Sept. 30, 2009 -- WASHINGTON — As Congress debates the government's role in health care, a report out Wednesday finds that state and federal officials failed to detect millions of dollars in Medicaid prescription drug abuse.

An audit of the government program in five large states found about 65,000 instances of beneficiaries improperly obtaining potentially addictive drugs at a cost of about $65 million during 2006 and 2007 — including thousands of prescriptions written for dead patients or by people posing as doctors.

The report, by the Government Accountability Office (GAO), represents "an enormous opportunity to save money," says Sen. Tom Carper, D-Del., who has scheduled a hearing Wednesday on the findings.

When bills for the doctors' visits are added, along with the potential for Medicaid fraud in states not reviewed by the GAO audit, Carper said: "We're talking hundreds of millions of dollars."

That could be good news for President Obama, who argues that a massive expansion of health care coverage can be funded by squeezing waste out of the current system. But as Obama continues to press for a government-run health insurance plan, the GAO report also reveals shortcomings in how the government manages Medicaid. The program for low-income and disabled Americans, run jointly by states and the federal government, underwrote more than $23 billion in drug costs last year.

The GAO audit focused on 10 types of frequently abused prescription drugs — painkillers and mood-altering medications. Abuse of such medications is "second only to marijuana," Joseph Rannazzisi of the Drug Enforcement Administration says in prepared testimony for the hearing.

A well-known example is the death of pop star Michael Jackson, which was ruled a homicide in August after revelations that the singer had pressed his personal physician to prescribe powerful sedatives to help him sleep.

The states targeted by the GAO — California, Illinois, New York, North Carolina and Texas — accounted for 40% of Medicaid's prescription drug payments in fiscal years 2006 and 2007. They are not fully taking advantage of federal databases or technology that could spot fraud, the report said.

The GAO found:

• About 65,000 cases where Medicaid beneficiaries visited six or more doctors and up to 46 different pharmacies to acquire prescriptions — a practice known as "doctor-shopping" that allows purchasers to exceed the legal limit of drugs.

• Sixty-five doctors or pharmacists writing or filling prescriptions after being banned from Medicaid, some for illegally selling such drugs.

• About 1,800 prescriptions written for dead patients and 1,200 prescriptions "written" by dead physicians.

States are working to prevent Medicaid prescription abuse but there are "significant issues that must be addressed," Ann Kohler, director of the National Association of State Medicaid Directors, says in testimony prepared for the hearing. One obstacle she identified: tight state budgets that are slowing needed information-technology improvements.