Fraud Flowers When Funds Flow Fast

In California, a helpful reminder of how hard it is to police even good programs when they expand too rapidly. A state program was set up to provide in-home health care for elderly and disabled; this year it was budgeted at $5.42 billion to service 440,000 Californians. Under the program, people receiving care can hire whomever they want at state expense, and most hire their own family members for anywhere from $8 to $14.68 an hour. This is where it gets interesting.

One of the bigger busts in Fresno so far involved a husband and wife who got their children to bill the state $150,000 to care for them. The husband claimed he was completely disabled and could not get out of bed. A few days of surveillance revealed that he was spending eight to 10 hours a day working on his ice cream truck. He was caught on camera stocking the truck -- as well as dragging a washing machine across his driveway. His wife claimed to be completely paralyzed on one side. She was caught using the arm that she said was paralyzed to wave to her husband, pull down a heavy wood garage door and unload groceries from her car.

Problem is, no one is even investigating most of the alleged fraud. L.A. County has no investigators at all, and a backlog of over 800 fraud tips. Fresno County had to spend $650,000 of their own money to set up the state's only investigative unit. It is tiny, and they have a backlog of over 1,700 tips.

The nasty little secret: Those family members providing care have to pay union dues to SEIU, who collect over $5 million a month from in-home caregivers. They in turn donate heavily to the Democratic party, which enjoys single party rule in the state legislature, who in turn keep the spigots to the program running at full blast.

State Sen. Mark Leno (D-San Francisco), who sits on the committee charged with investigating the cost of the program, cited the small amount of funds recouped from fraud convictions--as though that's an true measure of the fraud committed--and compared it to, you guessed it, waste in Iraq:

"Seeing as we seemed to have misplaced $50 billion in the rebuilding of Iraq, it's [$5 million] an amazingly low figure," Leno said. Prosecutors say the state isn't uncovering more fraud because state officials are not looking for it.

The article seems to suggest a tiny fraction of the fraud has been found, even less recovered. The real number could be $50 million, or $500 million. Of course, we'll never know the amount of fraud in programs this big because we can't afford the enforcement necessary to find all or most of it. It's too big to be audited. 

But California can afford the program. The state is only facing a $41 billion shortfall over the next 18 months.