country, according to a 2001 report by the Community Transportation Association of America, and spends more than the next three states - California, New Jersey and Florida - combined.

The largest chunk of the $316 million spent on transportation went to some 450 ambulette services, about a fifth of which are clustered in Brooklyn.

And much of that spending appears to be entirely unnecessary.

That was clear on a recent afternoon in southern Brooklyn, when an elderly woman strolled out of a doctor's office and clambered into the front seat of a van owned by M. J. Trans Corporation, a medical transport company that billed Medicaid for more than $2 million last year. After a 25-minute ride across the borough, she got out in front of her apartment, again without help, and walked inside.

The van is called an ambulette, and Medicaid is supposed to pay for it only when a patient cannot walk without help or requires a wheelchair. In fact, the state refers to the service as an "invalid coach." But on three days spent following M. J. vans over several months, a Times reporter found that almost all of the company's passengers walked easily, without assistance. The pattern was repeated as recently as last month.

Many doctors, therapists and clinics regularly order ambulette transportation for their patients when cheaper alternatives should have been used instead, according to a 2003 audit of Medicaid transportation expenses in New York City by the state comptroller, Alan G. Hevesi.

The state has known about abuses in the ambulette industry for years, and about the neighborhoods where kickbacks and other questionable activity takes place. In the early 1990's, regulators discovered that a quarter of the entire state's transportation billings were coming from Brighton Beach, Brooklyn, where a few companies had cornered the market with an elaborate set of kickback arrangements, according to a 1996 report on waste in the industry by the New York City public advocate's office. The report, along with others on the industry, suggested that many ambulette services billed Medicaid for rides that were never delivered.

But even though these schemes date back years, government records show that the state has spent almost no time looking into the ambulette industry. Prosecutors and outside auditors say that fraud, including the kind in which van services pay kickbacks to medical offices that order rides, remains rampant.

Only five ambulette providers who billed Medicaid in the 2004 state fiscal year had even a portion of their billings audited by state officials, according to state records.

Mr. Whalen, the senior state health official, maintained that the industry was properly regulated, adding that in an effort to detect fraud, the department had begun requiring providers to supply more information on their operations. "Transportation and ambulettes are on our radar screen as an active area of inquiry," he said.

One of the ambulette companies that has never been audited is M. J. Trans, though it had more billings per vehicle than almost any other of its size in the state. Its Medicaid billings jumped to more than $2 million annually in 2004 and 2003 from $700,000 in 2001.

Yuri Levitas, a manager at the ambulette company, said none of its billings were illegal or improper.

"We do only legal business," he said.

In fact, an analysis of its Medicaid billings raises questions about whether the company is abusing the system, or possibly allowing individual patients and doctors to do so. The records indicate that the company has business relationships with medical practices in southern Brooklyn that often bill Medicaid for what seem an inordinate number of trips.

A doctor at a pair of clinics that specialize in pain relief and massage therapy often ordered more than 90 trips a day, as did a colleague of his.

At another doctor's office, Medicaid was billed 153 times by M. J. for transporting a single passenger in 2003, or essentially two or three times a week for an entire year. Another recipient went 152 times. Still others made the trip in M. J. vans more than 130 times.

M. J. Trans said most of those rides were ordered by the office for recipients receiving physical therapy there.

"They order, and we go," Mr. Levitas said, adding that he was not responsible for ensuring that the rides were necessary.

Several physical therapists expressed skepticism that anyone would need so much therapy.

"There is always the difficult or complicated case here and there that requires extensive and intensive therapy, but as a general rule, 153 visits would seem excessive," said Gabriel E. Yankowitz, a physical therapist for more than two decades and an official with the New York Physical Therapy Association.

But Gail Bednik, the manager of the office, at 280 Quentin Road in Gravesend, that is in the records as having ordered the 153 rides, said there was nothing surprising about the patients who took scores of ambulettes annually at taxpayer expense.

"It's old people," Ms. Bednik said. "They want to come every day because they're bored at home."

The School Districts

In just a few hours on a single day in September 2000, a senior official in the Buffalo school system wielded a rubber signature stamp and cost millions of dollars in questionable Medicaid payments for children.

Her name was Sheryl Carswell, and at the time she was Buffalo's director of special education. Moving her rubber stamp with assembly-line speed that day, she put 4,434 special-education students on the Medicaid rolls by recommending that they receive speech therapy, according to a federal audit. That represented nearly 60 percent of the district's special-education population, roughly twice the national average of special-education students who require speech therapy.

Yet she had not evaluated more than a few of those 4,434 students, according to the audit, issued by the inspector general of the federal Department of Health and Human Services, nor had she reviewed their case files.

Ms. Carswell was not stealing the money for herself or maliciously abusing the system. Instead, she was doing business in a way that has become increasingly common in Buffalo, New York City and around the state, collecting millions of Medicaid dollars for her school district by putting students into health and speech programs, often without any apparent effort to see if the students really needed them.

