News: CJ Exclusives

Officials: Checking Medicaid Eligibility Could Be Costly

State may have to repay feds if fraud uncovered

Replicating a cost-saving Illinois reform program could root out Medicaid fraud and abuse, but if not done properly, the state could be forced to repay the federal government for any misspent dollars, a key Senate Republican says.

“It would take some significant investment of the state in having an audit done of the system” to identify Medicaid recipients who are not eligible for the program but are improperly receiving benefits, said Sen. Ralph Hise, R-Mitchell. He is co-chairman of the Senate Appropriations Committee on Health and Human Services and chairman of the Joint Legislative Oversight Committee on Health and Human Services.

A larger disincentive is “once you identify one of those problems, you start a clock,” Hise said. The state would have to repay any misspent federal dollars within one year whether or not the state recovered money from the recipients or providers, Hise said.

That could spell trouble for a government insurance program that routinely spends more than is budgeted. If the state uncovered $100 million of improper payments, Hise said, $65 million would be owed to the feds.

In Illinois, the Medicaid program has tightened its review of annual eligibility redeterminations to ensure everyone receiving benefits qualifies for the program.

A computerized cross-check system periodically runs checks throughout the year to flag ineligible Medicaid recipients immediately.

State Rep. Jean Farmer-Butterfield, D-Wilson, was unfamiliar with the Illinois model but intrigued by its possibilities. She is a proponent of Medicaid expansion in North Carolina.

“If people who don’t qualify [improperly remain enrolled], and then there are people who need it and can’t get it, that’s horrible,” Farmer-Butterfield said. Tax dollars spent on ineligible Medicaid recipients would be better used expanding the Medicaid rolls, she said.

Hise also expressed interest in the Illinois eligibility renewal reform to limit unqualified recipients from remaining enrolled, and said the North Carolina system is “very ripe for fraud.”

He blamed that partly on ongoing problems with the state Department of Health and Human Services’ computerized NCTracks program, a Medicaid billing and claims system.

The department bases success “on how many times we say yes” to payments on NCTracks, Hise said, while there has been a reduction in program integrity because the department pays bills first, then chases information later, to verify the payments were legitimate.

“You also have the federal government coming down on us every month, saying our backlog for processing applications cannot exceed certain amounts or they make threats on the entire Medicaid system,” Hise said.

That combination of pressures makes it difficult to presume “we’re avoiding fraud and making sure we’re not paying out funds inappropriately,” Hise said.

Adopting a reform similar to that in Illinois would require approval from the federal Centers for Medicare and Medicaid, which is quick to shoot down changes if it deems they would make it more difficult for someone to receive Medicaid, he said.

Devon Herrick, senior fellow and health economist at the Dallas-based National Center for Policy Analysis, said Hise is correct in worrying that the state could be hit with federal repayment costs when scrubbing Medicaid rolls of ineligible participants.

“If it’s fraud that the state couldn’t catch, or wouldn’t be expected to identify, that’s one thing. If it’s just negligence on the part of the state I can see the state being forced to pay back some of the money,” and that could be a disincentive to state reform, Herrick agreed.

To avoid that scenario, he said, North Carolina could do more general analysis of eligibility renewal problems and look for suspicious patterns among enrollees.

Enhanced front-end scrutiny is among measures the Naples, Fla.-based Foundation for Government Accountability is prescribing. It has been involved with the Illinois project and is working with other states on similar reform efforts.

Those states conduct “a more robust eligibility check to begin with up front … to make sure that person in fact is eligible,” and then check at regular intervals throughout the year to make sure those getting benefits are eligible to do so. This method is better than relying on a one-time retroactive audit to catch past fraud, abuse, and errors, said Josh Archambault, FGA senior fellow.

Illinois removed hundreds of thousands of ineligible enrollees in the first two years of the new system. It did so by quickly removing ineligible enrollees rather than trying to collect from people who had been enrolled but weren’t qualified.

A state can enter agreements with a number of contractors that have access up to automated, electronic databases that perform immediate, comprehensive checks to verify eligibility at enrollment, and flag any boost in income or assets during the year, Archambault said.

States generally will say they do cross-checks with electronic verification in addition to the annual renewal form mailers, Archambault said. North Carolina DHHS said that is how it safeguards the Medicaid system here from waste, fraud, and abuse.

“But more often than not they’ll accept somebody’s self-assessment” about how many people live in their house, whether they got a job, if their income has risen above allowable maximums, or that they are the rightful person to whom the benefits are being provided, he said.

“I think in some states it’s been very intentional” on the part of bureaucrats and politicians to allow Medicaid abuse to persist, Archambault said, because some want to make sure people who don’t have private health coverage stay on the Medicaid rolls. Officials may avoid a comprehensive review of applicants or renewal candidates.

Bureaucrats and elected officials with vested interests may be reluctant to engage reforms because “it makes them look bad” when waste, fraud, and abuse are discovered, Archambault said.

Farmer-Butterfield, a former DHHS employee, said the Illinois program is “something they should look at as a department” at DHHS. She said she’s going to ask Secretary Aldona Wos whether they’ve examined the Illinois approach, “what they think of it, and whether they’re considering that at all for Medicaid reform in North Carolina.”

But she cautioned against rushing into such a system.

“Sometimes when you look at something and it looks like it’s working, it costs more” to implement than is actually saved, Farmer-Butterfield said.

Asked if the agency would consider using an outside contractor to assess the state’s Medicaid qualifying process, DHHS spokeswoman Alexandra Lefebvre said there were no contracts pending.

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