DOVER — Legislators on the Joint Finance Committee said last year they believed the state government could save taxpayers $12 million by developing an innovative program to investigate Medicaid fraud and waste.

So when a government-funded project not only was put into place late but failed to find savings that met the committee’s expectations, many members were upset.

Last year, the 12 members of JFC designed a specific program that would have used smart cards to keep track of patients. Medicaid-eligible Delaware residents in a specified area would have had their Medicaid cards replaced with new ones containing an electronic chip.

The patient would have presented the card during a visit to a health-care provider, and the provider could have obtained off it electronic information containing previous medical procedures and treatments.

In this way, “doctor shopping” could have been prevented, as doctors would have quick access to a patient’s history to see if he or she was receiving duplicate services or drugs.

However, the plan was not implemented as legislators had wanted. JFC members criticized officials of the Delaware Department of Health and Social Services in February when DHSS appeared before the panel to discuss its budget request.

DHSS was required to hire a contractor by Oct. 31, but the agency missed the deadline and ultimately did not select an agent until March.

Medicaid officials drew heat from the 12-member committee in February, and on Tuesday, lawmakers again expressed their displeasure with DHSS’ efforts.

While a full report was supposed to be filed by April 30, the delay in hiring a company made that impossible. Instead, the contractor issued a preliminary report, which covered services such as dental, pharmacy and inpatient.

The report found $4.1 million in claims that it identified as problematic, although it noted they were not necessarily evidence of fraud. About $2.5 million of that came from services billed at the more expensive inpatient rate when they should have been treated as outpatient.

Viewing the findings as disappointing, several members of JFC ripped the report and DHSS on Tuesday.

Sen. Brian Bushweller, D-Dover

“I just have not felt with any confidence that this exercise is going to produce anything worthwhile,” said Sen. Brian Bushweller, D-Dover. “I hope I’m wrong.”

Even if all of the $4.1 million is found to have been improperly paid out, that doesn’t mean the state will be getting $4.1 million back. Some of that money would go to the federal government, meaning Delaware likely would receive less than half of the total reimbursement, according to Kimberly Reinagel-Nietubicz, a member of the Controller General’s Office.

“We can’t say that we can recoup any of those funds,” she told JFC members.

While the contract already has been signed, Ms. Reinagel-Nietubicz, who communicates regularly with DHSS, said she would pass along the committee’s request for more specific information.

Sen. Karen Peterson, D-Stanton, expressed frustration the final report would not be released until Oct. 1. It was intended to be finished by April 30 to allow the budget-writing committee to determine if the program should continue.

Sen. Karen Peterson, D-Stanton

The chances Delaware is able to receive money back are “slim to none,” she said.

DHSS officials, who were not at the budget-drafting session Tuesday, said Wednesday they did not have estimates on how much the state government might recover.

“You hope and we like to think that we’re doing a fairly decent job of ensuring the integrity of the program, but at a program this size obviously there are going to be things that we’ve missed,” said Stephen Groff, director of the Division of Medicaid and Medical Assistance.

Other states have found it can be difficult to recover money gained by companies as a result of fraud, he said, but in situations where providers simply make mistakes in billing, overpayment is much easier to rectify.

Legislators allocated $500,000 for the program in this fiscal year, with half of that to be withheld until “an adequate return on investment,” defined as at least $250,000, is found in waste or fraud.

Some JFC members criticized the return on investment figure as being too low. While the committee wrote the language governing the payout, lawmakers were counting on the smart card feature, which Sen. Peterson characterized as preventative rather than reactive.

“You’re doctor shopping. You know how we know? Because you’ve taken your card from doctor to doctor to doctor because you want your pain pills or whatever,” she said. “It would have been real information.”

DHSS officials told a somewhat different story, expressing confidence in the work being done by the agent, Health Integrity. Acknowledging the contract was delayed, Mr. Groff said his division had to work with other units, meaning the request for proposal was developed later than planned but was more inclusive.

He said specific language included in the budget bill passed last summer by legislators does not require the department hire a company that utilizes smart cards. Such technology also raises questions of security and risks overburdening providers, he said.

DHSS also had a defender in JFC co-chair Rep. Melanie George Smith, D-Bear, who attempted to answer some of the questions posed by lawmakers Tuesday. While the report is not what lawmakers had hoped for, Health Integrity still can find usable data, she said. DHSS has the same goals as JFC in seeking to save money by preventing fraud, but the agency has had to wade through a “mammoth bureaucracy,” she argued.

But other lawmakers disagreed.

The program is now in danger of being a “bust,” Sen. Peterson said.

“Where do we go? Do we pile another $500,000 back into wasted programs?” asked Sen. David Lawson, R-Marydel.