All told, the schools in New York State misspent $1.2 billion in Medicaid payments on speech services from 1993 to 2001, federal audits concluded.

In an interview, Ms. Carswell said she was simply following longstanding school procedures. "I just filled out the paper," she said. "Nobody bothered me about it."

Since 1990, schools in New York have been able to bill Medicaid for speech, hearing, and other school health services, and the state has become the most aggressive in the nation at taking advantage of this benefit. Around the state, school districts short on cash discovered in Medicaid a new revenue source. As a result, in recent years, school health services have become an $800 million annual expense, rising to the point that New York accounts for 44 percent of this type of Medicaid spending nationally, according to federal statistics.

Licensed speech professionals quickly realized what was happening, and many have complained that schools are cutting corners and using the funds to pay for services that have nothing to do with helping poor children speak or hear better. "We have been seeing a lot of very suspicious billing practices in New York," said James G. Potter, director of government relations and public policy at the American Speech-Language-Hearing Association, which has 118,000 members. "At times, folks in the schools have been just plain making it up out there when it comes to billing."

This spending was routinely approved by the state, but the federal government was not as credulous. The questionable spending touched off two audits in 2002 by the inspector general, and a civil inquiry by the federal Department of Justice.

In an audit released last month, the inspector general revealed that in New York City schools, 86 percent of the Medicaid claims that were paid from 1993 to 2001 lacked any explanation for why the services had been ordered or violated other program rules. In Buffalo and other upstate schools, the auditors concluded that the figure was 56 percent for the same period, according to a report released last year.

The audits should not have come as a shock. In the mid 1990's, a private consultant told New York City school officials that their record-keeping was in such disarray that 51 percent of attendance forms for speech students could not be found. Yet school officials did not change their practices, according to the subsequent audit.

When the upstate school districts found out about the audits in 2002, some tried to cover their tracks, the inspector general found. Digging through their filing cabinets, they backdated records to justify Medicaid spending for services performed as many as eight years earlier.

Now, after the audits, federal officials say Washington is likely to begin demanding its money back, and so this misuse of Medicaid money could haunt either the districts that spent it, or the state, or both. Many districts are worried that the repayment could devastate their education budgets.

School officials, including those in New York City, have sharply disputed the audits, and called for them to be withdrawn.

The Justice Department suspended its civil inquiry after complaints from Senator Charles E. Schumer, Democrat of New York, and other politicians, and federal health officials have agreed, for now, not to seek restitution from school districts. But the state itself could still be liable, and could then in turn penalize the districts.

Pataki administration officials say Washington has never been clear about what kind of school services it will pay for and how children should be referred to these programs, accusing Washington of changing the rules.

"There is no question that school districts actually provided health services to poor, disabled children," wrote Kathryn Kuhmerker, a deputy health commissioner, in her response to the upstate audit.

The state, however, did not meet its responsibility to make sure the money was properly spent, the federal audit found. The State Health Department reviewed the books of the Buffalo district only once from 1993 to 2001, and told the district its records were "well organized."

The Executives

Among the biggest beneficiaries of the Medicaid program have been executives of the state's nursing homes and clinics, many of whom earn substantial salaries and profits from the program.

According to records obtained from the Health Department under the Freedom of Information Law, 70 executives of nursing homes and clinics personally made more than $500,000 in 2002, the last year for which figures are available. Twenty-five executives made more than $1 million.

For the nursing home executives, that money was earned in salaries and profits, most of which came directly from the daily fee that Medicaid pays for caring for each low-income patient, usually in the range of $200. Salaries are earned by employees of the homes, and profit is earned by owners, although owners are often executive directors or chief executives of the homes, allowing them to benefit in both ways.

Consider three homes in the Bronx. The operator of the Laconia Nursing Home, which receives 90 percent of its revenues from Medicaid, earned $3 million in salary and profit. At the Grand Manor Nursing Home, also 90 percent financed by Medicaid, the operator and three family members earned a total of $2.4 million in salaries and profit. The owner and operator of the Morris Park home, 75 percent financed by Medicaid, took in $1.5 million in salary and profit.

Advocates for nursing home residents acknowledge that the homes' operators and executives are entitled to make decent profits and salaries. But the advocates insist that it is unseemly for the profits and salaries to reach such high levels, given what the advocates contend is the industry's longstanding record of poor care. They point out that at New York nursing homes, the staffing levels are lower than the national average, a crucial indicator. All three of the Bronx homes have staffing levels lower than the national average, according to federal statistics.

"It's unconscionable to give yourself high salaries and not give some more money to hire people so some of these quality problems can be dealt with," said Cynthia Rudder, executive director of the Long Term Care Community Coalition, an advocacy group for nursing home residents.

