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Friday, Jul. 10, 2009

Schwarzenegger's fraud allegation tough to pin down

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In his effort to fill the state's massive $26.3 billion budget deficit, Gov. Arnold Schwarzenegger is targeting social service programs he says are rife with fraud and abuse.

But the governor is unable to substantiate a centerpiece claim that fraud wastes as much as a quarter of the In-Home Supportive Services program, which provides home health care workers for low-income elderly and disabled.

"I've never had anyone tell me where that number comes from," said Virginia Bella, who specializes in studying the IHSS program for the nonpartisan Legislative Analyst's Office.

The program is the state's fastest-growing social program. The state now pays about $2 billion a year of the $5.5 billion cost of the program. Federal and county funds make up the rest. The program's intent, ultimately, is to save money by allowing recipients to stay home with the aid of caregivers so they do not have to enter more costly nursing homes.

Grand juries in six counties have issued reports criticizing existing anti-fraud procedures and suggesting more safeguards, some of which the governor is recommending.

Schwarzenegger's proposed changes to IHSS – including fingerprinting of providers and clients and hiring more state investigators – could add up to savings of $420 million this year, the governor says.

The savings estimate is based on a 10 percent reduction in IHSS fraud, the Governor's Office acknowledges, yet the 25 percent figure for fraud has taken on a life of its own. It's popped up in various official documents and in the governor's public remarks designed to urge adoption of his proposals.

The 25 percent figure is the only estimate for fraud cited in a document from the Governor's Office outlining savings he believes could be achieved through anti-fraud measures.

"There is unfortunately a large amount of fraud in IHSS – estimated by some to be as much as 25 percent of all dollars expended," the document says.

At a news conference Monday with district attorneys who support his IHSS changes, the governor repeated again that "some people say that there is 25 percent fraud. That would be over a billion dollars right there."

He and some of the district attorneys with him also said there are lower estimates of fraud – 5 percent to 10 percent, for example – which would add up to less but also substantial waste.

But none of those who spoke identified a source for any of these estimates.

At the news conference, Sacramento County District Attorney Jan Scully addressed Schwarzenegger: "I know you've used the figure, and a lot of us agree with that – 25 percent fraud. But we just say, give us any number. Let's acknowledge that we have a problem."

Contacted later, Scully said the 25 percent estimate has not been documented.

She suggested it may be based on surveys that detected a rate of 25 percent fraud in a different type of social program.

Schwarzenegger spokesman Aaron McLear said the 25 percent figure stems from conversations with district attorneys, state officials and grand jury reports.

The figure was cited in a Sacramento County Grand Jury report earlier this year on IHSS problems. The report says, "According to a published news report an analysis by the Governor's Office estimates the statewide fraud rate for IHSS at 25 percent."

Frank Mecca, executive director of the County Welfare Directors Association – counties directly supervise IHSS – said he doubts the figure.

"We don't know anyone who thinks there is a 25 percent fraud rate in this program," he said.

Mecca said his organization supports some of Schwarzenegger's changes to curb fraud.

But he added: "It's hard to have a rational discussion on this in an environment so flush with demagoguery."

Ever since the number began to circulate, Bella said she has been trying to do research to pinpoint its origin.

Officials at Schwarzenegger's Department of Finance also attributed the 25 percent figure to the same sources who said they got the figure from the governor.

"The grand jury reports and conversations with district attorneys indicate that fraud could range up to 25 percent," department officials responded in an e-mail.

Officials said 25 percent fraud estimate, however, is "not directly" being used to calculate savings that the governor's reforms could yield.

Originally, a rate of 5 percent fraud was used, but after Monday's meeting with district attorneys, officials decided to assume a 10 percent rate of fraud in their calculations.

That would result, officials said, in a net savings of $130 million this year.