Medicaid Audits Find More Than $500 Million in Waste

Dinapoli Report Urges Increased Oversight With Transition to Managed Care

State Comptroller Thomas P. DiNapoli’s audits identified a total of $513 million in improper Medicaid payments and untapped revenue opportunities over a four-year period, according to a report released today. Auditors identified another $361 million in questionable transactions that will require further review and actions to prevent overpayments or recover costs.

“Medicaid is a vitally important program, insuring nearly 6.4 million New Yorkers and enabling them to access health care that would otherwise be unaffordable,” DiNapoli said. “But New York’s Medicaid program costs billions of dollars annually and the work done by my auditors has found waste throughout the system. My office will continue to diligently examine Medicaid payments to make sure healthcare dollars are being spent appropriately and taxpayer dollars are not squandered.”

The state expects to transition the majority of Medicaid spending, services, and enrollees to managed care by 2016, but recent audits by DiNapoli’s office highlight the need for more effective oversight of managed care organizations (MCOs). The report notes it is essential for DiNapoli’s auditors to have ready access to the MCOs’ financial and program data in order to perform its mandated financial oversight functions.

In state fiscal year 2015-2016, the Division of the Budget projects Medicaid expenditures will reach $62 billion in federal, state and local funding. State funding alone for the Medicaid program is projected to account for $22.4 billion.

While the Department of Health (DOH) administers the state’s Medicaid program, DiNapoli’s office plays an independent role in ensuring the Medicaid program’s integrity through auditing along with the Office of the Medicaid Inspector General (OMIG). The Attorney General’s Medicaid Fraud Control Unit (MFCU) investigates and prosecutes individuals and companies responsible for improper or fraudulent billing schemes at the state level, and county District Attorneys perform the same functions at the county level.

From January 2011 through February 2015, DiNapoli’s office released 73 audit reports highlighting recurring deficiencies in eMedNY, the computer system that processes Medicaid claims.

Flaws and inadequate system controls in eMedNY caused at least $190 million of the improper payments. Audits found that DOH was often slow to modify eMedNY, at times taking as long as three years to resolve issues raised by DiNapoli’s auditors.

Over the period, DOH failed to collect more than $170 million in drug rebates and discounts and made $169 million in improper payments for services provided to enrollees covered by both Medicare and Medicaid.

Overpayments also resulted from:

• eMedNY’s failure to deduct patient cost-sharing amounts from nursing-home payments ($47 million);
• Duplicate payments by managed care organizations (MCOs) and fee-for-service Medicaid ($18 million); and
• The issuance of multiple client identification numbers ($17 million).

Significant recoveries that resulted from DiNapoli’s audits included nearly $82 million from dual-eligible claims; $48 million from audits of cost-sharing funds in nursing homes and other errors on nursing-home claims and nearly $13 million from dental claims.

The Comptroller recommends that New York take the following actions to enhance the state’s financial oversight of MCOs in Medicaid:

• Set standards to ensure that MCOs detect, prevent, and correct errors in provider payments;
• Strengthen standards for MCOs regarding provider credentialing, review and verification, and timely reporting of this information to the state;
• Implement previously issued audit recommendations, which address processing of MCO claims, in the new Medicaid Administrative Services system;
• Strengthen the enforcement of timeliness and quality standards as well as provider identification requirements for encounter data from MCOs; and
• Apply financial penalties when MCOs do not comply with DOH requirements.

See the complete report: Ensuring Integrity in New York State Medicaid.