Trade groups representing nursing homes counter that most homes in the state are actually in financial distress because Medicaid does not pay enough.

Many hospital executives in New York also receive high salaries, but hospitals earn significant revenues from sources other than government social programs, including H.M.O.'s and private insurance. The 550 public, private and nonprofit nursing homes around the state, by contrast, earn more than two-thirds of their revenues from Medicaid, taking in roughly $6 billion last year from the program, according to state records. Many clinics receive most of their revenues from Medicaid as well.

Morris Berkowitz, operator of the Morris Park home, said he deserved his profits because he worked long hours and provided excellent care.

"Do you know how much I have invested in this place?" he said. "A lot of money. And I am constantly investing in this place."

Earlier this year, after residents repeatedly wandered from Morris Park, federal and state officials accused the home of grievously poor supervision, and it was fined $86,000.

Mr. Berkowitz said the home had done nothing wrong. "It was a political thing, and we got caught up in it," he said. "People with power, they abuse their power."

Martin Liebman, operator of Grand Manor, said it was misleading to focus on salaries and profits.

"This is a family-owned business," said Mr. Liebman, an officer of the state trade group of private nursing homes. "I'm third generation in the business. We have taken care of thousands of residents and given quality care for many, many years."

Barry Braunstein, operator of the Laconia home, did not respond to three calls seeking comment.

Besides their high salaries, some executives profiting from Medicaid were also taking part in another tradition: cheating the program.

In 2002, the two owners of the AllCity Family Healthcare clinics in Brooklyn collected a total of $1.4 million in salaries, according to state records. Last year, the company was forced to return $6 million to the state, and one of its owners, Rossia Pokh, pleaded guilty to grand larceny in a case brought by the attorney general.

At the AllCity clinics, it turns out, thousands upon thousands of the Medicaid claims were fraudulent.

July 19, 2005
As Medicaid Balloons, Watchdog Force Shrinks
By MICHAEL LUO
and CLIFFORD J. LEVY, NY TIMES

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New York's Medicaid program pays more than a million claims a day, feeding a $44.5 billion river of checks to radiologists and ambulance drivers, brain surgeons and orderlies, medical centers and corner pharmacies. Many who get those checks pocket more money than they deserve, and millions of taxpayer dollars are believed to be lost every day to theft and waste.

Yet the state, charged with protecting those dollars, has done little to stop them from draining away.

A yearlong New York Times investigation found only a thin, overburdened security force standing between this enormous program and the unending attempts to steal from it. Even as spending by New York Medicaid has more than tripled since the late 1980's, the number of fraud investigators who guard its cash register has fallen by half, and several of their leaders have quit or retired in disillusionment.

Of the 400 million claims that Medicaid paid last year, Health Department regulators uncovered just 37 cases of suspected fraud, far fewer than their counterparts in any other large state, even though New York's Medicaid budget is by far the largest in the nation. Many experts say that it is likely that at least 10 percent and probably more of New York Medicaid dollars are stolen or wasted.

In dozens of interviews, prosecutors, lawmakers and former regulators said the program paid for almost everything and scrutinized almost nothing, in large part because its primary mission has been to ensure that there are enough health care providers in the system to address the needs of the poor. It often appears that the Health Department is barely even looking: There are more than 140,000 hospitals, nursing homes, doctors and other health care providers in the system, but the department visited just 95 in the 2004 fiscal year to audit their billings.

Analyzing Medicaid data obtained under the state's Freedom of Information Law, The New York Times identified scores of instances in which the claims of health care providers jumped markedly in a single year. These spikes are a classic indication of possible improper billing, yet few of those providers had even part of their billings audited by the department, state records show.

New York's Medicaid program, once the pride of the Great Society era, has become a system "that almost begs people to steal," said Michael A. Zegarelli, a senior New York Medicaid regulator until 2003 and a past president of the national association of Medicaid oversight officials.

Meanwhile, other states, including California and Texas, have increased their antifraud efforts and discovered what seems a simple truth: The effort to seek out theft and unnecessary spending can more than pay for itself, just as a parking violations bureau brings in revenue. Workers assigned to Medicaid fraud prosecution units around the nation help bring in an average of $200,000 each in recoveries, according to federal statistics.

Twenty-five years ago, New York was in the vanguard of fraud prevention. But over the decades it has failed to maintain the investment in employees necessary to close the door on thievery and abuse. Repeated delays stretched the replacement of a 1970's-era computer system that could barely detect fraud into a seven-year ordeal, allowing billions to slip by with little scrutiny.

As dozens of former employees describe it, the state's antifraud effort has been plagued by the same gridlock that has stifled innovation in Albany for years: bureaucratic infighting, allegiance to campaign contributors from the health care field, reliance on public indifference.

