MEDICAID FRAUD AND ABUSE CAN GO UNDETECTED IN PENNSYLVANIA, PRIMARILY BECAUSE THE STATE DOES NOT HAVE AN AUTOMATED CLAIMS PROCESSING AND INFORMATION RETRIEVAL SYSTEM IN FULL OPERATION. MORE STATE FUNDS ARE NEEDED TO IMPLEMENT THE PLANNED MEDICAID MANAGEMENT INFORMATION SYSTEM (MMIS). IN ADDITION TO PROVIDING THE STATE WITH AN EFFECTIVE CLAIMS PROCESSING SYSTEM, MMIS CAN ANALYZE THE CLAIMS DATA BASE TO IDENTIFY POTENTIAL FRAUD AND ABUSE. FEDERAL AND STATE INVESTIGATIONS OF MEDICAID FRAUD HAVE INCREASED DURING THE PAST YEAR, BUT HAVE LED TO FEW PROSECUTIONS. THE PENNSYLVANIA MEDICAID FRAUD CONTROL UNIT ONLY RECENTLY TOOK STEPS TO COMPLY WITH A FEDERAL REQUIREMENT TO ASSURE REFERRAL OF CASES FOR PROSECUTION. THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE SHOULD REVIEW THE UNIT'S ACTION. PENNSYLVANIA RELIES ON CRIMINAL STATUTES ON WHICH TO BASE ITS PROSECUTION OF FRAUD CASES, SOME OF WHICH CALL FOR LESSER PENALTIES THAN DO THE FEDERAL MEDICAID FRAUD STATUTES. TO COMBAT MEDICAID FRAUD, PENNSYLVANIA SHOULD ESTABLISH PROVIDER AND RECIPIENT FRAUD STATUTES CONSISTENT WITH FEDERAL STATUTES. (AUTHOR ABSTRACT MODIFIED--RCB)