News: CJ Exclusives

Expert: N.C. Needs Better Way To Monitor Medicaid Rolls

Income eligibility for program largely relies on honor system

RALEIGH — Before North Carolina considers Medicaid expansion, it should ensure its existing rolls are not bloated with ineligible recipients, and create a verification system to prevent adding even more unqualified beneficiaries, a national health policy analyst warns.

Josh Archambault, senior fellow at the Florida-based Foundation for Government Accountability, said his organization has determined few states have adequate safeguards to root out waste, fraud, and abuse when enrolling Medicaid recipients, or in verifying annually that recipients remain eligible for continuous coverage.

In Illinois, Archambault said, a state crackdown found hundreds of thousands of ineligible recipients still receiving tax-paid Medicaid benefits due to sloppy or nonexistent means of checking that recipients were eligible to be on the program. The state discovered it was paying Medicaid benefits to 3,000 dead people, some residents who had moved out of state, and others whose income exceeded the cutoff for qualifying.

Much of Illinois’ problem resulted from its reliance on a system of passive redeterminations — an honor system under which the state asks Medicaid recipients to return a postcard if they no longer qualified for benefits, Archambault said. Those who failed or refused to return the postcards continued receiving Medicaid coverage, and the state rarely followed up. This passive system is used by the North Carolina Department of Health and Human Services and Medicaid agencies in many other states, he said.

DHHS spokeswoman Alexandra Lefebvre said North Carolina has a number of crosschecks that provide valid, reliable information to protect the integrity of Medicaid.

Still, Archambault said, North Carolina has had “some major issues throughout the years, so I’m going to go ahead and guess they’re not the model” for annual eligibility redeterminations to confirm a recipient’s income, address, citizenship, family size, and other criteria still meet program guidelines.

“If they’re not doing a good job with administering the program that currently exists, then why should we be throwing all these other able-bodied adults into the program” through Medicaid expansion, Archambault said.

DHHS Secretary Aldona Wos has faced a multitude of spending, contracting, budgeting, computer and other problems she inherited with the agency, which ran $2 billion over budget during the past four years.

Wos maintains DHHS ran a $63.6 million surplus for the 2013-14 fiscal year by deploying better monitoring and operating more efficiently. At a Feb. 11 joint meeting of House and Senate Appropriations Committees on Health and Human Services, she said Medicaid is “on target” to meet its budgeted spending again this year.

State Sen. Louis Pate, R-Wayne, a frequent critic of the way Medicaid has been administered, said recently the state is “making some progress” under Wos.

“I think that we can show that we have some potential for having much better predictability and accountability than we’ve had in the past with Medicaid,” Pate said.

“There’s ample evidence to be suspicious of those claims even if in one year they claim they have a surplus,” Archambault said. And that does not negate the need for a concerted effort to clean up Medicaid rolls, he said.

The Foundation for Government Accountability has detailed Medicaid waste, fraud, and abuse in many states. “There’s really not a great shining star of a state to point to” in scrubbing unqualified recipients, Archambault said.

They’ve found examples of people owning four or five luxury cars but receiving Medicaid. A New Hampshire family who owns a Christmas tree farm valued at $1 million was on Medicaid and food stamps because that state does not verify the assets possessed by Medicaid applicants.

In Pennsylvania, lottery winners took lump sum payments and were removed from Medicaid rolls because that counted as income for the month. They became eligible for benefits the following month because they had no “income” despite their bulging bank accounts.

Jonathan Ingram, senior fellow at the Illinois Policy Institute and director of research at FGA, said the Land of Lincoln was rife with ineligible Medicaid recipients. He helped to work on reform legislation.

State lawmakers in 2013 forced the administration of former Gov. Pat Quinn to hire an outside contractor to implement a new eligibility review project. At one point the vendor determined the state had a 61 percent error rate in eligibility approvals.

“In the first year they actually removed about 300,000 people from the Medicaid program” who were ineligible, Ingram said. “The second year, which just ended in December, they removed almost 400,000 people.”

Determining a savings figure has not been possible because the previous administration did not actively monitor that, Ingram said.

It’s also difficult to determine how much has been saved by the anti-fraud provisions because Illinois recently shifted its Medicaid structure from fee-for-service, which pays doctors every time a patient visits, to managed care, in which providers receive a set fee per patient no matter how much service a patient requires.

Moreover, there were issues with Illinois’ passive-determination “honor” system for Medicaid enrollees. “Shockingly, very few people sent back a postcard with information saying that they were no longer eligible for Medicaid,” Ingram said.

The contractor further discovered about one in five of the passive redeterminations were not being done as often as federal law required, and some had gone five years without a review, “which is just crazy,” Ingram said.

“They looked into a bunch of the case files and found that a huge percentage of them didn’t have the required documentation [to be] on the program to begin with,” he said.

Ingram said North Carolina Medicaid officials “absolutely” should duplicate the Illinois project. Every dollar spent on someone who is not eligible for Medicaid, he said, “is a dollar we can’t spend on someone who is eligible.”

“We just had a period of probably three months we suspended our [Medicaid] recertifications. We just said everyone’s automatically requalified of those who were coming in,” said state Sen. Ralph Hise, R-Mitchell. “I think we may very well be looking at a system that’s very ripe for fraud in North Carolina.”

Lefebvre said DHHS mails passive redetermination forms annually to all 1,898,779 North Carolina Medicaid recipients.

“If there are no changes affecting the children’s Medicaid eligibility, the family does not have to return the redetermination form,” Lefebvre said. “The redetermination is automatically completed and eligibility is updated for another year using online verification and information currently available in the social services agency.”

The online verification “pulls data and interfaces with other divisions that contain income sources, such as Social Security, employment security, child support, etc.,” and an asset verification system connects with financial institutions to verify bank assets, Lefebvre said.

Using those online systems “streamlines and produces valid, reliable information, and reduces the burden on the beneficiary to provide necessary information,” she said.

Error rates in eligibility and enrollment “have not been established,” Lefebvre said. Instead, the state focuses on modified enrollees’ reported adjusted gross income.

Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.