Audit Reveals States Owe Federal Government Billions for Fraudulent Medicaid Overpayments

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A watchdog group estimates recent audit of fraudulent Medicaid payments totaling nearly $2 billion "is really closer to $60 billion."

A recent audit of the Department of Health and Human Services (HHS) reveals that it directed $2.6 billion worth of taxpayer money toward fraudulent and/or mismanaged Medicaid claims over a period of five years. More than half – $1.6 billion – remains uncollected to cover the agency’s losses.

"In a way, this is a good news, bad news story," Truth in Accounting’s Director of Research, Bill Bergman, told "The good news is that they found the bad news. The bad news is that the dollar amount for the bad news is, indeed, a big number ... But this 'big number' pales in comparison to unfunded retirement benefits now facing the states, after accumulating for decades off the balance sheet."

According to the HHS inspector general (IG), taxpayer money was spent on Medicaid claims between 2010 and 2015 that were either flat out fraudulent or overpayments for incomplete claims. The IG’s office issued hundreds of audits to determine payments made through the Centers for Medicare and Medicaid Services (CMS).

The report does not specify the geographic regions where overpayments were made, or why they were made, but in states where payments were made, a large number lacked proper documentation. In many cases, the existing documentation provided revealed that payments were made for ineligible claims.

In California, for example, the IG’s office found that for an audited sample dating between October 2014 and March 2015, at least $959.3 million was paid on claims that didn’t qualify to receive Medicaid payments, and on claims that lacked documentation, which made them ineligible.

The Medicaid overpayments mentioned in the IG report related to two separate audits covering two separate time periods.

For the first audit covering Fiscal Years 2004 to 2009, states owed the federal government $188.6 million for overpayments it made, according to the report.

For the second audit covering Fiscal Years 2010 and 2015, states owed $2.6 billion, of which roughly $1 billion has been recovered. The balance leaves states owing the federal government, and taxpayers, $1.78 billion.

Under the Obama Administration, the federal government expanded Medicaid coverage to a greater number of people, which beginning in 2010 covered the costs for states’ Medicaid enrollments on a sliding scale. The federal portion has since receded and is expected to cover 90 percent of the annual costs of the program beginning in 2020.

About one-third of state spending is on Medicaid, CMS estimates, with current predictions that spending will increase by 6.1 percent annually for states and 5.7 percent for the federal government.

"The Medicaid program lacks program integrity and these major flaws hurt both taxpayers and the truly needy," Sam Adolphsen, vice president of Executive Affairs at the Foundation for Government Accountability, told "Unfortunately, a couple billion dollars in waste is just the tip of the iceberg. The fraud number is more like $60 billion a year, and most of that is caused by problems with the eligibility process, made worse by the explosion in enrollment thanks to Medicaid expansion."

The FGA points to a recent audit of Louisiana’s Medicaid program, which found that eight out of 10 enrollees were ineligible. Part of the reason for this ineptitude, Adolphsen argues, is because the state agency responsible for checking applicants’ information, like their reported earned income or household members, "aren’t being done frequently enough thanks to Obama-era regulations. Fortunately, the Trump administration could close these loopholes and help protect the safety net for taxpayers and the truly needy."

The IG report concludes that CMS has not adequately addressed how to resolve overpayment disputes.

"CMS had not recovered all overpayments covered by this review because its policies and procedures did not include timelines for resolving overpayments when State agencies disagreed with the recommendations," it states.

The report also says that "CMS did not ensure that states correctly reported Medicaid overpayments" on federal forms, and that in some cases CMS did not implement proper document retention procedures. IG auditors found that CMS had expunged some documents detailing recovered payments.

In a written response to a draft of the audit, CMS officials acknowledged the problem, stating it was "committed to achieving more expeditious resolution of these types of issues, as they arise, thereby ensuring Federal funds are repaid in a timely manner." The statement also said CMS was taking measures to correct its failed administration of the program.

According to the IG report, CMS was "negotiating with states on a number of identified overpayments," although which states, and for what amounts, was excluded from the report.

Published under: Medicaid