10 August Fraud, Waste, and Abuse Standards August 10, 2016By Jon Coss - Blog Manager fraud detection systems, government fraud prevention, program integrity false positives, fraud, fraud detection standards 0 One of my colleagues recently returned from a conference on government program integrity with an interesting anecdote. He recounted a vendor presentation where the speaker was touting a 52% accuracy rate in their fraud lead generation system. So… nearly half of the system’s leads generated false positives. Not so sure I’d brag about that.High false positive rates lead to wasted investigative time and money and unwarranted intrusions into the lives of legitimate program beneficiaries and service providers. Ultimately, they lead to a lack of confidence in the system itself and investigators revert back to more manual detection methods. When one considers all the important services governments deliver and the immense political pressure they endure, this is obviously not acceptable.Shortly after hearing this story, we were asked to respond to a question about false positive rates and any existing industry standards or even benchmarks. While every vendor, including Pondera, makes claims about our system efficacy, very few standards actually exist. Conversely, our clients (the government program administrators) generally are subject to improper payment standards placed on them by the federal government.I think there is a great opportunity, even responsibility, for governments to create these standards. Fraud detection standards would challenge the vendor community to “put up or shut up”, leading to more innovation. They could also be adjusted as the standards are met and surpassed leading to constant improvement. And they would provide governments with a uniform method for measuring vendor performance.It is true that fraud detection systems still rely on quality program data and can suffer from the old adage "garbage in, garbage out”. So government would still share in the responsibility of meeting any new standards. But clearly, there is more we can do. And this would benefit all parties involved… except, of course, the fraudsters. Related Posts 37 States Targeting Elder Abuse Regular readers of our blog know that Pondera has strong feelings about the need to protect the elderly from abuses while they are being cared for in facilities and their homes. In fact, in April of this year we wrote about the devastating abuses in nursing homes that continue to plague the elderly. Now, a number of states are stepping up the pressure on the federal government to allow them to more effectively fight the problem.In a letter dated May 11th, 37 states’ attorney generals requested that the U.S. Department of Health and Human Services eliminate several restrictions on the use of Medicaid Fraud Control Unit (MFCU) funds. In the letter, they point out that 10% of elderly Medicaid recipients who receive care in their homes will be abused. They also cite a report that indicates that only 1 in 24 incidents are ever reported.Specifically, the states asked for the ability to use the funds to “investigate and prosecute abuse and neglect of Medicaid beneficiaries in non-institutional settings” and to “screen complaints or reports alleging potential abuse or neglect”. In effect, this would allow the states to close “loopholes” in the use of MFCU funds that were previously only available to investigate abuses in facilities. And they point out that Medicaid currently covers over 6.4 million people over the age of 65.At Pondera, we are pleased to see this increased attention by the MFCU. In addition to physical abuse, we also see other types of in-home abuses including identity theft (often strong-armed) that leads to theft from other government programs. We applaud the states’ continuing efforts to address this heinous problem and hope their progress is dramatic and expedient. Disturbing Reports of Nursing Home Abuse Last month CNN published a horrifying report on sexual abuse in America’s nursing homes and assisted living facilities. The report provided details on dozens of assaults, rapes, and other incidents that, quite frankly, were extremely difficult to read. In my opinion, however, this level of detail is probably necessary to shock people into taking action against what CNN rightly labelled “an unchecked epidemic”.The numbers themselves are devastating. Approximately one million senior citizens are currently residing in 15,000 government-regulated long term care facilities. Since 2000, it appears that over 16,000 cases of sexual abuse have been reported, but the number is probably higher because of complex reporting systems and processes. And it’s impossible to determine the number of unreported cases.Between 2013 – 2016, CNN found that 1,000 government-regulated facilities had been cited for mishandling or failing to prevent sexual assaults. 100 of the facilities had been cited numerous times. And despite this, only 226 facilities were fined just $9 million. Only 16 of the facilities were cut off from Medicaid and Medicare!What is equally disturbing to the actual cases of abuse is the blatant disregard of safeguards and even the intentional impeding of investigations. Consider a case here in California where the employer allowed a nurse to continue working for weeks after reports of him kissing and fondling a female resident. This crime, by the way, resulted in only a $27,000 fine.At Pondera, we often say that fraud and abuse is most prevalent at the intersection of large amounts of money and vulnerable populations. This makes nursing homes “ground zero” for abuse because it is here that the escalating costs of long term care combine with dementia and other health issues that can make senior citizens problematic witnesses.Among several recommendations made by CNN was a call for improved reporting systems. We agree that this is an important piece of the solution. It will provide greater transparency and help regulators identify trends and clusters of abuse. But clearly, stricter oversite and enforcement are needed. So too is the type of no-nonsense reporting that CNN did for this report. Funding Donald Trump’s Child Care Program Donald Trump recently announced plans for a new child care and paid family leave plan. While I will not be offering any opinions on the plan or on Donald Trump as a candidate, I was interested to see that the announcement sparked discussion of government fraud, waste, and abuse. In this case, the discussion surrounds the Unemployment Insurance (UI) program because Mr. Trump claims that he will reduce fraud in UI by over a billion dollars each year to help pay for his proposed child care plan.Paymentaccuracy.gov, a government website devoted to providing information on payment inaccuracies, estimates a 10.7% improper payment rate in UI for 2016 resulting in $3.5 billion in erroneous payments. While a small amount of this actually represents underpayments, the majority of the $3.5 billion is waste. The trick, of course, is reducing fraud without delaying benefits to those who are eligible and without spending more money on improving the system than you actually save!This is where things get interesting. The White House Office of Management and Budget claims that UI program integrity improvements, over the next 10 years, would result in just $150 million a year in savings, or just over 4% of