How Republicans Have Used a Phony Audit to Smear Medicaid Expansion in Louisiana

While there isn’t any legitimate or compelling reason to believe Medicaid expansion was ever beset by widespread recipient fraud, there is a desperate political need to create a counter-narrative from Republican elected officials who had built their careers by explaining to voters all of the horribles that would occur if Louisiana dared to accept “Obama’s healthcare money.”

State Legislative Auditor Daryl Purpera. Photo by Robin May.

“Nobody knew healthcare could be so complicated.” – Donald J. Trump

On Nov. 8th, 2018, less than a month before the Louisiana Department of Health (LDH) debuted their state-of-the-art system for Medicaid enrollment, a total overhaul that transformed the inefficient method in place since Edwin Edwards’ final term as governor, the state legislative auditor, Daryl Purpera, published “Medicaid Eligibility: Wage Verification Process of the Expansion Population.” According to more than a dozen healthcare policy experts and legal scholars familiar with Purpera’s report, the document, which purports to be an audit, could be described at best as earnest analysis based on misinformed speculation and, at worst, a cynical exercise in political propaganda and historical revisionism.

As the 2019 gubernatorial campaign begins to heat up, Purpera’s report is now back in the spotlight, because, among other things, he claims LDH doled out as much as $85.5 million in Medicaid expansion funding to managed care organizations for patients who should have never been eligible for coverage. Actually, to be precise, Purpera wrote: 

Because this sample was random, we were able to project these results to the entire population of 19,226 single-person household Medicaid expansion recipients. Based on this projection, it appears that LDH may have paid between $61.6 million and $85.5 million in PMPMs (Per-Member, Per-Month) for Medicaid recipients who did not qualify at some point during their Medicaid coverage.   

Or, as U.S. Rep. Ralph Abraham claimed in a press release on March 5th (emphasis added): “In November, a report by Louisiana Legislative Auditor’s Office revealed that 82 of 100 Medicaid recipients in a random sample did not financially qualify for the program. The Legislative Auditor’s Office estimated that the state wasted as much as $85 million on ineligible Medicaid recipients.”

It is grossly misleading to characterize Purpera’s sample as “random” Medicaid recipients; he explicitly selected only from “a population of 19,780 Medicaid recipients who had average wages that appeared to exceed the amount to qualify for Medicaid.” Purpera assumed these recipients made more than allowable, not based on tax filings, but based on Louisiana Workforce Commission data, which is, itself, based on “unreliable” self-reported information from employers and a semiannual national survey conducted by the Bureau of Labor Statistics.  

Source: Louisiana Budget Project

At a recent forum hosted by the Pelican Institute, a right-wing “think tank” in New Orleans, Rep. Abraham put it somewhat differently but no less dishonestly: “We have $100 million going to people who shouldn’t be on the rolls.” The money goes to providers, not patients.

But even if you accept Purpera’s fuzzy math, the document he produced no longer reflects the on-the-ground reality of how the Louisiana Department of Health monitors and determines eligibility for Medicaid, rendering Purpera’s analysis almost entirely irrelevant. In fact, the new system has been lauded by the Centers for Medicare and Medicaid Services (CMS) as one of the four best in the entire country, a credit to Sec. Rebekah Gee of LDH and Gov. Edwards.

Again, there is an election later this year, and the outmoded report that cherrypicks a sample and relies on fuzzy math nonetheless carries value as a talking point. (The irony here is that the reason Louisiana had to spend an inordinate amount of time overhauling its wage verification software and practices is because of corruption during the Jindal administration. An illegal contract for this specific work forced the state to start from scratch and resulted in felony indictments, subsequently withdrawn, against former Sec. Bruce Greenstein).

Rep. Abraham is not the only Republican politician to seize on Purpera’s speculation in order to advance an argument that Louisiana is awash in welfare fraud as a consequence of profligate government spending and the concomitant “culture of dependency.” 

In a letter to The Advocate in January, U.S. Sen. John N. Kennedy cites Purpera’s findings as the primary reason he decided to file the Income Verification Act, which would require states to use federal tax information prior to granting any entitlement benefit program; his scheme is unworkable for a whole range of reasons, but that isn’t the point. Sen. Kennedy found an opportunity to grandstand about Democrats and welfare, red meat for his political base. 

State Attorney General Jeff Landry has spent more time in office shadowboxing Medicaid recipient fraud than battling consumer fraud or white collar crime. Last week, Landry issued a press release boasting about five arrests that had recently been made against people accused of welfare fraud, four of whom are alleged to have underreported their income in order to qualify for health insurance. Suffice it to say, none of these four individuals are alleged to have actually earned a significant amount of money.  

