American-Statesman

State Pushes for High-Tech Fraud Detection

May 6, 2005

By Michelle M. Martinez

Medicaid recipients would be subject to fingerprint checks.

State officials began the high-tech fight against welfare fraud in 1999, when they started requiring food stamp applicants to provide electronic fingerprints.

Now, they want to use a more sophisticated version of that technology to reduce Medicaid fraud across the state. But how quickly that will happen — or whether it will happen at all — remains to be seen as they try to work out kinks in a six-county pilot program now under way and figure out if it will really prevent fraud.

Finger-imaging — photographing a person's fingerprints and using that print to verify identity — has come came under attack nearly every legislative session since it was required by the Legislature. Critics, citing studies, say finger-imaging hasn't prevented much food stamp fraud and isn't worth the cost.

Though the technology that the state hopes to expand statewide for Medicaid approaches the problem in a slightly different way, state officials acknowledged in February that a nine-month test run didn't "clearly establish Medicaid fraud reduction," partly because not enough doctor's offices, clinics, hospitals and patients participated in the voluntary system.

However, state officials said, the pilot showed that the technology could work if applied properly. The state has extended the program, which will ultimately cost about $15 million, through the end of August for further study. Officials said they don't know what it will cost to expand the program statewide.

Sister Helen Brewer, an advocacy consultant for Seton Healthcare Network, supports the technology. Seton, the biggest participant in the Travis County pilot program, logged 6,000 transactions on the finger-scanning equipment during the first nine months of the pilot.

Brewer said she saw the Medicaid fraud prevention pilot as an opportunity to get involved early in the game.

"I wanted to be in at the grass-roots portion of it and work through the difficulties that are inherent in anything that is new," she said.

Officials say the technology prevents patients from sharing their Medicaid identification cards with other people and prevents medical providers from cheating the system, either by billing the state for services never performed or for treatments that cost more than those actually provided.

Together, the state and federal government spend about $300 billion a year on Medicaid.

Nationally, states recovered $268 million in 2003 from investigations into fraud by medical providers and patients, according to the most recent annual report by the U.S. Department of Health and Human Services. Those investigations led to 1,096 convictions.


Food stamp version


To cut down on abuse of the state's food stamps program, the state started scanning and storing in a database the electronic fingerprints of food stamps applicants. The process, which is still used today after six years, was meant to prevent people from "double-dipping," applying for additional benefits under a different name.

But a study by the University of Texas concluded that the state spent $1.7 million in the first seven months of testing the system and "yielded no savings in benefit payments."

State officials say that the effort has saved $115,000 to date but emphasize that they can't measure how much additional fraud was deterred.

Nonetheless, some critics oppose electronic fingerprinting for food stamps because they say checking a person's Social Security card is sufficient, and cheaper.

"We don't need an expensive finger-imaging requirement," said Celia Hagert, of the Center for Public Policy Priorities, which advocates for low-income families. "I think the policeman-on-the-corner argument plays on the public's misconception that most of the people using these benefits are doing so fraudulently, and that's simply not true."

Hagert said her group isn't against finger-scanning to prevent Medicaid fraud, but wants to make sure people are not scared away from the program because of the system.

Under the Medicaid pilot program, patients are issued a "smart card." A biometric reader scans their index fingers, converts the prints to mathematical algorithms and stores them on the card, which the patient keeps. The goal is to be able to verify that the person presenting the card is the person to which it was issued.

The process is different from that used in the food stamp program because the print is not stored in a database, which, supporters say, reduces the risk of having crucial personal information stolen.

The American Civil Liberties Union, which has opposed legislation this session that would allow the Department of Public Safety to create a database with finger and facial images, isn't opposed to expanding the Medicaid program statewide because finger images are not stored in a database, said Scott Henson, director of police accountability projects for the organization.


Medicaid prospects


The Senate passed a bill sponsored by Sen. Jane Nelson, R-Lewisville, last month that would require the state to expand the Medicaid pilot program, if the state determines it would be cost-effective. The House hasn't acted on Senate Bill 47 yet.

An independent group hired by the state evaluated the pilot program after its first nine months and found that one of its biggest weaknesses was that it was voluntary. As a result, doctor's offices, clinics and hospitals didn't have to ask for the smart cards, patients didn't have to present them when asked, and there was no firm data on how much fraud the system prevented.

"It is reasonable to assume that providers and clients intent on committing fraud during the pilot would simply choose not to participate," the evaluation found.

Some of the providers indicated in a survey by the independent evaluator, International Biometric Group LLC, that the process of checking people in and out was a hassle.

The state's Health and Human Services Commission could make participation in the pilot program mandatory but wants the support of the Legislature before doing so, spokeswoman Jennifer Harris said. The system would be mandatory if expanded statewide.

Another weakness of the program, according to the evaluation, was the exclusion of children, elderly people and people with disabilities, populations that together account for 2.5 million of the state's 2.8 million Medicaid recipients.

The four companies that run the pilot in the six test counties are trying to get more providers to sign on during the remaining months of the pilot, said Wayne Singer, senior vice president for marketing for eMedicalfiles Inc., the operator in Travis County.

The company is upgrading the biometric readers with software that will instantly tell medical providers whether a patient is eligible for Medicaid. That would save office workers the task of calling the state to confirm eligibility or having to do more computer work for verification, he said.

mmmartinez@statesman.com; 445-3633