In an interview, Dennis P. Whalen, executive deputy commissioner of the Health Department, said combating fraud remained a major goal. He denied that the department had been lax in policing Medicaid and excluding providers who had cheated the program, saying that new computer systems have improved the state's detection efforts.

But State Senator Kemp Hannon, a Nassau County Republican who is chairman of the Senate Health Committee, called The Times's findings deeply troubling, and said they showed that the Medicaid fraud detection system was broken. Mr. Hannon said the Health Department, run by a fellow Republican, Gov. George E. Pataki, was failing to oversee the system.

"This is a red flag for them," Mr. Hannon said. "I have not seen anything that would indicate that there has been any sort of focus at all from the department."

New York's failures have come at a high price, according to advocates for the program's recipients.

"There is all this money that is being drained away and not being spent on care for the poor people who need it," said Elisabeth Benjamin, who spent eight years as a lawyer at the Legal Aid Society specializing in Medicaid. "It's analogous to the $5,000 toilet seat in the military."

Investigation Staff Is Cut

More than a dozen years ago, in the heyday of the unit charged with fighting Medicaid fraud and abuse in New York City, dozens of state employees would troop out to locations throughout the city for a regular ritual. With reporters in tow, they would serve papers on scores of shady doctors operating low-quality, high-volume clinics known as "Medicaid mills," said James Mehmet, who retired from the State Health Department in 2001. Mr. Mehmet was the unit's chief of investigators in New York City.

Most days, more than a dozen investigators went undercover as patients to see how they were treated by a doctor or a pharmacist, and then how their visit was billed. In the office, they worked alongside auditors and lawyers, as well as nurses, dentists and doctors - a full medical review staff.

But the energy and ambition of the office have dissipated along with the staff, Mr. Mehmet said. By the time he retired, he said, the 15 lawyers in the office had been reduced to one. The medical review staff was gone. And with the Medicaid budget growing rapidly, it was not the fraud that had diminished, he said, but the will to pursue it.

"The volume of work was so much different," Mr. Mehmet said, recalling earlier days. "The caliber of work was so much different. There was much more emphasis on going after people that were committing fraud and abuse."

Mr. Mehmet and other frustrated former regulators say the drop in the New York City office mirrors the statewide decline in staffing over the last decade, at a time when thieves have become more sophisticated.

In the late 1980's, more than 200 people in the New York Medicaid bureaucracy were devoted to fighting fraud and abuse, said Philip J. Natcharian, who directed those efforts until 1990. Now only 50 people, including clerical staff, have that job, along with a few dozen outside contractors, said Mr. Zegarelli, who worked at the Health Department's headquarters in Albany until his retirement. He said that was far too few to be effective, an assessment echoed by four other former senior department officials.

The former officials said reducing the fraud force made little sense to them, given the huge increase in Medicaid spending in recent years, which has brought the program to more than 40 percent of the state budget.

"How do you not increase the staff to monitor the largest expenditure in New York State?" said Mark J. Ives, who directed the state's fraud and abuse efforts until he retired in 1998.

One likely result of the staffing decline is that since 2000, the amount of money the Health Department has recovered from fraud investigations has fallen by 70 percent, according to data compiled by federal regulators.

At the same time, the state has virtually stopped excluding doctors from Medicaid for violating its rules, excluding only eight out of the 43,000 doctors enrolled in the program last year, a Times analysis shows.

"I think the department's reached the point of Smokey the Bear with a shovel," Mr. Zegarelli said. "They're just running around putting out fires."

The former regulators said they did not believe there had been a deliberate decision in Albany to loosen enforcement. Instead, they described a gradual move away from regulation as Albany focused on expanding and plugging holes in the program.

"They want recipients to get medical care," said Michael P. Sofarelli, who retired as a Medicaid prosecutor in the attorney general's office in 2003 after handling some of the state's biggest Medicaid fraud cases. "Investigating is a small part of the job."

The Health Department reports to Governor Pataki, and in recent years, his budget aides have actually reduced goals for recouping money from Medicaid providers for improper billing.

The decline of fraud control in New York contrasts sharply with the situation in other states. In 1998, California, which had several high-profile Medicaid fraud cases in the 1990's, added about 400 employees to an existing staff of about 40 charged with rooting out abuse. The number of fraud cases referred to prosecutors has since doubled.

Officials in Illinois and Ohio, where the Medicaid budgets are roughly a quarter the size of New York's, visited more than three times as many health care providers in the 2004 fiscal year to audit their billings.

Mr. Whalen, the executive deputy commissioner of the Health Department, said it frequently stopped Medicaid payments it considered questionable. He acknowledged that the staffing for fraud prevention had dropped, but described the change as insignificant, saying the state employed roughly 400 workers whose jobs involve fighting Medicaid fraud and abuse, supplemented by 200 outside contractors.

