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HHS inspector general's funding cuts will hurt fraud probes

By Joe Carlson
Posted: July 26, 2013 - 6:30 pm ET

Funding cuts are blocking investigations into Medicare and Medicaid fraud and the data security of the new health-insurance exchanges, among other items at HHS' top watchdog agency.

All told, HHS' inspector general's office is slated to lose more than 20% of its staff between 2012 and 2015 due to budget cuts, at a time when public alarm over fraud in government healthcare programs is arguably at an all-time high.

“I am surprised to hear this. I would have thought that of all the places the government would think of cutting, healthcare-fraud enforcement would be very low on the list,” said Stephen Sozio, a former prosecutor who is now a healthcare defense attorney with Jones Day in Cleveland. “They are a revenue gain, not a revenue drain, on the federal fisc,” otherwise known as the U.S. Treasury.

The OIG's office on Friday released a list of specific audits (PDF) in the offices' 2013 work plan that would be canceled as a result of the office dropping to 1,400 staff members, down from its peak staff size of 1,800 last year. Among them are:

Gary Cantrell, deputy inspector general for investigations in the office, said in an interview that in addition to those changes to the 2013 work plan (PDF), the budget cuts will reduce the number of investigations of specific allegations of fraud that the office can pursue. On average, each agent in the investigations unit carries about 10 cases at once, some of which are coordinated through city-specific healthcare fraud strike forces in fraud hot spots.

“Those efforts have been extremely successful, and we are going to have trouble sustaining that effort over time,” Cantrell said. “The impact will vary from place to place. But the overall long-term impact is, it will be difficult to sustain our efforts with the strike forces, and it will be difficult to confront emerging issues” such as fraud in Medicare Part D prescription drug program, he said.

The office had a hiring freeze in place in 2012 because of the expiration of $30 million in funding for the office. The across-the-board budget cuts commonly known as sequestration earlier this year led to another $15 million in cuts to the office. All of the job reductions in the office have been accomplished through attrition and two rounds of early retirements and buy-outs in 2013, Cantrell said.

The OIG is funded primarily through the Health Care Fraud and Abuse Control program, which is controlled jointly by HHS and the U.S. Justice Department. In 2012, the program returned $7.90 to the federal government for every $1 spent on enforcement, according to its annual report (PDF).

Sozio said the impact of some of the cuts will be blunted by the fact that OIG investigators often work on teams that include agents from multiple jurisdictions.

“Many other federal agencies have agents assigned to those task forces as well,” he said. “It may make their jobs more difficult and people will have to take on more responsibility.”

State fraud investigators and increasingly sophisticated private whistle-blower attorneys will also pick up some of the work, he said.

Follow Joe Carlson on Twitter: @MHJCarlson

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