An outside investigation into Maine’s Medicaid system reveals a shocking potential for fraud within Maine’s vast welfare bureaucracy, and it’s all on video.  Yet policy reforms to increase accountability and safeguard measures will help protect Maine’s welfare system from fraud, if officials act soon.

The Maine Heritage Policy Center (MHPC) and Americans for Prosperity-Maine (AFP) held a joint press conference in Augusta today, where the groups showed footage from a video-recorded interaction earlier this year between a Department of Health and Human Services employee at the Biddeford office, and an individual posing as a “pharmaceutical” importer seeking free, taxpayer-funded Medicaid health coverage.

The individual, who posed as a Mr. Ted Ceanneidigh, revealed the following to the DHHS worker:

• He has access to enough money to buy private health insurance
• He drives a Corvette
• His parent are unaware he has turned their failing fishing business into a “pharmaceutical imports” business that does its dealings in international waters
• His business card prominently features a marijuana leaf
• His income is strictly in cash and precious metals, because metals are “less traceable.”
• He has no pay stubs and none of his income is declared

After learning this information, the DHHS employee advised the individual to keep his income hidden.

“You don’t have a paycheck, you don’t file taxes, you have no income,” the employee said.

Applicants for Medicaid must earn below a certain level of income to qualify for the free taxpayer-funded health coverage.

“How many Ted Ceanneidighs out there were advised by DHHS workers to hide their income?  How many were never reported for suspected drug dealing?  How many Ted Ceanneidighs are receiving taxpayer-funded health care today because of unethical practices within Maine’s welfare bureaucracy?” AFP-Maine State Director Carol Weston asked at the press conference.

The explosive details in the video demonstrate the vulnerability of the welfare system to fraud and abuse, which may contribute to the growth in enrollment and cost for Maine’s welfare programs.  Today, almost one in three Mainers is on some form of welfare, and the state spent more than $2.5 billion on its welfare system in 2008 alone.

“Maine spends billions on its welfare system.  Is this potentially illegal behavior what those billions are funding?” Weston asked.

Prior to the press conference, Weston and MHPC chief executive officer Lance Dutson met with the Commissioner of Health and Human Services and staff from the Governor’s office to show them the video, and to discuss potential reforms to safeguard Maine’s welfare system from fraud and abuse.

MHPC has specifically suggested the creation of a divergence program that helps potential applicants find work or job training while making welfare benefits a last resort, establishing a Secret Shopper-type program to monitor the performance and practices of DHHS employees, and lifetime bans from receiving benefits and working in state government for applicants and employees, respectively, who are found to have knowingly engaged in fraudulent or illegal behavior.

“I hope that what we have revealed today motivates action from officials in all branches of our government.  Our system is clearly vulnerable to fraud and abuse, and we can no longer pretend these things only happen in other states,” Dutson said.

“I have shared our reform ideas with the Commissioner of Health and Human Services and members of the Governor’s staff at our meeting this morning,” Dutson continued.  “I have also pledged the full support of The Maine Heritage Policy Center to develop and promote welfare system reforms that root out fraud, waste and abuse, while preserving our safety net for those in need.  Action must be taken.”

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CLICK HERE to watch the footage shown at today’s press conference.

CLICK HERE to watch the complete, 48 minute video on YouTube.

Download the PDF of the full transcript here.

Download the PDF of business card and picture of boat shown to DHHS worker

For more information, or for an interview with Lance Dutson, please contact Chris Cinquemani at chris@mainepolicy.org, or at (207) 240-7090

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Download PDF of remarks

Press Conference Revealing Evidence of Maine Medicaid System’s Vulnerability to Fraud

Remarks by Carol Weston, State Director

Americans for Prosperity-Maine

August 11, 2011

Good morning and thank you for joining us.  I am Carol Weston and I serve as State Director of Americans for Prosperity-Maine.  I am joined today by Lance Dutson, the newly-named chief executive officer of the Maine Heritage Policy Center.

