Fraud in the $300-billion-a-year Medicaid (search) program is widespread and the federal government is not doing enough to combat it, congressional investigators said in a report released Wednesday.

Just eight federal employees monitor widely varying state efforts to fight Medicaid fraud, the Government Accountability Office (search) said. The federal Centers for Medicare and Medicaid Services (search) has been reviewing state programs since 2000 at a pace that will take it until late 2006 to cover all 50 states and the District of Columbia, said GAO, Congress' investigative arm.

The oversight "may be disproportionately small relative to the risk of serious financial loss," GAO said.

CMS administrator Mark McClellan said his agency is beefing up its financial management staff to review Medicaid spending.

Medicaid is the government health care program for the poor. It is run by the states, and its costs are shared by the federal and state governments.

Medicaid reimbursements are expected to top $300 billion this year, more than half of that in federal money.

While the report said it could not put a dollar figure on the extent of Medicaid fraud, it detailed several schemes uncovered by state and federal prosecutors. In California, for example, 15 laboratories billed more than $20 million for tests that were never ordered by physicians.

Also in California, an eyeglasses store fraudulently billed Medicaid for 59,574 pairs of glasses between 1995 and 2001, GAO said.

In addition, there are indications that Medicaid fraud involving drug pricing practices is increasing, said Sen. Charles Grassley, R-Iowa, who requested the GAO study.

Federal and state prosecutors are investigating several allegations of improper drug pricing, following settlements in seven cases of alleged pricing and marketing fraud since 2001, said Grassley, chairman of the Senate Finance Committee.

Grassley said the government needs to do more. "CMS has a problem with Medicaid fraud and its limited oversight is insufficient to protect the integrity of the program."

By contrast, he said, the government's Medicare health care program for older and disabled Americans, is more successful in rooting out abuse.

Other studies have found that the federal government recovers 20 times more money from prosecuting fraud in Medicare than in Medicaid — $1 billion compared with $43 million in 2001, according to the Washington-based Taxpayers Against Fraud Education Fund (search).

McClellan said the government is taking steps to look at both programs together since schemes to defraud one also often target the other.

A pilot program in California in one year produced a reported $58 million in savings and more than 80 cases against health care providers suspected of fraud, GAO said.