Millions of tax dollars are likely being wasted in Utah's Medicaid program on procedures -- including a breast augmentation and nose jobs -- that aren't covered by the government insurance program, according to a scathing legislative audit released Tuesday.

Millions more are lost because the Medicaid department isn't adequately going after providers who submit fraudulent bills. And while there are three sets of internal auditors charged with overseeing the department and its $1.7 billion budget, none are independent enough to do their jobs appropriately, the report says.

"I don't know that I've read a more damning report," said House Speaker Dave Clark, R-Santa Clara, during a Tuesday legislative meeting. He called leaders of Medicaid and the health department "somewhat lazy and sloppy."

"Every single page of this audit talks about lack of leadership, lack of management, lack of organization, lack of follow up," he said. "Lack of, lack of, lack of. ... I'm concerned."

The audit reviewed Medicaid's Bureau of Program Integrity, which is responsible for protecting Medicaid from provider fraud, waste and abuse through avoiding unnecessary costs and recovering wrongly paid bills. It was reorganized in 2008 in response to "growing concerns" by the federal government about "Utah's commitment to Medicaid integrity," according to the audit, which nevertheless found the bureau lacking.

"We believe there is significant room for improvement in BPI's operations, which can result in significant savings over time for the Medicaid program," Tuesday's audit states.

David Sundwall, the executive director of the Utah Department of Health, and Michael Hales, its Medicaid director, did not dispute the audit's findings.

"We accept all the recommendations of the audit and have begun the work required to implement them," they said in a written response, adding that some changes may require additional funding.

While auditors said they couldn't pinpoint exact dollar figures of potential savings with reform, they estimated at least $20 million savings in federal and state dollars.

One problem is the prior authorization process. The audit found that nurses charged with authorizing payment before certain surgeries and sleep studies have OK'd them even when they aren't covered. The audit blames an ambiguous state policy, lack of training and nurses who ignored the rules.

That led to the approval of 106 non-covered surgeries last year, including 65 circumcisions, 15 face reconstructions and three rhinoplasties. The surgeries may have been medically necessary, and thus allowable, but a committee should have reviewed them first, according to the audit.

The nurses also unilaterally approved 127 complex sleep studies, costing $1,200 each, without committee approval.

The committee, comprised of doctors and nurses, is less likely to approve noncovered surgeries than the nurses.

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