Today, AFP and MHPC have partnered to share with you the shocking results of an investigation into the Maine Medicaid system’s vulnerability to fraud and abuse.  We will show you video footage from an interaction earlier this year between an employee at the Biddeford office of the Department of Health and Human Services, and an individual posing as a “pharmaceutical” importer seeking free, taxpayer-funded Medicaid health coverage.

The video you are about to see was produced and sent to me by James O’Keefe.  Mr. O’Keefe is best known for exposing on video how employees at multiple branches of the taxpayer-funded ACORN provided advice on how to avoid detection by authorities of tax evasion, human smuggling and child prostitution.

Just a few moments ago, we shared this video with the Commissioner of the Department of Health and Human Services and the Legal Counsel for Governor LePage.  They were as shocked as we were to see this footage.  Now, we are making this footage available to the public.

The unabridged footage, which is 49 minutes, is available on the Web.  A link has been provided in your press kits.

This video reveals explosive evidence of the potential for fraud within Maine’s Medicaid system.  It replaces what have been unverifiable anecdotes of welfare system fraud and abuse with a concrete example of unethical and potentially illegal behavior within Maine’s welfare bureaucracy.

In your press kit we have provided a transcript of the dialogue from this footage, as well as a profile of Ted Ceanneidigh, the individual seeking free health care.  This profile includes images of the business card he presents to the DHHS worker, as well as the boat he shows her.

This is what we, and the DHHS worker, know about Ted Ceanneidigh:

• Ted confirms to the DHHS worker he has access to enough money to buy private insurance
• He drives a Corvette
• Ted explains that his parents don’t know he has turned their failing fishing business into a “pharmaceutical imports” business that does its dealings in international waters
• His business card prominently features a marijuana leaf
• Ted’s income is strictly in cash and precious metals, because metals are “less traceable.”  He has no pay stubs and none of his income is declared
• Ted never verifies Maine residency

When asked if he will be questioned about his income, the DHHS worker responds, “You don’t have a paycheck, you don’t file taxes, you have no income.”

When Ted expresses concern that his Corvette might be noticed, the DHHS worker responds, “They probably won’t see your Corvette” and then councils Ted not to say anything about it.

Had Ted actually taken the advice of the DHHS worker and went on to submit an application for free health care based on that advice, fraud would have been committed.

How many Ted Ceanneidighs out there were advised by DHHS workers to hide their income?  How many were never reported for suspected drug dealing?  How many Ted Ceanneidighs are receiving taxpayer-funded health care today because of the unethical procedures within Maine’s welfare bureaucracy?

Maine taxpayers deserve better than this.  They deserve peace of mind that their tax dollars are funding a safety net only for the truly needy, not people who game the system.  Taxpayers should not be paying government employees to ignore obvious drug felonies.  And they should not be paying them to advise individuals to commit tax evasion and hide assets in order to qualify for free health care.

Every year, Maine spends billions on its welfare system.  Is this what those billions are funding?

Let me be clear.  I am not suggesting all recipients of Medicaid and welfare system benefits are engaged in illegal behavior or gaming the system.  For many of our most vulnerable neighbors, our welfare safety net helps them through tough times.

But this video does prove that welfare fraud is possible, and it might be fostered by a broken welfare system, and the employees tasked with keeping that system running.

Reform is needed.  The potential for fraud within our welfare system must be erased.  The parts of the system that allow for unethical and abusive practices must be fixed.  In our meeting this morning, it was quite clear the Commissioner of DHHS and the Governor’s administration agree.

Here to talk more about the policy reforms needed to root out abuse and fraud from our welfare system is Lance Dutson, chief executive officer of the Maine Heritage Policy Center.

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Download PDF of remarks

Press Conference Revealing Evidence of Maine Medicaid System’s Vulnerability to Fraud

Remarks by Lance Dutson, CEO

The Maine Heritage Policy Center

August 11, 2011

Good morning.  As Carol mentioned, my name is Lance Dutson, and I serve as chief executive officer of The Maine Heritage Policy Center.

Let me begin by saying that I never imagined my first week on the job would be this eventful.

The video you just watched is shocking.  It shows clearly what many of us have believed for some time – that Maine’s welfare system is exceedingly vulnerable to fraud, and that we have frontline stewards of taxpayer funds who are not adequately equipped to perform their duties.  What we have seen in this video is unacceptable, and calls for action.

