INDIANAPOLIS — 13News has new information about what might have led to a massive Medicaid budget shortfall last year and how it may have been prevented in the first place.

A federal whistleblower lawsuit was just unsealed that provides insight into the Family and Social Service Administration’s announcement last December of a nearly $1 billion projected budget deficit.

That deficit meant cutting services to some of the most vulnerable Hoosiers.

The lawsuit is hundreds of pages long and details the allegations. It basically claims that several insurance companies and hospital systems defrauded Indiana’s Medicaid program by improperly billing them for patient care and walked away with more than $700 million.

According to the lawsuit, the alleged fraud sometimes involved duplicate claims, some of them made months and years after a patient had died.

The whistleblowers named in the lawsuit are two former state employees. According to court documents, they filed their lawsuit in 2021.

One of those former employees claims he worked closely with a contractor to look for fraud and warn hospitals and insurance companies when improper billing and claims were found.

According to the lawsuit, that former employee says in 2017, state Medicaid officials told him and his team to “significantly curtail its efforts” to use information from the contractor to “recoup improper Medicaid overpayments.”

The lawsuit accuses those Medicaid officials of “bowing to political pressure exerted by the health insurers’ and the hospitals’ lobby.”

All this comes about a year after the state announced a nearly $1 billion projected Medicaid budget shortfall.

The state blamed how families of medically complex children got reimbursed for care as part of the reason for that budget deficit.

At the time, those families were paid hourly to care for their children at home, so the state changed how they were reimbursed to a daily rate to cut costs.

Hundreds of families rallied at the Statehouse last year, protesting the changes and calling for more state accountability.

“We’ve been told it’s on all of us to make sure we are playing by the rules when it comes to Medicaid and it’s a little bit hard to swallow as a parent when it feels like allegedly families, we’re being held to a different amount of accountability and responsibility then what these large insurance companies and hospital systems are,” said Jennifer Dewitt with Indiana Families United for Care, who was part of those rallies.

RELATED: Parents who care for children with special needs protest impending FSSA cuts at Statehouse

Dewitt has a 16-year-old son, Jackson, who’s medically complex. He has a feeding tube and uncontrollable seizures that keep him in a wheelchair.

“Living with him is like running a PICU room out of my house,” said Dewitt.

The lawsuit names some of the biggest hospital networks and insurance companies around, companies like Indianapolis-based Anthem, Ascension Health, Community Health, IU Health and the Marion County Health and Hospital Corporation.

“If these allegations are true, we find this to be really disturbing. Our families have been made to feel like we’re the problem,” said Dewitt. “We were kind of made out to be the scapegoats.”

13 News reached out to FSSA about the lawsuit and did not hear back. 

We also reached out to several of the organizations named in the suit. Most said, in essence, they would not comment right now on ongoing litigation.

Ascension Health also added that it “is committed to vigorously defending the organization and our associates against the untrue allegations in the complaint.”  

RELATED: Changes to how state pays parents to care for their medically complex kids take effect Monday

For parents like Jennifer Dewitt, the lawsuit is proof of one thing. She said there needs to be more oversight of FSSA and its programs.

“Indiana just needs to do more, quite frankly,” said Dewitt. “This is three-quarters of a billion dollars. That’s enormous for that not to be important enough to investigate.”

She questioned why FSSA or Indiana Attorney General Todd Rokita did not investigate the allegations.

“If there’s $50 that I don’t understand where it went on my checking account, I want to investigate where that $50 went. How do you not investigate where $720 million go?” asked Dewitt.

According to a statement provided by a spokesperson for Rokita, the AG’s office looked at the case, along with federal investigators.

The statement said, in part, “In the best interest of the taxpayers, we declined to intervene and directed our resources elsewhere.”

According to the attorney general’s website, “A whistleblower must first file a private lawsuit against the company under the False Claims Act.”

Essentially, the whistleblower uses their own resources to file a suit on behalf of taxpayers. After a private lawsuit is filed, the state and federal governments can investigate the fraud case and intervene.

While the government investigates the fraud, the case is sealed. If the government intervenes, the case is unsealed and can go to trial or proceed to settlement.

RELATED: Families impacted by FSSA’s proposed cuts meet with governor, FSSA secretary

Both the taxpayers and the whistleblower can be reimbursed if a settlement is reached, or the case goes to trial.

According to the AG’s website, several years can pass between a whistleblower filing a sealed lawsuit and the conclusion of the case.

Democrat Destiny Wells, who is running against Rokita in the 2024 election to be Indiana’s next attorney general, issued a statement about the fraud allegations.

“In case the state’s top attorney needs a reminder, he is in control of Indiana’s Medicaid Fraud Control Unit,” the statement read, in part.

The attorney representing both whistleblowers said the goal of the lawsuit is to recover “much-needed funds for Indiana’s Medicaid program and to hold health insurers and major hospitals accountable for the alleged Medicaid fraud.”

State Rep. Greg Porter (D-District 96) released a statement on the lawsuit which said in part: “We need answers because each dollar of that shortfall represents a life-saving service for our most vulnerable Hoosiers.”

Porter called the alleged fraud “disappointing, frustrating and diabolical.”

13News reached out to Gov. Eric Holcomb’s office for his comment but did not receive a response.