One man was arrested for claiming his child, who lived with its mother, as a dependent. Landry arrested a 60-year-old woman who accurately reported her income as $40,000 a year, but who had previously represented to LDH that she earned less than $10,000 a year. Notwithstanding the fact that in four of the five cases, the principal crime alleged is pretending to be slightly less poor in order to get health insurance- which is, in fact, a crime- it is worth questioning the morals of anyone in the justice system who would seek to ruin someone else’s life for an offense that could be easily remedied without any fanfare or publicity. (The fifth person was arrested for provider fraud). 

“A Medicaid card to a drug pusher is like a credit card,” Landry claimed, without any scintilla of evidence, shortly after he took office. “It costs them nothing, then on the street it’s 100 percent profit.” 

Landry claims the recent arrests were made “after investigations by the Louisiana Bureau of Investigation, the Louisiana Department of Health, and the Louisiana Legislative Auditor’s Office” (emphasis added).

Of course, the legislative auditor does not have the authority to criminally investigate individual recipients. Landry wasn’t really praising Purpera for his detective work; he was praising him for speculating about the scale of potential Medicaid recipient fraud. 

A solution in search of a problem

Gov. John Bel Edwards’ decision to accept federal Medicaid expansion funds has proven to be an undeniable success and, as such, an enormous embarrassment to conservative partisans who had once campaigned on rigid opposition to President Obama and anything associated with him.

The simple truth is that Louisiana has never been beleaguered by widespread “welfare fraud,” and the vast and overwhelming majority of crimes associated with Medicaid fraud are committed by the provider, not by the recipient.

For nearly four consecutive years, in one of the poorest and sickest states in America, former Gov. Bobby Jindal and the majority of the state legislature had stubbornly refused to accept billions of dollars in federal funding to expand health insurance through Medicaid. Publicly, they claimed to be concerned about the possibility of over-obligating the state’s finances, but privately, many would acknowledge their concern was political, not financial. Louisiana has long received more federal money than it generates in federal taxes, and because Gov. Jindal had spent the final six of his eight years in office slashing taxes and cutting spending on education and healthcare, the state needed the money more than ever.

Today, there are 502,647 people in Louisiana who now have health insurance as a direct consequence of Gov. Edwards’ decision to accept federal funding for Medicaid expansion. According to LDH, the program has saved countless lives, created thousands of jobs, and not drained a penny from the state general fund.

So, while there isn’t any legitimate or compelling reason to believe Medicaid expansion was ever beset by widespread recipient fraud, there is a desperate political need to create a counter-narrative from Republican elected officials who had built their careers by explaining to voters all of the horribles that would occur if Louisiana dared to accept “Obama’s healthcare money.”

Read the report here.

Purpera’s Projections

The problem for Rep. Abraham, Sen. Kennedy, and state Attorney General Landry: Daryl Purpera was guessing.

Only a year before, Purpera had issued a similar report that was even more absurd, speculating that it was hypothetically possible the state wasted $500 million a year on covering ineligible Medicaid recipients. State Sen. Sharon Hewitt spliced together a video of Purpera testifying at a senate committee hearing, cut out all of his disclaimers and equivocations, and promoted the clip to her audience on social media.  

Tricia Brooks of Georgetown University’s Health Policy Institute politely yet adroitly ripped Purpera’s most recent analysis to shreds in an article she titled “Louisiana Medicaid Audit Report Misses the Mark.” Jeanie Donovan, policy director for the Louisiana Budget Project, was even more understated in her review of Purpera’s analysis; she titled her report “Five Points of Clarification on Louisiana Medicaid Audit.” (Donovan is now policy director of the Louisiana Department of Health). 

“The Louisiana Legislative Auditor’s recent review of Medicaid eligibility determinations caught the attention of journalists, the Legislature and political pundits,” Donovan wrote. “But the audit findings were more nuanced than the headlines suggest, and a careful reading of the audit report reveals findings that aren’t as salacious as conservative critics would have you think.”    

If you’re not feeling as beneficent, you may be inclined to use a more direct term to describe Purpera’s report: Fake news. 

Regardless of how you describe it, one thing is clear: Despite having the imprimatur of the legislative auditor’s office, the document Purpera produced is not an audit. (In a feat of bureaucratic magic, Purpera claims on the title page that the work was a product of the office’s “Medicaid Audit Unit,” an obscure government agency that apparently has only one employee, Daryl Purpera). 