Last year, The Maine Heritage Policy Center launched a major welfare reform initiative known as Fix the System.  Our research throughout that initiative found that between 2003 and 2010 welfare system enrollment grew 70 percent, that almost one in three Mainers is on some form of welfare, and that in 2008 alone, Maine spent more than $2.5 billion on our welfare system.

How much of that explosive growth is due to fraud and abuse?

In this era of limited funds and budget shortfalls, can Maine taxpayers afford to have that question remain unanswered?

In a small state like Maine, we like to think that something like this doesn’t happen.  Sadly, this video shows that the potential for fraud is real.  Action must be taken.

Part of the bipartisan budget that passed this year included several reforms MHPC called for as part of its Fix the System initiative.  Time limits for certain benefits, elimination of benefits for legal non-citizens, and greater accountability measures for convicted drug felons are among them.

One idea we proposed that was not adopted was the creation of a diversion program.  Such a program would have those seeking enrollment in the welfare system first be assisted in finding meaningful employment.  Welfare would be reserved as a last resort.

Had a diversion program been in place, this video would have shown a DHHS employee running through various employment or training opportunities.  What we saw instead was the employee assisting in a potentially fraudulent gaming of the system.  Diversion programs not only help well-intentioned individuals explore ways to become self-sufficient first, they also reduce the potential for fraud and abuse.

In light of the shocking details we all just saw in the video, we believe additional reforms must also be explored to identify and discourage fraud and unethical management within our welfare system.

Elected officials should explore what is best known as a Secret Shopper program for our welfare system.  State authorized “secret shoppers” would visit DHHS offices seeking enrollment in our welfare system, and would monitor the responses and practices of DHHS employees as they interact with potential applicants.

If DHHS workers are found to be unethical, incompetent, or engaged in fraudulent or illegal behavior, they would be reported to the state and face whatever penalties are deemed appropriate.  No one, including state employees, should be above the law.  Taxpayer-funded government workers must be held accountable and to a strict set of standards to protect state resources and the public at large

Maine should also further public trust with a series of strict penalties for individuals found to be knowingly engaged in illegal and fraudulent behavior.

If a welfare applicant or recipient is found to be hiding income, hiding assets, or committing fraud in any way in an attempt to receive taxpayer-funded welfare benefits, that individual should face a lifetime ban on all state benefits.  Our safety net should be reserved for the truly needy.  Those who willingly take advantage of taxpayers’ generosity should be penalized.

Similarly, if a state employee, particularly a DHHS employee, is found to be knowingly advising individuals to commit illegal or fraudulent behavior, or if known violations of law or policy are not immediately reported, that individual should face a lifetime ban from any position working in state government.  There are plenty of good-natured, law abiding individuals in Maine who would appreciate a job working in government.  Those positions should not be filled by known law-breakers.

I have shared each of these reform ideas with the Health and Human Services Commissioner and the Governor’s staff at our meeting this morning.  I also pledged the full support of The Maine Heritage Policy Center to develop and promote welfare system reforms that root out fraud, waste and abuse while preserving our safety net for those in need.

We have to keep in perspective the reason we have these programs in place. Maine is a generous state, and we share a strong commitment to taking care of those in society who are unable to take care of themselves. The real tragedy of waste, fraud and abuse in our social welfare programs is that it diverts much-needed funding from our most vulnerable. At a time when there is a limited amount of funding available for these programs, fraud like that demonstrated in this video takes services away from those who really need it. When an offshore drug dealer receives welfare benefits because he’s hidden his earnings, a Maine family in real need is deprived of the safety net taxpayers have sought to provide.

I hope that what we have revealed today motivates action by our officials in all branches of government.  The evidence this video investigation has revealed cannot be ignored.

Thank you for your attention.  Carol and I are happy to answer any questions at this time.

A short excerpt is below – read the full story on PPH’s website here: “Maine welfare system data proves hard to get”

Getting detailed information on what the state spends and who gets the money can be a tall order.

