Sen. Tom Garrett says Medicaid fraud unit "in Virginia alone recovered over $200 million" last year

State Sen. Thomas A. Garrett Jr. says Medicaid is bloated with fraud in Virginia and across the nation.

In an op-ed published by three newspapers last month, Garrett cited an eye-popping amount of money recovered by Virginia’s Medicaid Fraud Control Unit as an argument against expanding the state’s Medicaid program to up to 400,000 additional residents.

The fraud unit, known as MFCU, operates out of the state attorney general’s office. Garrett, a Republican, worked in the unit for a few years before being elected Louisa County commonwealth’s attorney in 2007.

"Last year, the MFCU in Virginia alone recovered over $200 million!" Garrett wrote. "How can expanding this be a good idea?"

We took a look at Garrett’s $200 million claim and came across nearly identically written statements made earlier this year by two other Republicans opposed to Medicaid expansion: Dels. Kirk Cox of Colonial Heights and Tim Hugo of Fairfax County. Each of the three lawmakers cited the $200 million recovery figure in a paragraph discussing the damage Medicaid fraud inflicts on Virginia’s budget.

Paul Allen, Garrett’s legislative assistant, said the senator made a mistake -- he understated the amount of Medicaid fraud recovery in Virginia. MFCU actually recouped about $1 billion during the budget year that ended in mid-2013, according to a report by the Office of Inspector General at the U.S. Department of Health and Human Services.  

Allen added that "$200 million is the average year’s recovery amount."

MFCU, in its latest  annual report, said it recovered $1.01 billion during the budget year that ended June 30, 2013. The report shows that between 2009 and 2013, the unit recouped an average of $223.8 million a year.

But the figures, to be fully understood, require a lot more explanation than Garrett, Cox or Hugo provided.

The $1 billion-plus recovery last year was an anomaly that accounts for more than half of the total $1.9 billion total MFCU has recouped since the unit was created in 1982. Only fractions of the recovery stemmed from fraud in Virginia and were returned to state coffers.

Almost all of last year’s recovery came from a national case MFCU prosecuted against Abbott Laboratories for misbranding one of its drugs, Depakote, as treatments for schizophrenia and aggression in elderly dementia patients. Depakote never has been proven effective for those uses.

Abbott, which pled guilty, was ordered to pay a total of $1.5 billion to the federal government and states.

The Virginia Attorney General’s office explained in its 2011-2012 annual report that the state’s fraud unit was approached in 2007 with allegations that Abbott had illegally marketed the drug, which was provided to people on Medicare and Medicaid.

"Although neither the whistleblowers nor the defendant in this case were located in Virginia, the whistleblowers came to Virginia because the MFCU has a national reputation for successfully investigating major national cases," the Virginia attorney general’s office said in a May 7, 2012, news release announcing the settlement.

The release broke down the $1.5 billion settlement. Abbott paid the U.S. government a $500 million criminal fine. It also paid civil penalties of $270 million to the federal Medicaid program and $291 million to Medicare and other U.S. health programs. Another $239 million was distributed to state Medicaid programs and Abbott paid an additional $198.5 million in criminal asset forfeiture penalties. Of those asset forfeitures, Virginia received $115 million because MFCU led the investigation.

The unit partnered with the U.S. Attorney’s Office in the Western Office of Virginia on the four-year probe, which the attorney general’s office says entailed 40,000 man hours of investigation and sifting through 1 million records.

Virginia Medicaid’s share of the settlement portion going to states was $4.2 million. That’s the total amount of fraud Abbott inflicted on Virginia’s program, according to Michael Kelly, spokesman for state Attorney General Mark Herring’s office.

Outside of the Abbott case, Virginia’s MFCU recovered $11 million during last year, according to Kelly.

Now, let’s get back to Garrett. His legislative assistant said the $200 million Garrett cited is the average yearly amount of Medicaid fraud recovery in Virginia. Including the Abbott settlement, MFCU has averaged recouping about $223.8 million annually during the last five budget years. If Abbott is not included, the five-year 2009-2013 annual average drops to $23.8 million.

"The federal government frequently lets Virginia’s MFCU take the lead on large, multi-state cases," Kelly emailed us. "This is important to note because it means that not all the money that is ordered recovered thanks to a Virginia case came out of Virginia’s Medicaid budget, nor is it necessarily coming back to Virginia’s budget."

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Eric Cantor

stated on February 5, 2013 in a speech.

"Collectively states are spending more on Medicaid than they do on K-12 education."

By far, the two next biggest years for MFCU were 2007 and 2008 when the unit recovered a total of $648.8 million. Virtually all of the sum was attributable to a national case the unit prosecuted against pharmaceutical maker Purdue Frederick Company.  The company pled guilty to misbranding OxyContin as less addictive than other pain medications when no medical research supported the claim.

The recoveries from the Purdue and and the Abbott cases come to more than 85 percent of the $1.9 billion MFCU has recouped in its 30-year history.

The unit also prosecutes allegations of malfeasance by health care providers, such as double billing, charging for services not rendered and embezzlement.

The Department of Medical Assistance Service, the state agency that oversees the state’s Medicaid program, handles cases of fraud by Medicaid recipients. In the 2013 fiscal year, the agency identified $3.4 million in "overpayments" to Medicaid beneficiaries, but not all of it was due to malfeasance, according to Christina Nuckols, a spokeswoman for Virginia Health Secretary Bill Hazel.

"Overpayments can occur for other reasons (than fraud), and sometimes they are the result of mistakes," she emailed.

Our ruling

Garrett, in arguing against Medicaid expansion in Virginia, wrote that the Medicaid Fraud Control Unit last year "in Virginia alone recovered over $200 million!" Garrett’s aide says the senator understated the recovery, which was actually $1 billion.

The figures are correct. But Garrett’s claim that MFCU collected $200 million "in Virginia alone" easily can be read as a statement about the amount of fraud that occurred in the Old Dominion.

He doesn’t mention that almost all the money MFCU recovered last year came from a national fraud case it prosecuted against Abbott Labs.

The amount of Medicaid fraud Abbott committed in Virginia was $4.2 million. Outside of the Abbott case, MFCU recovered $11 million last year.

So Garrett’s statement contains an element of truth, but ignores critical facts that create a different impression about the level of fraud in Virginia’s Medicaid system. It’s hard to imagine Garrett wasn’t clued in on the details of MFCU’s work. After all, the senator was a lawyer for the unit between 2005 and 2007.

We rate his claim Mostly False.