Planned Parenthood Paid $3 for Birth Control but Billed Medicaid $35, Former Manager Says

Kelsey Harkness /

A little-known whistleblower lawsuit accuses Planned Parenthood clinics in Iowa of wrongly siphoning millions of American taxpayer dollars with a series of complicated billing schemes aimed at increasing profits.

Among other dishonest practices, a former manager of the clinics alleges, Planned Parenthood staffers routinely purchased birth control pills for just under $3, billed Medicaid $35 for the same package of pills, and got reimbursed for $26.

The lawsuit, brought by Sue Thayer, a 17-year employee of Planned Parenthood in Iowa, coincides with a national scandal over undercover videos that show the organization’s officials in other states talking about the sale of body parts from aborted babies.

The series of videos, hotly disputed by Planned Parenthood Federation of America, triggered renewed efforts by conservative lawmakers to strip taxpayer dollars from the nation’s largest provider of abortions.

In her suit, Thayer alleges multiple accounts of fraud, waste, and abuse in the Iowa clinics that add up to nearly $28 million. Her allegations raise both ethical and legal questions at a time when the national Planned Parenthood organization faces a hostile climate in Washington, D.C., and beyond.

From April 1991 to December 2008, Thayer managed Planned Parenthood’s clinic in Storm Lake, Iowa. From 1993 to 1997, she also was center manager of the clinic in LeMars, Iowa. The two locations since have been consolidated into Planned Parenthood of the Heartland.

Thayer says she was fired at the end of 2008 after raising concerns about “webcam abortions”—a controversial practice that allows Planned Parenthood doctors to dispense abortion-inducing pills to clients remotely using video-conferencing equipment.

Planned Parenthood of the Heartland calls Thayer a “disgruntled former employee.” In an email to The Daily Signal, it said: “We deny those allegations and have no other statement to make on that case.”

Thayer maintains she’s anything but disgruntled. She continues to move forward with her lawsuit, and she testified before Congress in October about her experience inside the nation’s largest abortion provider.

“I really feel like, as a taxpayer, as a mom, as a lover of life, it’s my job to try to shed light on what goes on in there,” Thayer told The Daily Signal in an exclusive interview. “I know they’re not being honest.”

Medicaid Billed for More Than 10 Times Cost of Pills

By privately negotiating a deal with Ortho Tri-Cyclen Lo, a birth control prescription manufactured by Janssen Pharmaceuticals, Thayer said the Iowa clinics were able to purchase birth control pills for $2.89 per 28-day cycle.

In late October, The Daily Signal emailed both Ortho Tri-Cyclen Lo and Janssen to confirm these numbers, but neither has responded.

Thayer then said Planned Parenthood of the Heartland would bill Medicaid $35 for each birth control package and be reimbursed about $26 by Iowa Medicaid authorities.

Medicaid, a government-run health care program, provides free services to low-income families and individuals. When a patient on Medicaid seeks treatment at one of Planned Parenthood’s more than 600 locations, the organization bills Medicaid on that patient’s behalf.

Medicaid programs use what are called “open fee schedules” to set compensation levels for prescriptions such as birth control.

According to Iowa Medicaid’s current open fee schedule, providers such as Planned Parenthood are allowed to be compensated $25.36 for each package of contraceptives (or 92 cents a pill).

The Daily Signal called and emailed Iowa Medicaid multiple times to ask what it considers “excessive” charging by providers for prescriptions, and what safeguards are in place to prevent fraud, waste, and abuse. A spokeswoman for Iowa Medicaid said cost for prescriptions such as birth control pills “is based on established national pricing” and that a number of safeguards are in place to protect against fraud. She said:

The Iowa Medicaid Enterprise Program Integrity Unit regularly reviews payments to all providers to assure that providers are not fraudulently billing for services. If any billing and/or payment irregularities are discovered, resolution includes recoupment of any overpayments, all the way up to referral to the state’s Medicaid Fraud Control Unit and, where warranted, to the U.S. attorney.

‘Unusual’ Arrangement

Casey Mattox, a senior attorney at Alliance Defending Freedom who represents Thayer, called the alleged profits Planned Parenthood of the Heartland made from birth control subscriptions “unusual.”