“It’s amazing how difficult it is to get information out of (the Department of Health and Human Services),” said Steve Bowen of the Maine Heritage Policy Center, a conservative think tank.

Bowen said he was forced to rely largely on U.S. Census data and other federal numbers when compiling a recent critical report, “Fix the System.” Then, he said, DHHS criticized his report for not using the right numbers.

The Maine Sunday Telegram ran into similar obstacles while compiling information for this series.

A reporter was asked to file a Freedom of Information Act request to obtain spending and enrollment numbers for several core social programs, and then was told by a DHHS attorney that the data was not available.

When asked for the same information in different ways, the department did gradually provide much of the requested data.

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A short excerpt is below – read the full story on PPH’s website here: Welfare: Well-meaning, well-funded, well-done?

• More than one in six Mainers — about 18 percent — are receiving public assistance to help pay for food, shelter or other basic needs, according to state data. Most receive food supplements, or food stamps, a federal program that has expanded to record enrollments in Maine and nationwide.

• If you include MaineCare, a government health insurance program, the number of Mainers getting some public assistance jumps to nearly one in three, or 29.7 percent. That’s 391,178 adults and children, state records show.

• A record number of Mainers — 56,000 — are counted as unemployed, and more than 150,000 — one in nine — lived below the poverty line last year, according to state and federal data. Long-term trends, including a rapidly aging population, mean pressure on Maine’s welfare system is likely to continue even as the economy recovers.

• Government is spending about 45 percent more than it did five years ago to provide food and shelter assistance in Maine. The federal government has paid for three-quarters of the increase.

To critics, the growing size of the programs reflects a culture of dependence. “There’s been a massive explosion in the amount of people trapped in Maine’s welfare system,” says Tarren Bragdon, director of the Maine Heritage Policy Center.

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Click no further than www.FixWelfare.com to understand the extent of Maine’s welfare dependency crisis. The skyrocketing level of dependence on Maine’s welfare system is a growing crisis—in almost every city and town in the state.

FixWelfare.com is a new site launched by The Maine Heritage Policy Center (MHPC) to show just how many Maine families are trapped in a welfare system that promotes dependency rather than self-sufficiency. At both county and town levels, users can see the number of people and percent of population enrolled in Maine’s major welfare system programs—Food Stamps, Medicaid, and TANF cash assistance. The site also features charting functions that offer town-to-town comparisons of the growth in welfare system dependence since 2003.

MHPC launched FixWelfare.com two weeks after the release of its 33-page report on the issue, titled Fix the System: Freeing Maine Families from Welfare Dependency, which is also available on the new site.

“There has been a lot of discussion on the issue of reforming Maine’s welfare system, but there was very little research and data available to inform those discussions and policy debates,” said Steve Bowen, director of MHPC’s Center for Education Excellence and lead researcher for MHPC’s Fix the System initiative. “With our report, and the launching of FixWelfare.com, we hope the public and policy makers will have a better understanding of Maine’s dependency crisis, and what we can do to lift families out of poverty and move them from welfare to work.”

The data on the site comes directly from government sources including the United States Census and the Maine Department of Health and Human Services. The site also includes symptoms of Maine’s dependency crisis, proven solutions to fix Maine’s welfare system, and a petition Maine people can sign in support of welfare reform that fixes the system to one that actually lifts families out of poverty while preserving the safety net for Maine’s truly needy.

“Maine’s dependency crisis is closer to home than people think,” said Chris Cinquemani, MHPC’s director of communications. “412 of Maine’s 488 towns reporting have seen an increase in the number of people enrolled in Maine’s welfare system since 2003. Instead of lifting people out of poverty and moving them toward self-sufficiency and work, Maine’s welfare system is designed to trap families in dependency. The system is broken. Unless we fix the system, in three years more Mainers will be on welfare than will have a job in the private sector.”

“Visit FixWelfare.com,” Cinquemani concluded. “See how close to home Maine’s dependency crisis really is, and sign the petition in support of reform. We must fix Maine’s broken welfare system. Maine families have been trapped in dependency for too long.”