the $3.5 billion. The Congressional Budget Office’s estimates are even worse. They estimate annual savings of $40 million at a cost of $17 million per year, for a net gain of just $23 million per year!These dramatically different viewpoints between Mr. Trump and government regulators point out two problems when discussing government fraud, waste, and abuse. On the one hand, aspiring politicians and much of the public dramatically underestimate how difficult it can be to detect, investigate, and enforce fraud findings. On the other hand, many government agencies only report on the fraud they know about and estimate savings based on using traditional techniques against those unrealistically small numbers.Here’s what I can tell you from our experience working in Unemployment Insurance. By combining modern detection techniques with cooperation between states and the federal government, we could net far greater savings than are estimated today. Whether or not other facets of Mr. Trump's program are viable is up to you, the voter, to decide. However, I think we can all agree that there are better uses for those funds than making payments to fraudsters. Changes to Government Healthcare As a company, Pondera is closely following the comments coming from the incoming administration about how they are approaching government efficiency and entitlement reform. Paul Ryan, in particular, has made several statements about the Affordable Care Act (Obamacare), Medicare, and Medicaid. This post provides some of our thoughts around how these changes may affect fraud, waste, and abuse.While changes are clearly coming to Obamacare, this week Speaker Ryan also hinted at potential changes to Medicare and Medicaid. In Medicaid, where Pondera works with multiple states to detect fraud, Ryan hinted that the administration would consider offering tax credits in place of expanding the number of Medicaid recipients. This is necessary because Medicaid expansion, a byproduct of Obamacare, shares its fate with Obamacare.While the tax credit idea is interesting, it is certainly not without its own problems. Tax credits, which unlike tax deductions offer dollar-for-dollar savings off bottom line taxes owed, are an attractive target for fraudsters. In fact, the Earned Income Tax Credit (EITC), which offers tax breaks to low income Americans, suffers from a 23.8% improper payment rate in 2016. This is one of the highest rates for any government program translating to $15.6 billion in waste.On the surface, it seems the administration’s idea may shift much or all of the fraud problems in Medicaid expansion from health departments to state tax collection agencies. Here is one thing we can be sure of though: as long as there are large amounts of money in these programs, there will be bad actors who will attempt to defraud the system. And experience shows us that they will create innovative and technologically-advanced methods to support their efforts. 36% of Lifeline Recipients Can’t be Validated Another federal subsidy program is garnering congressional attention for large amounts of fraud, waste, and abuse. This time it’s the Lifeline program that provides discounts to low-income households for home or wireless telephone and broadband service. This program, which many Americans have likely never heard of, distributed $1.5 billion in subsidies to 12.3 million households in 2016.The problem is that a recent study by the General Accounting Office (GAO) could not confirm the eligibility of a whopping 36% of program beneficiaries. The surprising part of this is that validating eligibility is as straightforward as checking an applicant’s enrollment form against a qualifying benefit program, such as Medicaid-- if someone has already been deemed eligible for Medicaid, then they are also eligible for Lifeline.It is also troubling to note that the 84-page GAO report comes after a 2010 study that found problems with the program and led to a number of recommended reforms in 2012. Fast forward five years to today, and the problems persist.Fraud in Lifeline stems from several factors common to most government programs: pressure to distribute timely benefits, a lack of effective data matching, and service providers (in this case telecommunications carriers) that benefit from a lack of control. The GAO actually called this last one out in their report when they explained that “companies may have financial incentives to enroll as many customers as possible” despite questionable eligibility.None of the problems outlined in the report are particularly difficult to solve from a technical standpoint. But turf battles often lead to data sharing problems that lead to eligibility validation issues. And an unwillingness to enforce fraud reforms on businesses provides them with incentives to simply “look the other way”. Multiply this problem over the 2,300 federal subsidy programs operating today, and this adds up to a lot of money, all lost due to fraudulent, wasteful behavior. Is your organization ready for change? By the time we engage with an agency, they are fully convinced that they need to change something: the way they are detecting fraud, waste, and abuse, or maybe the way they are managing cases. When it comes to change though, we’ve found that the devil truly is in the details.Each of your staff will typically fall into one of the following categories. It’s important to recognize this and to staff your change projects appropriately.Champions: These people embrace the future vision and want to help achieve it. They love new challenges but also expect that they’ll need to find ways around unexpected problems. They vocalize successes and accept changes for the “long haul”. Projects without champions will never meet their potential.Cynics: Unlike champions, these people think that the change, usually any change, is not necessary. They perceive their value in their knowledge of how “things have always worked” and any threat to this is a threat to them. There is no way to change a cynic’s mind and no way to bring them on board. Cynics are never good for a change project. It’s important to recognize them and keep them to the side.Skeptics: Skeptics, which can often be confused for cynics, need proof to get on board with a change effort. They need to be convinced that the change is good for the agency or for them. Skeptics are a vital component to project staffing because the rest of your agency will clearly see when a skeptic has been “converted” to a champion.Followers: This category makes up the majority of staff assigned to most projects. At the beginning of the project, they will contribute and won’t do anything to undermine the effort. As the project progresses, they will move to whichever side is gaining momentum: success or failure. This is why champions and converted skeptics are so important—they generate excitement and commitment from followers.If this all sounds obvious, I challenge you to think back to a change effort that you’ve observed that should have succeeded but managed to fail short of expectations. You may very well find that the reason was that identifying “change readiness” was either done incorrectly or ignored altogether. We’re not advocating expensive, complex, and lengthy change processes. But we are suggesting that you think about this before engaging in any important project or process change. Comment (0) Comments are closed.