HELENA — Montana State Auditor James Brown says his office has identified what could be up to $50 million in attempted health care fraud, in what he calls a scheme targeting vulnerable people in the state’s tribal communities.
Brown told MTN the suspected fraud stands out because of its scale.
“It’s unprecedented in the history of this office, there’s no doubt about it,” he said.
Brown says, shortly after he took office last year, the insurance company PacificSource alerted his staff to what it believed were fraudulent claims related to drug and alcohol abuse treatment. The agency then began a monthslong investigation. Now, they say, they’ve passed on their findings to the federal government and gotten authorities to stop $22 million in suspected fraudulent claims – with potentially much more to come.
“What we've been is able to be proactive and make sure the payments don't even go out on the first end,” said Brown. “You can imagine by the time that we started investigating this, we're pretty confident, unfortunately, that a lot of unjustified payments had probably already been made.”
The alleged fraud centered on purported substance abuse treatment facilities outside Montana, many in California. The auditor’s office says insurance producers, some unlicensed, went to tribal communities and aggressively recruited potential patients. They say those individuals were encouraged to sign up for Affordable Care Act marketplace health insurance plans – and sometimes to disenroll from Medicaid. They were then sent to the out-of-state facilities, but Brown says they would receive little or no actual treatment. However, the facilities would bill insurance companies up to $9,000 a day for up to 90 days.
“The most troubling part of this is that the services weren't provided, and then after the period in which treatment could be had in theory, they would just kick these people out on the street and provide them no way to get back to Montana,” said Brown.
PacificSource took the auditor’s findings and went back to the U.S. Department of Health and Human Services, which approved rescinding dozens of claims – meaning the insurer did not have to pay out the money in these cases.
Brown says Native Americans were particularly targeted because of provisions in the Affordable Care Act that allow tribal members to enroll at any time of year – not only during the standard open enrollment window – and without a waiting period to start claiming care. He says tribal communities and the people sent to these facilities are victims in this situation.
“This is a terrible injustice that's been done to vulnerable populations in Montana,” he said.
While these initial reports have focused specifically on PacificSource, Brown says it likely wasn’t the only insurance company affected.
The state auditor is Montana’s commissioner of securities and insurance, responsible for regulating those industries. Brown says, because most of the suspected fraudulent activity is happening outside Montana, his office doesn’t have criminal jurisdiction, but they are working with the FBI and the U.S. Attorney’s Office on possible additional action.
“We are hopeful that criminal charges will be brought,” he said.
The auditor’s office is able to bring civil penalties, including fines, against insurance producers who were responsible for signing up patients for these plans – particularly if they weren’t licensed by the state at the time.
Brown says other states with large Native American populations, including Oklahoma and Alaska, have seen similar activities. In 2023, federal authorities put out a warning about this type of scheme targeting Native American communities.
The auditor’s office has been speaking with tribal leaders, trying to get the word out to be cautious about these potentially fraudulent actions. Brown says the biggest red flags should be if someone is trying to get Native Americans to go out of state for addiction treatment, and if they are encouraging people to get off Medicaid and sign up for a health plan on the marketplace instead for this type of treatment.
Brown sought to differentiate what happened in this case from the investigations into suspected social services fraud in Minnesota, which has received national attention in recent weeks.
“Here, if you're a bad actor, you don't get to make excuses, you don't get political cover,” he said. “What you do get is investigations, rescissions and criminal referrals.”
