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Medicaid fraud scheme uncovered in Greensboro

The best description I have heard of for describing Medicaid and Medicare fraud is it’s like playing whack-a-mole: you can find one bad actor and then three more pop up. Fraudsters can fairly easily defraud Medicaid and Medicare if they want to. I have posted about this reality on the blog before.

A recent scheme happened in Greensboro and it was uncovered in an odd way. Richard Barron from the Greensboro News and Record reported:

A power outage on Thursday that displaced 35 residents of an apartment complex may have exposed an elaborate scheme by two local mental health agencies looking to profit from the Medicaid coverage of their clients.

According to city officials, the agencies — Ready 4 Change and United Youth Care Services — recruit the homeless to enroll in their substance-abuse programs. They provide housing in return — ostensibly so their clients can have a place to stay while they attend treatment programs.

Homeless advocates say the Georgetown Manor apartment complex where they lived was overcrowded, inadequate and essentially substandard.

“What I believe is happening for the people that are in the programs is they don’t charge them rent going in because there’s some kind of kickback scheme going on between the so-called legitimate organization and the housing people,” said Brett Byerly, the director of the Greensboro Housing Coalition.

Unfortunately, this type of fraud happens all the time in the Medicaid and Medicare programs. Lack of proper oversight and ballooning budgets create quite an incentive to defraud these programs. Here is how this particular scheme worked:

According to Byerly, the agencies use a sophisticated system to earn profits from the Medicaid coverage of their clients. He said Ready 4 Change and United Youth Care Services contract with people who canvass places where the homeless congregate — such as Potter’s House Community Kitchen — and vet potential clients to see if they’re covered by Medicaid and have a substance-abuse issue. 

Some people are willing to take illegal drugs just to get access to housing, Byerly said residents have told him.

Byerly explained that the mental health agencies contract with another group, which secures apartments for clients.

The final piece of the scheme comes from the number of times the two agencies send Medicaid a bill for reimbursement. The size of that check — minus the low rent for the apartment — is how Ready 4 Change and United Youth Care Services turn a profit, Byerly said.

Unfortunately, taxpayer dollars are often fraudulently acquired by bad actors through Medicaid and Medicare. Massive government programs with hundreds of billions of dollars flowing through the coffers every year are bound to be inefficient and gamed by bad actors. According to a GAO report, in 2017, Medicaid made $36.2 billion in improper payments. This taxpayer-funded program is riddled with expensive shortfalls. This is something that lawmakers need to consider when weighing proposals to expand the Medicaid program in size and budget.

Jordan Roberts / Health Policy Analyst

Jordan joined the Locke Foundation in the summer of 2018 as Health Care Policy Analyst. He analyzes state and national health policy issues with an eye toward removing governm...

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