"The number, in terms of a pure number, has declined, but I would say that it has not been a huge decline," he said.

"Every agency, I am sure, would love to have more staff, and we are no different," he said. "But we are also realistic about the state's fiscal situation."

But former senior department officials said most of the workers cited by Mr. Whalen are not actually investigating fraud. They are accountants, nurses, computer analysts, clerks and others doing administrative jobs, making sure basic regulations are followed, leaving only about 50 state employees dedicated to fraud work.

Mr. Whalen and his aides said new computers and software were helping the department shift its focus from reviewing Medicaid claims already paid to preventing questionable claims from being paid in the first place.

But state statistics show that the department rejected a much smaller percentage of claims in the 2004 fiscal year than its counterparts in California, Florida or Pennsylvania.

Asked to list cases that they developed that led to arrests and prosecutions, Health Department officials could point to only a handful in the last two years.

The result of the cuts is evident in case after case that the state simply missed. The billings of a Queens pharmacist, Newton Igbinaduwa, rose to more than $1.4 million in 2002 from $78,000 in 1998, according to billing records analyzed by The Times. But the department never referred the case to the state attorney general's office.

It was only when prosecutors in the attorney general's office got a tip through another case that they found out about Mr. Igbinaduwa, who pleaded guilty last year to grand larceny after billing for drugs he never dispensed.

Prosecution Unit Shrinks

The Health Department is only half of the dwindling security force posted outside Medicaid's gate. The responsibility for prosecuting Medicaid fraud lies with the state attorney general, Eliot Spitzer, who runs the Medicaid Fraud Control Unit. And in the attorney general's office, too, Medicaid abuse has had a reduced priority for more than 15 years, with far fewer prosecutors than it had in the days when Medicaid was a much leaner program.

Though New York has the largest Medicaid fraud prosecution staff in the country, several other states have fraud offices that are larger in proportion to the size of their Medicaid budgets, and they recover a larger percentage from fraud prosecutions. As a percentage of the overall Medicaid budget, New York's 301 employees won less than half as much as those in Texas, Florida and New Jersey, according to statistics compiled by the federal government for its 2003 fiscal year.

Mr. Spitzer's office said New York used a more conservative method of calculating recoveries than other states, but even using that method, New York still fails to make the nation's top 15 states in the amount recovered as a percentage of the overall Medicaid budget, going back as far as 1999.

Mr. Spitzer's zeal in fighting corporate abuses has not been matched by his efforts in fighting Medicaid fraud, former employees say.

"I didn't think there was that much focus at the main office," said John M. Meekins, who retired in 2003 as the director of the Albany regional office of the Medicaid Fraud Control Unit. Referring to Mr. Spitzer, he added: "I'm not faulting the man. His focus was on Wall Street."

Mr. Spitzer said his office had made strides, especially in investigating the abuse of nursing home residents. The fraud unit's prosecutors have made a philosophical shift, he said, cutting back on the number of inquiries to concentrate on what they consider cases with bigger impact, which could lead to industrywide changes.

"The strategies that we have pursued have made sense and have been successful," Mr. Spitzer said.

However, the attorney general's office has had few such breakthroughs. None have shaken the health care industry in the manner of his successes on Wall Street and in the insurance industry, or the inquiries into nursing homes conducted by his predecessors in the 1970's.

The relatively low profile given to antifraud efforts dates to before Mr. Spitzer's term in office. The size of the fraud control unit dropped by more than 40 percent between 1979 and the early 1990's. Even after Mr. Spitzer became attorney general in 1999, the size of the fraud unit remained about 300 workers, the same as in the early 1990's. Back then, though, Medicaid cost about $14 billion a year, and its cost has since more than tripled.

The state could have a much larger prosecution force with a relatively small investment, because the federal government has made a standing offer to pay three-fourths of the cost, and New York's current allotment is well under the maximum. If the state spent an additional $24 million on its fraud prosecution unit, the unit's current budget of $45.7 million would more than triple to $148 million, mostly from the federal match.

Mr. Spitzer said state budget officials had repeatedly demanded hiring freezes for his office.

"The possibility of increasing simply has not been presented by the Department of Budget," he said, emphasizing that he believed that hiring more staff members made sense.

Last year, Mr. Spitzer said, the fraud unit recovered a record amount in overpayments: $62.5 million, up from $40 million in 2003. But the higher figure includes $30.8 million that was New York's share of a major nationwide settlement with two pharmaceutical companies over drug pricing. That case was spearheaded by federal prosecutors, not New York officials.

Behind the Scenes, Turf Battles

The Health Department and the attorney general's office must contend not only with growing fraud and depleted resources but also with another opposing force: each other. Over the years, they have accused each other of foot-dragging, incompetence, or resistance to change. Their mutual animosity and suspicion have come at the expense of the battle against fraud.

