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State Hit Hard by Medical Fraud

Medi-Cal scam artists steal billions sorely needed for budget gap. One dentist charged for filling teeth that had already been extracted.

December 26, 2002|Tim Reiterman and Virginia Ellis | Times Staff Writers

Doctors, dentists, pharmacists and others in the health-care industry have been stealing huge sums from California's $25-billion Medi-Cal program despite increased state and federal efforts to combat fraud.

California can ill afford to lose billions of dollars from its health program for the poor, especially now that the state and federal governments both face large deficits and lawmakers are expected to try next year to cut spending on Medi-Cal. Gov. Gray Davis already has proposed trimming $167 million from the program, which is jointly funded by the state and federal governments.

Authorities have made a concerted effort to counter Medi-Cal fraud. In the last few years, criminal charges have been filed against about 700 people and companies accused of stealing from Medi-Cal. The state attorney general and the U.S. attorney's office in Sacramento, where the bulk of the federal charges are lodged, together have won almost $100 million in restitution. State health officials believe their civil enforcement actions have saved hundreds of millions more.

However, the program is so enormous, and the opportunities for fraud so widespread, that few think the efforts so far have done much more than hold the line. "Health-care crime is rampant in California," said James Wedick, head of the FBI's white-collar crime unit in Sacramento. "Even though our efforts have increased and we're getting good at it, I am still convinced there is as much fraud as ever."

A clinic owner charged Medi-Cal for perinatal services to women who already had undergone abortions. A dentist charged for filling teeth that already had been extracted. A suspended doctor billed for hundreds of nuclear brain scans although he lacked the proper equipment and expertise. A podiatrist billed for $250 custom-molded foot supports although he had outfitted patients with generic $24 shoe inserts.

The fraud is heavily concentrated in population centers of Southern California where there are large numbers of poor people and many immigrant communities that investigators say are particularly vulnerable to fraud.

Some experts estimate that up to 10% of health-care dollars are stolen. For Medi-Cal, that translates to about $2.5 billion a year, almost half from the state general fund.

State health Director Diana M. Bonta considers such estimates high but says, "Even 1% is too much.... Zero is what we want and why we have been so aggressive.... People need these programs."

The stakes are enormous in the battle against criminals investigators call "the fraudsters." Created in 1965, Medi-Cal covers health care for 6 million poor, aged, blind and disabled people by reimbursing providers for products and services.

And people who want to cheat the system have adopted sophisticated methods to stay one step ahead of authorities:

* Some steal the identities and billing numbers of legitimate health professionals, then use the information to submit phony bills to Medi-Cal and collect millions of dollars.

* Others peddle lists of Medi-Cal patient names and identification numbers. Crooked health-care providers use the information to dummy up bills to Medi-Cal without seeing the patients.

* A cottage industry has developed to sell blood from street people and others to laboratories. The labs then bill Medi-Cal for expensive blood tests that were never authorized by physicians or performed by the labs.

"The entrepreneurial spirit of those who commit this kind of fraud is as creative as it is insatiable," said Collin Wong, executive director of the attorney general's Bureau of Medi-Cal Fraud. "If one area of criminal activity is closed to them, they'll migrate to another."

Immigrant populations pose particular challenges to investigators.

Take the case of L & M Diamond Jewelry Optical in West Hollywood, a mom-and-pop store with wares such as glass beads, Russian stacking dolls and sunglasses.

Despite its modest facade, the store billed Medi-Cal for about 62,000 pairs of prescription eyeglasses from 1993 to mid-2001. State records show patients receiving up to 18 or more pairs during just a few years -- but several told investigators they actually got few if any.

Mila Sigal and her husband, David, were charged with Medi-Cal fraud and the theft of more than $3 million. The couple pleaded guilty. David Sigal received five years' probation while Mila Sigal faces sentencing on charges that call for up to three years in prison. They paid more than $100,000 in restitution but have been resisting the state's attempts to get almost $3.5 million more.

Mila Sigal's attorney, Tracy Green, said her client submitted multiple false claims to cover the cost of designer eyewear that customers wanted instead of less expensive glasses the state pays for.

"Lots of the beneficiaries are from former communist republics who are used to getting around the system," Green said.

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