DOJ: California insurer kept $320M in surplus Medicaid funds

Image shows the Department of Justice building — The DOJ says a California health insurer misappropriated $300 million in Medicare funds.

By John Hilton

The Department of Justice is suing a California health insurer for allegedly diverting $320 million in leftover federal Medicaid funds to other inappropriate expenses.

The lawsuit alleges Inland Empire Health Plan defrauded the federal government out of $320 million in surplus Medicaid funds the plan was supposed to return. Instead, the plan spent the money on unrelated expenses, according to the lawsuit filed in the Central District of California.

Inland Empire "developed a number of schemes to misuse surplus MCE funding," the lawsuit claimed. "To further these schemes, IEHP improperly spent money intended for the MCE population’s medical expenses on attorneys, consultants, and technology contractors."

IEHP received nearly $3.5 billion under the Patient Protection and Affordable Care Act to extend coverage through Medi-Cal, California’s Medicaid Program, to newly eligible Californians, many of whom were previously uninsured.

The DOJ said Inland Empire violated the False Claims Act by falsely reporting how it was spending the money, while simultaneously hiding the fact it was surplus from the state and federal governments.

"To evade the requirement that surplus MCE funding be returned, IEHP disguised when and how it spent MCE money, making false statements to the state about the nature, timing, and purpose of the payments it made," the lawsuit stated.

Inland Empire is a non-profit managed care health plan serving low-income and working-class families in the Inland Empire region of California. Representatives for Inland Empire could not be reached for comment.

Fraud targeted

The Trump administration tackled healthcare fraud early in the administration, with numerous fraud schemes targeted, including telemedicine fraud, durable medical equipment claims, and identity theft in Medicare and Medicaid.

“Today’s lawsuit against IEHP shows our steadfast commitment to hold accountable insurers that brazenly compromise the Medicaid system,” said Acting United States Attorney Bill Essayli. “We will take every measure to restore integrity and accountability to the Medicaid system and ensure that patient care – not financial gain – is the primary focus of our health care system.”

Inland Empire allegedly misspent funding it received to pay for the healthcare of people who became eligible for Medicaid between 2014 and 2016, the DOJ said. The money wasn’t needed for the care, so Inland Empire was supposed to return it to the state. State officials were to pass the funds back on to the federal government, the lawsuit said.

IEHP also disguised payments for consultants and technology services as incentive payments by funneling those payments through providers and backdated spending to fall during earlier time periods. According to the DOJ complaint, those payments allegedly were not “allowed medical expenses” permissible under the Inland Empire contract.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.