By law, it is the Health Department, not the attorney general's office, that is primarily responsible for identifying fraud. But the department's principal task is to keep the huge flow of payments moving swiftly, and at this point, with its shrunken enforcement bureau, the department sends very few cases to prosecutors.

Former officials of both departments say their different missions have left them clashing instead of cooperating.

Former prosecutors complained that Medicaid regulators often crippled their criminal cases by suing those they suspected of overbilling in civil court, hoping to get some money back to the system before the attorney general filed criminal charges. In those cases, prosecutors said, the state would often settle a case quickly for only a fraction of the amount overbilled.

Mr. Spitzer, a Democratic candidate for governor, said his prosecutors could not depend on the Health Department.

"They are just not a useful resource for us in the sense of providing us with ideas, places to look, referrals," he said.

Asked about Mr. Spitzer's criticism, a department spokesman, William C. Van Slyke, said, "We believe that his political ambitions are the motivation for his comments, as opposed to the facts."

Former Health Department officials said that when they turned over evidence of fraud to the attorney general's office, the prosecutors often took months or even years to piece together a case, all while the fraudulent activity continued to siphon money from the system. Medicaid officials said they preferred a civil case to stop the fraud immediately.

"They were malingerers," said Mr. Ives, former director of the department's fraud section. "They would take forever and ever to process a case."

Mr. Van Slyke said 70 percent of the cases the department referred to the attorney general's office since 2000 were still open. The office responded that many of those cases were fully investigated but just not technically closed.

Whatever the cause of the tensions, the department refers far fewer cases to prosecutors than its counterparts in other large states. Texas referred nearly seven times as many cases to its Medicaid prosecutors as New York did in the last fiscal year. California referred nearly four times as many, and Ohio more than three times as many.

Resisting Reform

In the fight against fraud, New York's inadequate arsenal is not an accident. In Albany, reformers have repeatedly been outspent and outmaneuvered by the health care industry.

Several large states, including California, Florida and Illinois, have laws that encourage whistleblowers to come forward with information about fraud schemes, offering them a portion of any money recovered. There is a similar federal law to fight fraud in Medicare, the program for the elderly and disabled.

But when Mr. Spitzer has had this type of bill, called a false claims act, introduced in New York, it has died. The bill was denounced by the Healthcare Association of New York State, which represents hospitals, nursing homes and other providers, as well as the State Medical Society, which represents doctors. The groups, which spend millions annually on lobbying and campaign contributions, predicted that the bill would lead to an epidemic of frivolous allegations.

"New York State's health care provider community has faced unprecedented, overzealous investigations by regulators and law enforcement officials," the association said in a memo.

Daniel Sisto, president of the association, said that its members believed that federal officials had used inappropriate tactics to crack down on fraud, and that they had fought the whistleblower law out of fear that the state would follow suit. He said the group's members faced a raft of different requirements from Medicaid, Medicare and numerous private insurance companies, and as a result made billing mistakes that were wrongly criminalized.

"What concerns me from our past experiences is that there is overzealousness in the interpretations of any overpayments as fraud and abuse," Mr. Sisto said.

In May, the Republican-controlled State Senate approved legislation, sponsored by Senator Dean G. Skelos of Nassau County, that would create an independent Medicaid inspector general. The measure would take away some of the responsibility for combating fraud from the Health Department and the attorney general's office and give it to the new agency and to local prosecutors.

Mr. Pataki and Mr. Spitzer opposed the measure, as did the Democratic majority in the State Assembly, which has long allied itself with large health care lobbies and unions. Assemblyman Richard N. Gottfried, a Manhattan Democrat who is chairman of the Health Committee, said he did not believe that the system needed to be changed.

Asked whether the Democrats would take any action on the issue, Mr. Gottfried said, "Maybe that would be a good one for us to hold hearings on in the fall."

TIMES EXPOSÉ ALLEGES STATE MEDICAID PROGRAM
LOSES BILLIONS OF DOLLARS TO FRAUD AND WASTE
Henry Stern, nycivic.org

TIMES CONTINUES ITS ATTACK ON MEDICAID FRAUD AND WASTE, CRITICIZES DEPARTMENT OF HEALTH AND ATTORNEY GENERAL

PATAKI MOVES ON MEDICAID FRAUD ON SECOND DAY OF TIMES' SERIES. BUT THE PROOF OF THE PUDDING WILL BE FOUND IN THE EATING.

Attorney General Elliott Sptizer takes action, finally, yet perhaps much too late:

July 21, 2005
Attorney General in New York Pushes to Punish Medicaid Fraud
By MICHAEL LUO, NY TIMES

LINK

Attorney General Eliot Spitzer called on state lawmakers yesterday to return to Albany to pass two bills that he said were urgently needed to help prosecute fraud in the state's Medicaid system.

