News: CJ Exclusives

Oversight group says Medicaid program detects waste poorly

NCGA's Program Evaluation Division finds contractors not holding counties accountable for failure to report waste or fraud

State Auditor Beth Wood, testifying in April about her office's findings of Medicaid fraud. (CJ photo by Dan Way)
State Auditor Beth Wood, testifying in April about her office's findings of Medicaid fraud. (CJ photo by Dan Way)

The state’s Medicaid program is not detecting or preventing waste, fraud, and abuse due to lack of staff, bureaucratic cooperation, and proper documentation, and the Medicaid Program Integrity Section is paying outside contractors much more to root out those problems than they return in savings, a state Program Evaluation Division report concluded.

Chuck Hefren, principal program evaluator for the Program Evaluation Division, told members of the Joint Legislative Program Evaluation Oversight Committee recently that problems at the state Department of Health and Human Services’ Division of Medical Assistance, which administers the Medicaid program, do not end there.

The DMA’s Program Integrity Section has failed to compile available reports from various federal and state agencies and law enforcement sources into a meaningful tool to detect improper Medicaid payments for services, or to identify the best areas to target to reduce problems before they occur, Hefren said.

The Program Integrity Section also has not held accountable county Departments of Social Services that are conducting inaccurate Medicaid eligibility reviews but not sharing lost costs of ineligible payments as a result of their mistakes with the state, Hefren said.

The Program Integrity Section was created to help ensure compliance and efficiency with Medicaid operations by detecting waste, fraud, and abuse, recovering improper payments, and identifying opportunities for cost avoidance.

The section is responsible for referring potential fraud to the state Department of Justice’s Medicaid Investigations Division for prosecution. But Hefren said the number of referrals has declined 84 percent, from 122 in 2012-13 to 20 in 2014-15.

Performance issues with the Program Integrity Section are “nothing new with the General Assembly,” state Sen. Ralph Hise, R-Mitchell, said during debate on the report. Hise is co-chairman of the Senate Health Care and the Appropriations on Health and Human Services committees.

In the past Hise has told Carolina Journal the state Medicaid system is “very ripe for fraud” due to insufficient eligibility determinations and renewals.

State Medicaid Director David Richard told committee members he objected to the process the Program Evaluation Division used to compile its report, and said the “findings are somewhat misleading” as a result.

He disputed that the Program Integrity Section refers fewer cases to the Medicaid Investigation Division. Some now channel from Medicaid Managed Care Organizations to Program Integrity, and are tabulated differently, but the totals remain consistent with past years.

The Program Evaluation Division report made several reform recommendations for the General Assembly to consider. Richard said his agency is willing to work with lawmakers.

Richard said some of the report’s criticisms have been or are being addressed. Some report findings used to illustrate underperformance are inaccurate, he said, because they were reviewed on a one-year time frame. One example he cited was recovering overpayments, a process that can stretch over more than one year.

In the 2015-16 fiscal year, 66,255 providers delivered Medicaid services to 2,295,654 poor, pregnant women and children, aged, blind, and disabled people. Medicaid consumes 17 percent of the state budget, so reducing waste, fraud, and abuse, and implementing cost-effective programs are top priorities.

The Program Integrity Section contracted with four private providers to do pre-claim and post-claim reviews to determine if payments were proper, and to perform data analytics to identify areas to monitor for abuse.

Hefren said the Program Integrity Section paid private contractors $8.6 million of its $13.8 million budget in fiscal year 2014-15. The contractor performing pre-claim reviews was paid $1.04 million, but saved the state only $370,000. Two contractors performing post-claim reviews were paid $2.6 million more in state funds than the state recouped from their work.

The Program Integrity Section focuses too much of its analytics and pre-claim and post-claim reviews on areas such as personal care, behavioral health, and ambulance services, which accounted for just 8.5 percent of Medicaid claims payments in 2014-15, while doing little to no review of skilled nursing facilities, prescription drugs, and inpatient/outpatient hospital services, which totaled 52 percent of claims, Hefren said.

The U.S. Centers for Medicare and Medicaid conducted a Payment Error Rate Measurement for North Carolina in 2013 that found $664.5 million in wrongful payments, an error rate of 6.7 percent. That was actually an improvement over 2010, when the error rate was 11.9 percent, and the value was $798.6 million.

The Office of State Auditor audited the Medicaid program and found a payment error rate projected at $835 million for 2014-15. In defending the Medicaid program then, as he did at the legislative committee meeting, Richard said those scrutinizing the program don’t always work with those operating it, which can result in misunderstandings and misinformation.

While most of the legislative meeting centered on programmatic ways to catch payment errors, some warned that piling on more regulations could be counterproductive.

Robert Leandro, a health care partner at the Parker Poe law firm in Raleigh, said he supports the findings of the PED report, but cautioned that under current prepayment reviews, “100 pages for one claim for one individual is a pretty average” output providers must submit to the Medicaid program.

Providers do not receive payments while under review, so cash flow problems arise in addition to the growing administrative burden, for which they might not have the money to hire additional staff. As a result, providers “almost automatically discharge” their Medicaid clients, which reduces their options for health care, Leandro said.

Knicole Emanuel, a Medicaid attorney at the Gordon & Rees law firm in Raleigh, testified that Medicaid auditors sometimes force providers to satisfy regulations that are stricter than those required by state law.

One personal care company got cited for not donning shoes on a Medicaid patient. “This person was an amputee and did not have feet,” Emanuel said. Another provider was cited for using purple ink on a form instead of blue or black ink.