Special Reports

CHICAGO (CBS) ― Each year, $35 million of your tax dollars are wasted through Medicaid fraud. The money is supposed to be used for psychiatric services. CBS 2 Investigator Pam Zekman first exposed how companies psyched out the system. But tonight, surprisingly, lawmakers have blocked efforts to stop the abuses.

Every day busloads of nursing home patients are dropped off at so-called psych centers where they play games and socialize. 

And as we disclosed in February 2007, Equip for Equality investigators found psychotherapy sessions were sometimes attended by 100 patients at a time or were conducted by untrained staff.

"Programs that are unlicensed, uncertified and not regulated by any state or federal agency," said Deborah Kennedy of Equip for Equality.

Doctors with no background in psychiatry made brief appearances and then left.

Like Dr. Solomon Okai, an internist, who was paid $1.2 million over a two-year period for group therapy sessions he supposedly did for several psych centers. Sessions he described as: "It's just like babysitting," Dr. Okai said. "Adult sitting. Adult babysitting."

But the taxpayers are paying for psychotherapy.

"I'm not doing this by myself," Dr. Okai said. "In fact, we are not rendering any psych treatment. No."

State officials now say that exchange captured the essence of fraud in the program where nursing homes are paid for the same services psych centers provide.

In other words the taxpayers were being billed twice.

"That's correct," said Jim Parker of Health Care and Family Services. "It was outrageous. The amount of money that was being spent on services that were not legitimate at a time, especially when we're faced with enormous budget cuts."

But incredibly, a committee of state legislators recently voted to prohibit the passage of new rules that would improve services and help regulators curb massive fraud in the program.

The proposed rules would require that patients be diagnosed with a mental illness; limit psychotherapy sessions to two a week and no more than 10 patients in a group; and be conducted by a psychiatrist for at least an hour.

"We could save anywhere from $20 million to $30 million by putting these rules in place and putting an end to the fraud and abuse that's going on," Parker said.

"We are concerned that it is a massive healthcare psychotherapy fraud scam," said Illinois State Police Lt. Sherri Anderson Martin.

These rules would "stop it, curtail it," Martin said.

So why would state senator Ira Silverstein reportedly hold up the passage of these reform rules? Could it be because in one recent six-month period he got a whopping $82,950 from nursing homes and their lobbying groups?

CBS 2's Pam Zekman asked him about that.

"No. No. I'm looking out for the people in the state of Illinois," Silverstein said. "There were specific problems with this rule that we addressed."

When asked about how state police say that fraud in this area is rampant and these rules are needed to stop fraud, Silverstein said: "And you know what? Because of you and your report, we're addressing those fraud issues and they will be addressed in this rule."

Silverstein now says the rules aren't dead. But will any compromise be tough enough to get rid of the fraud? We'll let you know.

Meanwhile consider this: the rules were first proposed after our stories ran two years ago. At $35 million a year in estimated fraud, that's $70 million lost because of all the delays.

(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)

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