In a letter to Senate Majority Leader Joseph L. Bruno and Assembly Speaker Sheldon Silver, Mr. Spitzer said the state needed a false claims act, which would increase civil penalties for fraud and encourage whistle-blowers, along with another law that would create a new category of crimes specific to health care. He said he had urged the passage of such bills in the past without success.

"Now with attention focused on the issue would be an opportune time for the Senate and the Assembly to embrace them," he said, referring to two articles published this week in The New York Times that said billions of dollars were potentially being squandered in New York's $44.5 billion Medicaid program because of fraud, waste and profiteering.

On Tuesday, in reaction to the findings, Gov. George E. Pataki announced plans to overhaul Medicaid's oversight system through an executive order creating an independent inspector general's office to focus on fraud.

In a telephone interview, Mr. Spitzer applauded the governor's proposal.

The false claims act, which is modeled after a federal version of the law, has two main provisions. The first allows the state to sue a Medicaid thief for triple the amount that was stolen, which Mr. Spitzer said would be a boon for financial recoveries to the state. The second allows whistle-blowers to be awarded part of the money won by the state.

Mr. Spitzer said many other large states, including California, Texas and Florida, already had such a law.

The other statute being pushed by Mr. Spitzer, called the Health Care Fraud Act, would make it easier for prosecutors to charge thieves, he said.

Representatives for both Mr. Bruno and Mr. Silver sidestepped questions yesterday about whether they would take up Mr. Spitzer's suggestions.

Mr. Bruno's office announced that the Senate would hold statewide hearings this fall on how to reduce Medicaid fraud.

John E. McArdle, a spokesman for Mr. Bruno, used the opportunity to press for a different Medicaid fraud bill the Senate passed earlier this year that has been rejected by the Assembly.

The measure would create an inspector general's office similar to the one proposed by Mr. Pataki, but take away some of the authority currently vested in the attorney general's office to prosecute Medicaid fraud. Mr. McArdle said that was a more important goal in the battle against fraud than Mr. Spitzer's bills.

"If the Assembly wants to take up our Medicaid fraud bill, we'll be back in 48 hours," Mr. McArdle said.

But Charles Carrier, a spokesman for Mr. Silver, said that the Senate's bill was flawed in how it sought to "recreate the wheel." Mr. Carrier said Assembly members were discussing Mr. Spitzer's proposals but also wanted to look at other parts of the system that needed improvement.

"There's been important information that's come out recently," Mr. Carrier said. "We want to assess everything in that light."

Elliott Spitzer's letter

What is The False claims Act?

The Law

Amicus Brief

TAF's Top 20 False Claims Qui Tam Cases

False claims/Qui Tam Overview

National Fraud Hotline

But New York State does nothing, according to Henry Stern:

Medicaid Fraud Was Exposed Last Week,
But Is Anyone Doing Anything About It?
By Henry J. Stern, nycivic.org, July 29, 2005

The first four days of last week (July 18-21) the media provided extensive coverage of the
persistent and costly problem of Medicaid fraud and waste. For several days lengthy articles in the New York Times and vigorous editorials in the Times, the News, Newsday and the Post denounced abuses in the 40-year-old federal program, intended to provide medical assistance to poor people. Billions of dollars were said to have been squandered in paying unjustified claims. Rule 29-T applies here: ("The trouble is, the charges are true.)

We believe that Medicaid is, in terms of dollars stolen and wasted, one of the world's largest scandals, topping even the Oil for Food program that was mismanaged by the United Nations from 1996 to 2003. In Oil for Food, billions of dollars in oil revenues which should have gone for food and medical supplies for the people of Iraq were diverted into armaments for Saddam Hussein, luxury goods for privileged Iraqis, baksheesh for officials at the United Nations and its member states, and other bribes and payoffs. Sadly, the son of the Secretary General himself was employed as an agent of one company to get oil contracts on their behalf, but he said he never told his father he was still working there. The war in Iraq led to the termination of the well-motivated but widely-abused program.

Assuming that the ten per cent estimate for fraud and waste in Medicaid is confirmed (and some call it modest), the mis-spent funds would exceed $4.4 billion a year. We write here about New York State, which is not the only locus of corruption, this is a national problem, but we do worse than other states in dealing with it. The sums involved are enormous, they all come from taxpayers, and they go to service providers who file fictitious, fraudulent, deceptive and unjustified claims, for unnecessary services which may or may not have been performed.

Medicaid is a $44.5 billion annual expense in the New York State budget. It is far more expensive than any other government program. Roughly half of that huge sum is paid by the Federal government, one quarter by New York State, and one quarter by the cities and counties in the State. In other states, the Feds pay up to 78% of the cost of Medicaid, while the lowest payment to any state is 50%.

