Vance singles out Hawaii as weak on Medicaid fraud policing

Federal officials declared a nationwide Medicaid fraud crackdown Wednesday, citing Hawaii as a state having little concern for prosecuting program theft.

Vice President JD Vance announced the effort at the White House while President Donald Trump was in China. He claimed that fraudsters in Hawaii effectively have had “free rein” from the state government to commit as much Medicaid fraud as they want.

“That is a complete disgrace,” said Vance, who chairs an anti-fraud task force that Trump formed in March.

Vance cited Hawaii, where about 387,000 residents are enrolled in Medicaid under its branded Med-QUEST program, as one state operating a largely federally funded Medicaid Fraud Control Unit that isn’t effective at protecting the health insurance program funded mostly through federal taxes.

“Guess how many convictions or indictments Hawaii had over the last few years in its Medicaid fraud program?” he asked at the news conference announcing the crackdown. “The answer is zero. Not a single indictment, not a single conviction, because the administrators of the Hawaii program just don’t take it seriously. They don’t think that fraud is a big enough problem. They don’t care about protecting resources, and they don’t care about protecting that Medicaid program.”

Vance said letters were sent to every state’s Medicaid Fraud Control Unit, or MFCU, asking that they show they are aggressively and effectively prosecuting Medicaid fraud and stating that if they don’t, the federal government will defund the units.

Hawaii’s MFCU is part of the state Department of the Attorney General. As of Wednesday evening, the department had not responded to a Honolulu Star-Advertiser request for comment on the federal allegations.

The MFCU, according to the department’s website, is staffed by investigators, attorneys and auditors charged with pursuing suspected civil and criminal Medicaid fraud by providers and administrators. The unit also investigates abuse and neglect of Medicaid beneficiaries and residents of board and care facilities.

According to the website, the MFCU has authority to investigate and prosecute fraud involving Medicaid providers and program administration, but not to investigate or prosecute fraud committed by Medicaid beneficiaries unless the beneficiary is colluding with a provider.

Medicaid provider fraud can involve billing the program directly or through healthcare providers for medicine, supplies, equipment or services that are unnecessary, duplicative, overpriced, not provided or not covered.

Providers can include doctors, nurses, dentists, hospitals, medical clinics, adult day care facilities, nursing homes, home healthcare providers, pharmacies, laboratories and equipment suppliers.

Investigations, according to Hawaii’s MFCU, are initiated based on complaints, referrals and information received from various sources that include Medicaid program administrators, managed care organizations, Adult Protective Services and the public.

According to information submitted to the Legislature, Hawaii’s MFCU budget for the current fiscal year is $3.9 million, of which $976,489 is funded by the state as a 25% match, largely to pay for about 15 staff positions.

MFCU staff frequently work with other federal, state and local law enforcement agencies to investigate and prosecute Medicaid fraud, according to the unit’s website.

Vance said the federal government’s letter is fundamentally an effort to improve the federal-state working relationship on Medicaid fraud enforcement.

“We’re going to the states and saying, ‘Here are the things that we can do to work on this issue together,’” he said. “And, of course, if they don’t work with us there are going to be penalties. But we don’t want to get there.”

Vance also said if states don’t cooperate and continue to have fraud issues, then the federal government could turn off other resources for states to run Medicaid programs. Already, federal officials are deferring $1.3 billion in Medicaid reimbursements to California, Vance announced Wednesday, to compel that state to better fight program fraud.

The vice president said hundreds of billions of dollars can be saved from Medicaid fraud nationally and help extend the life of the program without costing taxpayers more. Vance also said the issue with fraud affects states dominated by both major political parties.

“You may think that this is purely a red state or blue state issue,” he said. “That’s actually not true.”

Vance said Ohio and Maryland, run by Republicans and Democrats, respectively, are working with federal officials to take Medicaid fraud enforcement seriously.

But he also singled out Hawaii, California and New York as Democratic-led blue states for not taking the issue seriously.

Federal Trade Commission Chairman Andrew Ferguson, who is also vice chair of the federal anti-­fraud task force, said during Wednesday’s news conference that Medicaid program corruption has existed for decades, particularly in blue states like Hawaii, California, Minnesota and New York.

Ferguson accused such states of funding jobs programs “for blue state lawyers” using federal money provided to MFCUs and alleged that state attorney general offices were lining their pockets while taxpayers and Medicaid beneficiaries were being defrauded.

Criticism of Hawaii efforts to combat Medicaid fraud has been raised in the past by the state auditor and federal regulators.

A 2014 state audit found that Hawaii’s detection and enforcement activities against Medicaid fraud by staff in the Med-QUEST Division of the state Department of Human Services administering the program lagged far behind national averages, exposing the state to tens of millions of dollars in losses annually.

The report cited a 2011 federal Centers for Medicare and Medicaid Services finding that there was $67 million in improper payments from Hawaii’s Medicaid and Children’s Health Insurance programs.

“Division management has demonstrated a minimal commitment to safeguarding the Medicaid program against unnecessary or inappropriate use of services and excess payments,” the audit said. “Management has not developed a formal plan to govern its fraud and abuse detection and investigation program, nor has it been proactive in establishing formal policies and procedures for detecting, investigating, and remedying fraud. In addition, it has not dedicated sufficient resources for detecting and investigating Medicaid fraud and is unable to produce complete information about the results of these efforts.”

The audit said DHS, which coordinates with the MFCU, had three staff positions for detecting and investigating Medicaid fraud, and that only one position was filled while the audit was being done.

“Without an experienced investigator, the division cannot comply with federal and state regulatory requirements for preliminary investigations of all suspected Medicaid fraud cases,” the audit said.

In a 2019 follow-up report for the Legislature, the state auditor said DHS had implemented only parts of a recommended plan to better address fraud and abuse.

Meredith Nichols, DHS Med-QUEST Division administrator, said in a statement Wednesday that the division is firmly committed to partnering with the MFCU on investigations related to purported provider fraud.

“We take instances of fraud, waste and abuse very seriously and are confident that our federal partners will find no cause to withhold payment from our state,” she said.

WAYS TO REPORT MEDICAID FRAUD IN HAWAII

>> Call the Hawaii Medicaid Fraud Control Unit, part of the state Department of the Attorney General, at 808-586-1058.

>> Fill out an online MFCU complaint form at .

>> Call a Department of Human Services hotline at 808-587-8444 to report someone suspected of receiving undeserved benefits.

>> Call a DHS hotline at 808-692-8072 to report suspected fraud by Medicaid providers.

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