Raid of WellCare prompted by Medicaid fraud concerns

Nov 5 2007

A recent raid by federal and state authorities on Tampa, Fla.-based health insurer WellCare was prompted by allegations that the company inflated mental health care spending so it could keep funds it should have refunded to the state's Medicaid program, according to a person familiar with details of the investigation, the Wall Street Journal reports (Won Tesoriero/Francis, Wall Street Journal, 11/3).

Agents from FBI, HHS and the Florida Medicaid Fraud Control Unit on Oct. 24 raided the headquarters of the insurer. Almost all of WellCare's $4 billion in revenue comes from federal and state governments. WellCare has been under scrutiny for several months. Georgia's Department of Community Health -- which administers Medicaid and PeachCare, the state's SCHIP -- also is investigating WellCare. It has been auditing payments to medical providers for the insurer, in addition to Amerigroup and Peach State Health Plan (Kaiser Daily Health Policy Report, 10/25).

Under Florida's Medicaid program, the state pays HMOs a fixed monthly rate for each beneficiary, regardless of the amount of medical services they receive. However, managed care providers are penalized if they do not spend at least 80% of the funds they receive for mental health care on treatment and are expected to refund remaining funds to the state, according to the Journal.

WellCare allegedly defrauded Florida Medicaid of more than $35 million over five years, a person with knowledge of the investigation said. The company has not been charged with any wrongdoing. According to the person, the investigators are examining ways WellCare might have improperly collected money for mental health services, such as by lowering beneficiaries' ages to receive a higher payment from Medicaid. Investigators also are looking into whether WellCare's dealings with a Cayman Islands subsidiary might have allowed the company to keep money for mental health services that it was not entitled to by inflating expenses, the person said (Wall Street Journal, 11/3).