The reason for the discrepancy in Federal aid is that, 40 years ago, New York was considered a wealthy state, which could afford more than the poorer Southern states. Also, the liberal legislators of the Northeast liked Medicaid more than conservative Southerners did, and the sliding scale of Federal payments gained the bill political support it needed to pass. Unique among the states, New York divides its 50% share equally between state government and city and county governments. Medicaid costs the City of New York alone about $5 billion a year, about ten per cent of the entire municipal budget.

Responsibility for policing this enormous program lies with the State Department of Health, and the Attorney General's Medicaid Fraud Control Unit. In recent years, as the Medicaid program has grown in cost, the staff assigned to preventing and prosecuting abuse has declined substantially. New York, which has by far the costliest Medicaid program in the United States, is among the least effective in fraud prevention, with minimal recoveries of stolen or wasted funds, sometimes not even covering the cost of prevention efforts.

In response to the press exposes, statements were issued by the four state officials responsible for Medicaid. First the Governor promised to set up an Office of Medicaid Inspector General. His designee is Paul Shechtman, a first-rate lawyer. However, Shechtman will continue his private practice, so the oversight he will provide will necessarily be part-time.

The second responsible public official is the State Attorney General, who runs the Medicaid Fraud Control Unit. In his six and one-half years in office, the AG has won national renown for his pursuit of improper practices in corporate America. His office also shares responsibility for governmental misconduct, an area in which jurisdiction has primarily been exercised by Federal prosecutors and county district attorneys.

In response to the July 18 articles, he wrote the legislative leaders asking for greater authority, and released a letter he had written June 10 to the Secretary of Health and Human Services, asking for the release of currently restricted data so that he could pursue offenders. The Attorney General is somewhat limited by the fact that the Department of Health generally initiates complaints. Most of the complaints the AG receives deal with misconduct by nursing home personnel rather than overcharges. That is because it is the state that pays the bills, but it is the patients who may be neglected or abused by their alleged caregivers.

Of the four, one official who took action this year is the Senate Majority Leader. On May 2, the Senate passed a comprehensive bill to tighten Medicaid enforcement introduced by Sen. Dean Skelos, but the bill was not endorsed by the governor, and was not even introduced in the Assembly. A Republican source said that the Attorney General did not want the bill to be considered by the Assembly, which is possible if the bill would increase the power of the Health Department and not help the AG's own enforcement efforts.

The fourth reaction to the news stories came from the Assembly Speaker, who praised the Attorney General. He said more money and better computers would help enforcement. He did not comment on Medicaid reform. Traditionally Assembly Democrats are allied with hospitals, health care providers and labor unions. That is not the constituency for changing the system.

Eleven days after the storm broke, the sea and the sky are quiet. Rudyard Kipling described the silence:

"The tumult and the shouting dies,
The Captains and the Kings depart...

The newspaper-generated commotion has subsided, at least for a while, but the problem remains. As we reported, Medicaid fraud and waste cost the taxpayers $12.2 million per day in the State of New York. But how does one reform the state's longest gravy train? The recipients of the fortune the state dispenses daily hospitals, nursing homes, adult homes, health care providers, physicians, manufacturers of hospital equipment and other medical apparatus, big pharma, little pharma, pharmacists, all of the above share in the bonanza that is Medicaid today. Most of this money is wisely spent to provide care for the poor, but too much of it is not.

We do not see many civic organizations or traditional reformers involved in fighting Medicaid fraud and waste. First, the issue is too substantive; some goo-goos prefer to dwell on the procedural aspects of government. Second, it is politically incorrect to suggest that any government program supposedly intended to help the poor is in fact wasting money. Third, even if the money is spent unnecessarily, it is still not so bad because so much of it goes to nonprofits, or small entrepreneurs, but in any event is not used to pay for the government's war machine. Fourth, some believe that a close look at any part of the Great Society represents an attempt by the hard-hearted to repeal or subvert what little progress America has made in the last half century in achieving social justice.

Our conclusion: Medicaid is a basically good program, certainly needed in the absence of universal health care. Like all programs involving the expenditure of public funds, people take advantage of it to enrich themselves unjustly. The fact that so many people in so many occupations get money improperly makes it difficult to get a handle on the program.

Fortunately, the newspapers have given a great deal of attention to this deplorable situation. Whether this will result in substantive government action we will learn in the months, maybe years, ahead. The perceptive Rule 14-F, ("Follow the money.") suggests that achieving real Medicaid reform will be an uphill struggle, because the money is all on the other side.

We intend to write progress reports on Medicaid fraud control as time passes. We invite the relevant agencies and legislators to let us know what they are doing, by sending any material they produce on Medicaid, which we will pass along to you. We write late on Friday, July 29. Since the Times series began, about $12,200,000 may have been stolen or wasted, unless the thieves have slowed down for their summer vacations.

Enjoy the weekend. Stay healthy.