Unsubstantiated “Credible Allegations of Fraud” Pose A High Risk to Medicaid Providers: A Lesson from New Mexico

Abstract

A new Medicaid antifraud initiative enacted as part of the Patient Protection and Affordable Care Act, Pub. L. No. 111-148  (2010), 124 Stat. 119 (ACA) made it possible to quickly dismantle  the greater part of New Mexico’s behavioral health system in 2013.  This ACA initiative requires states to immediately stop payments to Medicaid providers based on a credible allegation of fraud (CAF) and to refer suspected providers to law enforcement for investigation.  However, for Medicaid service providers that do not operate with huge reserves, and for whom Medicaid recipients provide a significant portion of revenue, this ill-conceived federal mandate can put them out of business in a matter of weeks.  As 15 New Mexico behavioral health provider organizations  accused of Medicaid fraud soon learned, the CAF law and its implementing regulations lack safeguards that have historically existed under common law to protect those accused of fraud, with predictable dire consequences.   Further, absent a right to expedited review and other protections under state law, Medicaid providers suspended based on CAF have little meaningful recourse.  In 2013, New Mexico had no such law.