Gov. Roy Cooper recently made it easier for people to apply for Medicaid coverage during the COVID-19 outbreak. State Auditor Beth Wood worries the new rules will weaken an already-lax oversight system and encourage fraud. 

The coronavirus drove Cooper to waive some oversight of the eligibility of Medicaid beneficiaries. The moves would speed up processing to meet a flood of expected Medicaid applications. But they also open the program to fraud, Wood said. She wants to see harsher penalties for scammers, though the law doesn’t provide the tools she needs to identify who may be gaming the system.

“When I go in and audit, I’m going to look at what consequences are put in place for anybody caught scamming,” Wood told Carolina Journal. “There should be severe consequences to take advantage of a program with limited money that was meant for people who really, really need it. It’s not a money tree. It can’t give forever. Eventually it will run out if people abuse it.”

Even before the outbreak, the N.C. Department of Health and Human Services struggled to maintain proper oversight. The department risked overpaying millions of dollars because it failed to oversee programs and contractors — including those responsible for health care, food benefits, opioid treatments, and family reunification, according to a recent audit report.

There’s just no follow-up on money they give out to others to make sure they used the money correctly,” Wood said. “The federal government and citizens who are paying tax dollars expect the right people to be getting the money.”

The department could have paid as much as $200 million to ineligible Medicaid beneficiaries, Wood said. That number doesn’t appear in the audit report, but it’s based on projections from the audit’s sample findings.

Even that $200 million may underestimate improper Medicaid payments because of self-attestation — or applicants’ claims about their income and eligibility are true. The program relies on applicants’ honesty to calculate if they’re eligible, and federal regulations prohibit Wood from checking that honesty.

“The most critical pieces that determine whether you’re eligible — income, dependents, age — I’m not able to verify that,” Wood said.

COVID-19 could worsen that problem. 

Cooper’s executive order authorized DHHS to temporarily waive any restrictions on self-attestation, other than making sure applicants meet citizenship or immigration requirements. The order will help DHHS handle an expected flood of new applications. But it also lets DHHS rely more on unreliable data, Wood said. 

“This opens the door for even more mistakes that can’t be verified,” Wood said. “People that want to take advantage of this crisis and timing will do so, and there’ll be more opportunity for people to scam the Medicaid system.”

Wood is pushing for reforms that would allow her to actually audit whether people who applied for Medicaid were eligible for benefits.

The recent audit report highlighted the absence of quality controls over the contractors that ensure Medicaid spending is medically necessary. Contractors oversee some $2.5 billion for services that require prior approval each year. Only one of the five contractors has written monitoring procedures.  

There may be only three or four contractors, but God knows how many of [medical] providers they are touching,” Wood said. “If they’re not doing it well, we need to know.”

The General Assembly authorized a 5% rate increase for those Medicaid providers during the coronavirus emergency.

The department has agreed with many of the audit’s findings. NCDHHS blamed the lapses in oversight partly because the department was stretched thin shifting to Medicaid managed care. 

Making matters worse, the department is still plagued by problems with NC FAST, the state’s notorious computer system. 

An estimated $4.5 million in benefits could have gone to ineligible families in the Temporary Assistance for Needy Families program. The department may face a penalty of up to $8.6 million for sending inaccurate data to the federal government, among other penalties. The department credited both problems to NC FAST.  

Wood wants to see harsher penalties for fraud, after the results of her last audit and growing concern over the coronavirus outbreak. She says she doesn’t expect an explosion in fraud during the crisis — but the state should protect itself.

“If they believe there are no real consequences coming, it leaves the door wide open for those unscrupulous people who don’t have a conscience,” Wood said. “I want to believe that people in the majority are good people. So I’m not expecting it. But if it happens, I won’t be surprised.”