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Signs of welfare dependency are right in our own backyards. The interactive map on this Web site allows you to see the extent of Maine’s dependency crisis in every Maine county, and every Maine town.

“There has been a lot of discussion on the issue of reforming Maine’s welfare system, but there was very little research and data available to inform those discussions and policy debates, until now” said Steve Bowen, director of the Center for Education Excellence at The Maine Heritage Policy Center (MHPC) and lead researcher for MHPC’s Fix the System initiative. “With our report, and the map functions on our new Web site, we hope the public and policy makers will have a better understanding of Maine’s dependency crisis, and what we can do to lift families out of poverty and move them from welfare to work.”

FixWelfare.com is not just meant to be a Web source of information on Maine’s welfare system. It’s meant to be a wakeup call. We can no longer rely on anecdotes to guide reforms. We must let the research inform us, so we can truly understand the dependency trap more and more Maine families have fallen into as a result of Maine’s broken welfare system.

“Maine’s dependency crisis is closer to home than people think,” said Chris Cinquemani, MHPC’s director of communications. “412 of Maine’s 488 towns reporting have seen an increase in the number of people enrolled in Maine’s welfare system since 2003. Instead of lifting people out of poverty and moving them toward self-sufficiency and work, Maine’s welfare system is designed to trap families in dependency. The system is broken. Unless we fix the system, in three years more Mainers will be on welfare than will have a job in the private sector.”

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The Maine Heritage Policy Center (MHPC) released a 35-page report examining Maine’s vast welfare system to provide an in-depth look at the causes of Maine’s growing government dependency crisis.  The report, Fix the System: Freeing Maine Families from Welfare Dependency explains the various policies within Maine’s welfare system that have caused a major spike in enrollment, and offers solutions to reduce that welfare dependence.

“Today, one in three Mainers is on some form of welfare,” explained Tarren Bragdon, MHPC chief executive officer and an author of the report.  ”During the Baldacci administration alone, welfare system enrollment grew 70 percent.  By any measure, Maine is the most welfare-dependent state in the nation.  Maine ranks second in the nation in the percent of its population on Food Stamps, second for TANF cash assistance, and second for Medicaid.”

Many of Maine’s welfare system policies are out of the mainstream and have contributed to such a high level of welfare enrollment.  For example, Maine offers TANF cash assistance to non-citizens, as well as convicted drug felons.  Further, a convicted drug felon faces no requirements such as drug treatment or testing to receive TANF benefits.

More troubling, however, is the wide-range of benefits available to individuals, which has increased dependency on the welfare system and has undermined hard work.  Mainers in the welfare system, the report explains, can get cash benefits, health care, food supplements, rental assistance, transportation benefits, child care, job training, and subsidies for electricity and heating oil.  This vast level of taxpayer assistance for welfare enrollees, combined with liberal eligibility requirements, lengthy and unenforced time limits, and a failure to enforce what few rules are written into the system have caused an explosion of welfare dependency.  Without reforms, by 2013, more Mainers will be enrolled in the welfare system than are working in the private sector.

The cost, both fiscal and moral, of such a massive welfare bureaucracy is huge.  In 2008 alone, Maine spent $2.506 billion on its welfare system-more than it spent on attracting new jobs ($47.6 million) and K-12 public education ($2.278 billion).  Despite this massive cost to fund Maine’s welfare system, the portion of Mainers living in poverty is actually growing (from 10.3 percent in 2001 to 10.9 percent in 2007).

“There are three steps Maine must take to reduce dependence on Maine’s welfare system,” said Steve Bowen, MHPC Center for Education Excellence Director and co-author of the report.  “We must focus aid on the truly needy, we must define success as new paychecks not more welfare checks, and we must overhaul the welfare bureaucracy to insert greater accountability and efficiency.  Such reforms, explained in detail in the report, will mean a stronger, more prosperous Maine, and a more effective welfare system in place for the individuals who need it most.”

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Click here to read Fix the System: Freeing Maine Families from Welfare Dependence.

Visit the Maine Freedom Forum to read Tarren Bragdon’s and Steve Bowen’s blogs on ending dependence on Maine’s welfare system.