Texas lawmakers hold hearing on ‘epidemic' of social services fraud as state increases scrutiny

Texas policymakers spent almost eight hours discussing how to reduce fraud in social services programs, as state and federal pressure grow.

The Senate Health and Human Services Committee heard from several state officials and more than 50 members of the public during an interim committee hearing Wednesday. The committee was tasked by Lt. Gov. Dan Patrick in January to "explore and recommend ways to prevent fraud and abuse" in programs like Medicaid.

"We are dealing today with a health care epidemic, but not from a disease or virus," said committee chair Sen. Lois Kolkhorst. "We're examining [a] nationwide epidemic of fraud in health care."

She said with fraud "scandals" in Minnesota and California drawing national attention, Texas needs to examine its own system and see how it "measures up to other states."

Texas has one of the lowest Medicaid error rates in the country, according to Kolkhorst.

"We're better," she said. "But do we need to improve? Absolutely."

Sen. Molly Cook, a committee member and an emergency room nurse, said she's concerned about focusing on something the state is already doing well at.

"Rather than focusing on things that we seem to be struggling with as a state," Cook said. "Issues we should be tackling, like corporate health insurance holding Texans hostage, big pharma cartels driving up the prices for everyday Texans, and the lack of mental health services that we desperately need across the state."

Cook said the Texas Medicaid program mainly serves pregnant people, children and people with disabilities who have complex medical needs. That's because Texas is one of the few states that have chosen not to expand Medicaid.

"The effects will be devastating," she said. "If [people with severe disabilities] do not have home assistance, their options are homelessness or jail."

She also said that more than 50,000 Texas families have waited for more than 10 years for services, and less than 400 Texans make it off the "interest list" for Medicaid home- and community-based services every year.

Dozens of Texas residents raised their own concerns about fraud and abuse in social services programs across the state, including medical providers and people with disabilities with specific examples of Medicaid providers not providing necessary services.

However, the committee didn't hear from the public for about six hours after the meeting started. Most of the day was focused on people who were asked to speak by the committee, including leaders of health care industry groups and state agencies.

Several state officials explained how they were responding to calls for "stronger anti-fraud" measures from Gov. Greg Abbott and federal policy changes. The calls focused on the Medicaid and the Child Care Services programs.

Medicaid

In January, Abbott sent a letter to the head of the Texas Health and Human Services Commission and the Health and Human Services Office of Inspector General directing them to "proactively address fraud, waste and abuse" in Medicaid programs after the Trump administration identified potential fraud in other states.

"At HHSC, when we think of fraud, we think the front-end prevention of fraud activities," said Stephanie Muth, Texas Health and Human Services executive commissioner. "It's really embedded in our DNA and how we think about setting up services."

She said Texas was one of the first states to implement electronic visit verification, which allows home health workers to "clock in" and "clock out." While that is a fraud prevention strategy on its own, the state could also use that data to verify information in Medicaid claims.

Muth also said the partnerships and the broader "ecosystem" surrounding these programs play a significant role in preventing fraud.

Many of the directives from Abbott focused on policies housed under the Office of the Inspector General, or OIG. Several of those measures focused on the insurance companies that facilitate Medicaid programs — known as Managed Care Organizations, or MCOs.

One of the tasks was to determine if the MCOs had fully staffed "special investigation units," which complete legally required investigations into potential fraud.

Susan Biles, principal deputy inspector general, said OIG did a survey that determined several MCOs did not meet the staffing requirements in their contracts — as well as some of the "credentialing requirements."

"We're working through that with them, taking corrective action, and if necessary, any enforcement," she said.

OIG was also directed to look at services considered to be at a "high risk" of fraud. Biles said the agency was already monitoring those services through data analysis.

"Since January, our data team has taken a deeper dive on the last five years of information and identified and initiated focused analysis on any providers of interest there," she said.

Biles said OIG does background checks on owners, providers and managing employees on enrollment applications for "high-risk" Medicaid providers. In the past, she said about 20% of those applications were sent to OIG.

Now, the agency receives 70% of those applications.

Biles said a change in how larger systems are considered was a key component of addressing the low percentage of applications flagged for background checks.

For example, larger hospital systems can enroll under a single National Provider Identifier — a unique 10-digit code used to identify health care and medical providers. In the past, only the high-risk service would be reviewed. Now, the entire system is reviewed.

"If you have one entity within your larger system that's considered high risk, everyone is considered high risk," she said.

Abbott also wanted OIG to promote fraud reporting to the public. Biles said the agency was already enhancing website visibility and social media outreach. She said OIG also added fraud reporting to the Your Texas Benefits app.

In February, Texas state Medicaid director Emily Zalkovsky said her office was taking steps to address fraud – but was limited in what it could do.

During the committee hearing Wednesday, she said HHSC is considering how to respond to the letter and what it can do — including helping OIG with training and MCO policy reviews.

"When we do that, we look at 'How are the MCOs administering those things? Are they in line with the state policy?'" Zalkovsky said. "There's also an opportunity there to say, 'Is there anything that needs to change in the state policy if we see anything that we might want to tighten up?'"

Zalkovsky said the agency is reviewing several services, including non-medical transport and applied behavioral analysis therapy.

Child Care Services program

Two weeks before sending a letter requesting additional anti-fraud measures for Texas Medicaid, Abbott sent a letter to state officials to identify "high-risk providers" participating in the Child Care Services and conduct additional site visits. It came after a viral video purported to show child care fraud in Minnesota, and the Trump administration froze funding to Child Care Services programs nationwide.

HHSC oversees the regulation licenses of all child care programs in the state — about half of which participate in the program — but the Texas Workforce Commission, or TWC, facilitates the program.

Reagan Miller, child care and early learning division director for TWC, said the agency is "making some enhancements" to the child care automated attendance system.

"We have just implemented a new requirement for parents to both check their children in and out every day," she said. "It used to be that a parent just had to do one or the other. We've now implemented a requirement that they have to do both."

Miller said the agency wants to know if Centers for Medicare and Medicaid Services, or CMS, systems used by providers can collect the data elements the state is able to collect. She said if the systems can't, then the state will require child care providers to use a TWC-issued tablet, which even takes a photo of the person dropping off the child.

Miller said TWC commissioners approved amendments to child care services rules "specifically around the fraud portion." The agency is accepting public comments on those rules until April 27.

"One is a requirement for boards to refer for criminal prosecution based upon TWC's parameters," Miller said. "We've also been codifying the requirement for onsite provider monitoring and increased liability for fraud."

The agency is also waiting to see what changes might come from anti-fraud efforts on the federal level, according to Miller.