Thanks to legislation approved during the 2013 regular session, the state will set up an Office of Inspector General charged specifically with investigating fraud and abuse in the $5 billion-a-year Medicaid program.

Under Act 1499 of 2013, the inspector general must have at least 10 years’ experience investigating fraud, prosecuting fraud, auditing or comparable experience in detecting fraud in the health care industry.

The act sets up a series of penalties ranging from a misdemeanor to a Class A felony, if it is proven that a medical provider submitted false information in order to claim more than $1 million in Medicaid payments. The Office of Inspector General will have 33 employees, including an attorney, and will also investigate allegations that recipients knowingly supplied false information in order to fraudulently receive Medicaid services.

In addition to making criminal referrals, the office also will take legal steps to recover misspent funds.

Medicaid is administered through the state Human Services Department, the largest single state agency. There already exists a unit within the department to eliminate fraud and abuse, but a crucial provision in Act 1499 will remove those investigators from within the department, thus making them independent.

The governor will appoint the inspector general and the Senate must confirm the appointment. The office will work with local, state and federal law enforcement agencies. Audit findings of the Inspector General may be turned over to prosecutors to be used as evidence of suspected criminal acts.

The Inspector General will have power to issue subpoenas in order to compel the attendance of witnesses to be examined under oath, and to compel people receiving Medicaid funds to produce documents, records and other forms of written evidence.

The Inspector General’s Office can take legal action to exclude providers and vendors from the Medicaid program, and it will make regular reports to the legislature. Providers who receive more than $750,000 a year from Medicaid will have to adopt a compliance program, which will outline how billing errors and overpayments are to be corrected.

Act 1499 becomes effective on July 1.

Medicaid is a government health coverage program for low-income families, people with disabilities and elderly people who reside in long term care facilities.

The legislature enacted other laws to limit Medicaid fraud, including Act 1265 to set up a computer system within the Human Services Department for verifying the eligibility of Medicaid applicants. The system will electronically check the applicants’ income and citizenship status.

Act 1436 requires the Human Services Department, which administers Medicaid, and the Department of Finance and Administration, which collects state taxes, to share information to make sure that all Medicaid providers have paid their state income taxes. Providers who have not paid their taxes will be terminated from the Medicaid program.

Providers include physicians, hospitals, pharmacists, rehabilitation facilities, therapists, businesses that sell or rent medical equipment, dentists, hospices, long term care facilities, mental health professionals, assisted living facilities, nurses, businesses that sell prosthetics, companies that provide testing services such as X-rays and chiropractors. Numerous other medical fields are included in the list of providers who can be reimbursed by the government for treating Medicaid patients.