“Medicaid providers, particularly nonprofits, usually don’t make money off their Medicaid patients,” Mattox said in an email to The Daily Signal. “But Planned Parenthood is unlike most nonprofit Medicaid providers in that its own annual reports show $127 million in profit last year and $765 million profit over the last decade.”

Mattox calls this profit margin an example of “waste and abuse” but says it’s not necessarily proof of fraud:

While Planned Parenthood makes a lot of money from abortions, in some states birth control pills are also its cash cow. A federal government program makes contraceptives available cheap to Planned Parenthood but allows states to set the reimbursement rates, even though [the government] pays 90 percent of the cost for contraceptives for Medicaid-eligible women. Iowa has allowed Planned Parenthood to make a major profit on every cycle of contraceptives.

Unlike most health care providers, which prescribe only drugs, Planned Parenthood clinics both prescribe and dispense prescriptions, allowing its clinics to control the price and volume of prescriptions.

Ed Haislmaier, an expert in health care policy and markets at The Heritage Foundation, said Planned Parenthood’s unique structure increases the opportunity for fraud.

“Cost equals volume times price,” Haislmaier said, adding:

The prescribers [physicians] determine volume, while the dispensers [pharmacists] can mark up prices. Typically, the two are separate and uncoordinated. However, in those cases [such as with Planned Parenthood] where the same entity controls both prescribing and dispensing, it increases both motive and opportunity to engage in fraudulent or abusive billing practices. This has been an issue at times in other areas, such as with oncology centers both prescribing and dispensing cancer drugs, or with in-house pharmacies at hospitals and nursing homes filing prescriptions written by staff physicians.

The more birth control Planned Parenthood of the Heartland prescribes to clients, the greater profit the clinic may make. Thayer says her employer took full advantage of this opportunity by using a program called “C-Mail.”

‘C-Mail’

In an effort to increase the bottom line, Planned Parenthood of the Heartland used “C-Mail” (short for contraceptive mail) to prescribe birth control to women and ship it by mail, Thayer told The Daily Signal.

C-Mail began as a voluntary program where women could opt in, but Thayer said in court documents: “Planned Parenthood of the Heartland management concluded it could dramatically increase its revenues by converting the [previously] voluntary or ‘opt-in’ C-Mail program to a mandatory program.”

The Iowa clinics where she worked did so by eliminating follow-up examinations and mailing each client at least a 12-menstrual-cycle supply of contraceptives in three-month increments.

Typically, 28 pills come in a single birth control package, which equals 84 pills over three months. To increase profits, Thayer alleges, Planned Parenthood began sending three prescriptions to clients every 63 days, “so there’s a 21-day overage.”

By the end of 2008, Thayer said in the lawsuit, at least 7,000 Medicaid-eligible women were enrolled in the C-Mail program. If any of those women moved or refused the pills, she said, the pills would come back in a “brown mailer.”

“We’d open them up, return them to inventory, put a new sticker on them and sell them to the next patient that came in without ever crediting the first woman’s account,” Thayer said.

In doing so, Planned Parenthood of the Heartland “effectively [was] billing Iowa Medicaid and/or Iowa Family Planning Network at least twice for the same [birth control pills],” Thayer claimed in the lawsuit.

Soliciting Donations

In addition to overbilling Medicaid for birth control subscriptions, Thayer said Planned Parenthood of the Heartland would ask patients—including Medicaid clients—to contribute at least $10 as a “donation” for each package of birth control pills, despite knowing that Medicaid fully covered the prescription for low-income patients.

For other services the Heartland clinic provided, Thayer said in the suit, employees “strongly suggested” that Medicaid clients pay “50 percent of the bill,” never telling them “the entire amount of the bill for family planning services rendered would be fully reimbursed.” 

“I’m a foster parent,” Thayer told The Daily Signal:

I’ve had a lot of kids and I’ve taken them to different appointments and never once have I been asked to give a donation towards their dentist’s appointment—Medicaid has always covered it. And I remember saying to my boss numerous times, ‘Is this right that we’re soliciting donations from Medicaid-eligible women?’ And he said, ‘Yes, it’s fine…it’s all legal and we should’ve been doing it years ago.’

The former Planned Parenthood director also said these donations never were reported to Iowa Medicaid while her Iowa clinics were being reimbursed for birth control and other services.

