Two months ago, Attorney General Gary King indicted Joseph and Catherine Hernandez of Medicaid fraud with charges that would require them to pay around $78,600 back to the state.

The husband and wife, both Santa Fe residents, overcharged the Medicaid program while taking care of their two adult children, both of whom suffer from spina bifida, a birth defect affecting the spine. It's the latest in a string of Medicaid fraud prosecutions filed under King's Medicaid Fraud and Elder Abuse Division since his tenure began in 2007.

King, who has recently come under fire for failing to prosecute pay-to-play cases with sufficient vigor, now also must answer why New Mexico ranks 49th in the nation in its ability to reap back money lost through Medicaid fraud. A July 14 report by the Legislative Finance Committee says the state claimed just 53 cents for every dollar it spent prosecuting Medicaid fraud in fiscal year 2010.

"That's a pretty dismal performance," Sen. John Arthur Smith, D-Hidalgo, who chairs the LFC, tells SFR. "It's ineffective spending at the least."

Yearly Medicaid spending in New Mexico adds up to approximately $4 billion, a quarter of which comes from the state. The LFC report's lead evaluator, Maria Griego, says waste in the system can range from 3 percent to 23 percent.

"We don't aggressively dig out fraud, waste and abuse as well as we could," she tells SFR. "We should have a greater recovery."

The state's Human Services Department is responsible for identifying the fraud. But the report argues that HSD's effort lacks central focus, predisposing it to waste resources.

One example, Griego says, is New Mexico health provider Ambercare. Because it uses 11 different Medicaid provider IDs, the state monitors it as 11 providers rather than one. The result is an overlap in oversight, or what Griego calls "paying for things you don't need to pay for."

The state's seven managed care organizations, which act as Medicaid's insurance companies by managing patients' health expenses, have leeway as well. Although they're supported by taxpayer dollars, MCOs don't need the state's permission to hire or fire health providers like Ambercare.

Communication between the MCOs is broken, Griego adds. A health provider fired from one could still be listed in the network of another. Griego points to Arizona and Tennessee as examples of states with better oversight. "They have more visibility to who is participating in their Medicaid network," Griego says.

The report also singles out the attorney general for lacking both a time line to complete fraud investigations and guidelines to prioritize them. This means smaller fraud cases can overshadow the big ones.

Despite recognizing the LFC's role as "bean counters," Chief Deputy Attorney General Al Lama says the report emphasizes "a somewhat simplistic return on investment."

"When you're looking into fraud, it's not just about money, but also about successfully prosecuting the fraud committers," Lama tells SFR.

Lawsuits from the office for fiscal year 2011 led to 97 counts of fraud totaling a $3.2 million return, more than $800,000 of which was marked back to New Mexico. But compared to what the Attorney General's Office spent pursuing Medicaid fraud, the return is still much lower than states like West Virginia and South Carolina, which respectively reaped $17.72 and $22.44 respectively for each dollar spent curbing Medicaid fraud during the same period.

Since three-quarters of Medicaid money in New Mexico comes from the federal government, the same amount reaped from fraud goes back to the feds. Lama says New Mexico only reported the state's return rate to the LFC, while many other states reported the full amount, which could explain its low ranking. But Griego, who says the LFC used the data as the total amount, maintains the Attorney General's Office didn't raise concerns when it had a chance to review before the report went out.

Lama says his office will report the full amount in the next filing. Likewise, HSD spokesman Matt Kennicott says the state is planning to follow many of the report's recommendations.

But Smith still has concerns.

"The bottom line is, it's our tax dollars," he says. "If they choose not to investigate, there's not a whole lot we can do."