Purpera is an accountant and a career bureaucrat, not a healthcare expert, as is abundantly obvious to experts who have read his reports. He’s worked for the state government for the past 34 years, and for the past 14 years, he has also moonlighted as a Baptist preacher in a small church in suburban Baton Rouge. According to his biography on the church’s website, he earned a Bachelors from LSU and, at some point, an unspecified degree from Andersonville Theological Seminary, an unaccredited institution that relies on audio files to educate students over the internet.

I mention this not to diminish at all Purpera’s life-long public service, but the fact of the matter is he made a string of factually incorrect or incomplete assumptions. Analyzing Medicaid expansion, an enormously complex and largely federally-funded program, requires subject-matter expertise.

Without that expertise, you run the risk of handing a zealous politician a hand grenade and granting them permission to blow up someone else’s health insurance.

Lost in all of this has been the fact that Purpera’s report didn’t actually reveal a single instance of illegality by anyone administering the program or suggest that the state ever deviated from the guidelines set by the federal- not the state- government.

The report does create a false impression, however, that the money alleged to have been wasted came from the state. Medicaid expansion in Louisiana is almost entirely paid by the federal government, 93.5% to be precise. A provider fee covers the bulk of the “state match;” not a penny comes out of the state general fund.

As Donovan points out, even if you accept Purpera’s projections as valid, the very most the state would have ever paid to cover health insurance for ineligible recipients would be between $4 to $5.5 million. “That’s between .16 percent and .22 percent of the total projected state funding for Medicaid in this fiscal year,” Donovan writes (emphasis hers).

Credit: Louisiana Budget Project

There are other, more fundamental errors with Purpera’s analysis. He misstates federal law and, as a result, inaccurately concludes by implication that LDH could have done more.

Moreover, as Tricia Brooks of Georgetown explains, the state legislative auditor did not “test the accuracy of the eligibility determinations…,”failed to factor in ‘the reasonable compatibility standard’ that states may adopt if the beneficiary’s estimate of their income and the wage data source differ…,” and “did not examine the actual source of wage data.”

The final point deserves emphasis, because the state relies on eligibility determinations made by the Federally Facilitated Marketplace (FFM) “for people who come into coverage through this pathway (the federal marketplace) rather than forcing them to go through a second application process.”

The Stench of Politics

Purpera presented his report as if it were an audit, but he had been fully aware that the LDH was preparing to launch a new system and a different schedule for checking income eligibility (moving from an annual check, which is what CMS uses, to a quarterly check), a detail he conveniently downplays. “While LDH states that it will be able to do this (perform quarterly checks) in the new system, we have not audited the design of the system and cannot verify system capabilities at this time,” he writes. In other words, he wasn’t conducting an actionable audit; if anything, he was conducting a policy autopsy.

There is one other telling sign that Purpera’s document had more to do with playing politics than in guaranteeing good government. For some reason, his flawed analysis ended up catching the attention of U.S. Sen. Ron Johnson, a Republican from Wisconsin, and U.S. Rep. Jim Jordan, a Republican from Ohio. They asked CMS to respond, and on March 8th, CMS Administrator Seema Verma sent them a letter, calling the findings “deeply troubling.” Louisiana, Verma wrote, would now be included in a “future review of how ‘high risk states’ determine eligibility for government-financed Medicaid benefits,” according to the Associated Press.

Administrator Verma’s Senior Counselor is a man named Calder Lynch, and prior to joining the Trump administration and a brief stint in Nebraska, Calder Lynch was the Chief of Staff to the Secretary of Louisiana’s Department of Health during the Jindal Administration. Lynch, a Louisiana native, worked at LDH for six and a half years, joining shortly after graduating from LSU in 2008.

His first job was as the Special Assistant and Policy Advisor to Sec. Bruce Greenstein. Greenstein, it is worth noting, also joined the Trump administration, serving for a year as the Chief Technology Officer of the U.S. Department of Health and Human Services.

It seems more than a little ironic that Calder Lynch’s new boss claims to be “deeply troubled” by the delays in system modernization caused by his old boss and more than a little convenient that, less than a month before the state launched a new system, a report materialized that attempted to shift all blame away from the people who created the problem to those who were correcting it.

No one should accept wasteful or fraudulent spending, but in order to solve a problem, we should be guided by the facts, especially when a person’s healthcare is at stake.