A spokeswoman for Iowa Medicaid told The Daily Signal that no specific policy covers “donations” from Medicaid clients as a form of payment. However, she said one rule states:

All Medicaid providers [such as Planned Parenthood] must note on their submitted claims any payments received from other sources, which would include any payments received from a Medicaid member (or the member’s family). Any such amounts are then deducted from the final Medicaid payment to the provider.

No Pressure Allowed

It’s a gray area whether Thayer’s description of Planned Parenthood of the Heartland’s donation process constitutes a violation of the law, some health care experts say. Ultimately, the courts will decide.

However, in August  2013, shortly after Thayer filed her lawsuit, court documents noted that the Iowa Family Planning Council, a network of providers of federal Title X funds, updated its “donation policy.”

The amended policy reads:

Title X guidelines state ‘voluntary’ donations from clients are permissible. However, clients must not be pressured to make donations, and donations must not be a prerequisite to the provision of services or supplies. If a patient asks for a recommendation about what they should donate, staff should not provide a figure but tell the client to give what they feel comfortable with giving.

In the lawsuit, Thayer’s attorneys cited this change, stating;  “The conduct Thayer alleges [Planned Parenthood of the Heartland] engaged in did not comply with this policy.”

The Lawsuit

In an email statement to The Daily Signal, Planned Parenthood of the Heartland acknowledged the lawsuit by its former clinic director but denied all allegations. A spokeswoman said:

Planned Parenthood of the Heartland is involved in an ongoing lawsuit with a disgruntled former employee who alleges that we committed Medicaid fraud during her tenure with the organization. We deny those allegations and have no other statement to make on that case, which is still being litigated.

In court, Tiffany Amlot, a lawyer representing Planned Parenthood of the Heartland, argued that Thayer offered “no proof” to back up her arguments.

“Her function was in the billing department, but not in submitting the reimbursement claims to the government,” Amlot said Nov. 20, 2013, during oral arguments in the U.S. Court of Appeals for the 8th Circuit. “She doesn’t identify a single actual claim that was allegedly submitted to the government that was false.”

Chief U.S. District Judge John A. Garvey agreed with Planned Parenthood and, in December 2012, dismissed the case. But in August 2014, the appeals court reversed that decision, and ruled that Thayer’s former position at Planned Parenthood uniquely allowed her “to plead personal, first-hand knowledge of Planned Parenthood’s submission of false claims.”

In the appeals court’s decision reinstating the case, three judges wrote:

[W]e conclude that Thayer has pled sufficiently particularized facts to support her allegations that Planned Parenthood violated the False Claims Act by filing claims for (1) unnecessary quantities of birth control pills, (2) birth control pills dispensed without examinations or without or prior to a physician’s order, (3) abortion-related services, and (4) the full amount of services that had already been paid, in whole or in part, by ‘donations’ Planned Parenthood coerced from patients.

The appeals court, however, dismissed two claims in Thayer’s lawsuit for technical reasons. Those claims alleged that Planned Parenthood of the Heartland prompted local hospitals to violate the federal Hyde Amendment—first, by unknowingly submitting false claims to Medicaid for follow-up care for chemical abortions, and second, by billing Medicaid for more expensive procedures than were actually used or medically necessary.

The Fallout

If the courts eventually rule against Planned Parenthood of the Heartland, the group could be liable for a penalty of up to $11,000 for each false claim submitted, plus three times the amount of actual damages as well as Thayer’s costs and attorney’s fees.

In addition, the False Claims Act provides that a successful whistleblower is entitled to a share of the amount recovered—with the balance being returned to taxpayers.

In 2013, Houston-based Planned Parenthood Gulf Coast settled with the Justice Department over similar allegations brought by a whistleblower.

In the settlement, Planned Parenthood of the Gulf Coast paid $4.3 million to resolve civil allegations under the False Claims Act, filed in the U.S. District Court for the Eastern District of Texas. In a statement, the Justice Department said:

The government alleges that between 2003 and 2009, Planned Parenthood Gulf Coast billed and was paid by government programs, Texas Medicaid, Title XX, and the Women’s Health Program, for certain items and services related to birth control counseling, STD testing and contraceptives when such items and services were either not medically necessary, not medically indicated or not actually provided.

That settlement resolved a lawsuit filed by Karen Reynolds, a former medical assistant for a  Planned Parenthood Gulf Coast clinic in Lufkin, Texas.