AUGUSTA, Maine — Early last year, the national media turned its gaze to Maine and the tawdry story of a Zumba-instructor-turned-prostitute in the affluent seacoast village of Kennebunkport.
The exploits of Alexis Wright, including the fact that she managed a client list of more than 100 people and often secretly videotaped her encounters with her customers, were making national news. So, too, was the news that Wright — who earned more than $100,000 a year in her illegal trade — was receiving welfare benefits from the state of Maine.
Wright, a single mother at the time, was later found guilty of defrauding the state to the tune of more than $40,000 in welfare benefits, a part of the case that went largely overlooked.
Wright’s crimes fetched the high-profile treatment of an international celebrity, but the amount she bilked from Maine’s welfare coffers wasn’t even close to what the state would recover from another fraud case involving Medicaid funds, which was announced 10 months later.
This time the crook wasn’t a small-town prostitute, but a multinational medical device and pharmaceutical manufacturer.
In November 2013, Johnson & Johnson agreed to pay the federal government $2.2 billion to resolve criminal and civil allegations involving the marketing of off-label, unapproved uses of three prescription drugs.
Maine, according to a report in the Washington Post, would recover $2.8 million from the case, which involved alleged kickbacks to doctors and pharmacies for promoting a trio of drugs — two anti-psychotics and one heart medication.
The settlement funds, according to the Office of the Maine Attorney General, would serve as restitution for state Medicaid funds used to pay for the unapproved medications.
And while you could hardly avoid the news about Wright, the settlement with Johnson & Johnson blipped under the radar screen of most of Maine’s media.
Comparing the two cases, and the attention — or lack of — they received helps emphasize and lend context to a letter sent last month to state legislative leaders by Maine Attorney General Janet Mills.
In her letter, Mills urged lawmakers to be fair.
“There is a great deal of talk this election year about welfare fraud,” Mills wrote. “I hope we put this issue in perspective, that we make sure we apply the rule of law fairly and uniformly, that we go after big fish as well as small, and that we not elevate one over the other.”
Over the past three years, Maine judges have ordered individuals who have defrauded benefit programs to repay $488,303. That’s an annual average of $162,767.
On the provider side, the state has seen restitution set at $18.7 million over the past four years, an annual average of $4.6 million.
Mills said Thursday that welfare-recipient fraud is dominating the political conversation, not only in Maine but across the country.
“But people aren’t talking about the big welfare fraud, which is provider fraud,” Mills said.
“We shouldn’t ignore eligibility fraud,” she said. “We shouldn’t ignore recipient fraud; we shouldn’t ignore any allegations that somebody is getting state or federal benefits who isn’t really eligible for them, but the big fish are the corporations, the major pharmaceutical companies and the providers that have been ripping off the state Medicaid program for years to the tune of millions of dollars.”
And, according to Mills, the restitution orders the state has so far been able to get on the provider side “is only the tip of the iceberg.”
The message comes on the heels of a recently launched campaign by the administration of Republican Gov. Paul LePage to castigate individuals who have withdrawn cash benefits with state-issued electronic benefit transfer cards at questionable locations around the country.
The cards, which function as bank debit cards, are loaded with a range of financial benefits from the state, including child support payments, food stamp benefits and cash benefits under the federal Temporary Aid to Needy Families program.
The EBT campaign is part of LePage’s efforts to ferret out abuse and fraud in Maine’s welfare system.
Mills said that effort could be fruitless because the things LePage has been focusing on, the EBT side, may not even be crimes under state and federal law.
“The statute made it a disqualifier, but it’s not a crime,” Mills said. “It may be a civil violation, but it’s not a criminal offense. When you steal millions of dollars from the taxpayer through the same program, that’s a crime.”
Peter Steele, LePage’s communications director, said the governor is equally concerned about provider fraud and the focus on EBT card abuse is simply a new initiative.
“Nobody’s looked for this fraud in the past,” Steele said.
He said LePage has been equally forceful on provider fraud, yet in 2012 his Department of Health and Human Services commissioner, Mary Mayhew, rejected a legislative proposal that would have installed more oversight and better surveillance and auditing of Medicaid payments to health care providers.
State Rep. Peggy Rotundo, D-Lewiston, House chairwoman of the Legislature’s budget-writing Appropriations Committee, said the proposal is again being debated and will be part of the ongoing debate over the state’s supplemental budget.
Rotundo said a study by the National Conference of State Legislatures that focused on Medicaid fraud by providers found the problem was huge and that states had varying measures in place to protect against it and to recover misappropriated health care benefits.
The study also showed that nearly 75 percent of all health care fraud was committed by medical providers.
Meanwhile, a 2012 PEW Center brief on the issue, found that about 7 percent of all federal Medicaid funds — an estimated $19 billion per year — is absorbed by improper payments, including “fraud and abuse as well as unintentional mistakes such as paperwork errors.” On the states’ side, the figure is almost 9 percent of Medicaid funds, an estimated $11 billion based on 2010 figures, PEW found.
Rotundo said if LePage is serious about catching and prosecuting provider-side fraud, he would support installing new checks on the Medicaid system in Maine that would help root out abuse.
“We have to be able to find them and establish the controls within DHHS to do that,” Rotundo said. She estimated the annual cost to the state of making the changes would be between $100,000 and $200,000.
She said the issue has been a perennial recommendation of the state’s auditors. The measure suggests that the state contract with a private company to look each year for fraud within the health care benefits system. She said the state could achieve the same result by installing new software systems and by training an individual to operate them.
She said placing too much emphasis on the recipients of individual benefits without an equal focus on the provider side is not only unjust, but costly.
“If the focus is solely on those who are receiving those benefits and not on those who are providing them, then there is not a clear message that fraud is not to be tolerated amongst anyone,” Rotundo said.
Other lawmakers, including several Republicans, agreed with Rotundo.
State Sen. Roger Katz, R-Augusta, assistant minority leader, is the co-author of a bill that would expand eligibility for the state’s Medicaid program under the federal Patient Protection and Affordable Care Act.
The bill adds two new investigators to the state’s health care fraud unit. Katz said those investigators are meant to focus on both providers and recipients.
“Clearly, the larger dollars we need to be concerned about are from health care providers,” Katz said. “But there is a principle at stake here, too, and that is that nobody should be ripping off the system.”
Rotundo, Katz and other lawmakers said the issue of recipient fraud resonates politically because it’s the kind of thing everyday people believe they are witnessing.
“It’s much closer to home when someone believes that the person living four doors down is ripping off the system,” Katz said. “It’s hard to understand and see the faraway corporate behavior.”
The state has limited dollars, Katz said, “and we want to make sure they are getting to the people who need them and providers are paid fairly, but only what they are entitled to and no more.”