GAO: $14 Billion in Improper Medicaid Billing

A shocking new report from the Government Accountability Office has found that Medicaid wrongly paid out more than $14 billion to managed care organizations (MCO’s) — partners with states in providing health care services to clients.

The improper payments included “services that were not necessary, never performed or weren’t eligible for coverage,” according to this story in the Washington Examiner:

MCOs, which allow Medicaid beneficiaries to get their care though state-run programs are rapidly increasing in popularity through the expansion of Medicaid. The amount of annual improper payments could increase because of Obamacare, GAO found.
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The “size and diversity” of the MCOs have put both state and federal governments at odds on how to oversee the payments, the report said.

Specifically, the wrong payments made were for treatments or services not covered, not necessary, or billed for but never provided, GAO found.

States that expand Medicaid programs under Obamacare will receive a 100 percent reimbursement from the federal government for MCOs for the next two years, the report said.

Given that state and federal governments have recovered “only a small portion” of the wrongly paid money, unless they ramp up their oversight of MCOs, even more Medicare dollars will be “vulnerable to improper payments,” GAO said.

States were also under-reporting to the federal Centers for Medicare and Medicaid how much money they recovered when they realized they’d made these undeserved payments, GAO revealed.

In 2013 alone, Medicaid covered almost 72 million Americans. The program costs American taxpayers more than $430 billion annually.

No one knows how much total waste, fraud, and abuse is in the Medicaid program. If this independent audit of the Illinois Medicaid program is any indication, the US taxpayer is in a world of hurt.

In January, the Illinois Department of Healthcare and Family Services, or HFS, began a new project verifying eligibility for Illinois’ 2.7 million Medicaid enrollees. For years, state workers had failed to take adequate steps to ensure the people receiving Medicaid benefits were actually eligible for the program. As an Auditor General report noted, state workers failed to verify basic eligibility criteria, such as income, residency and citizenship status. Worse yet, some of the annual eligibility checks had been delayed for more than five years.

So state lawmakers pushed HFS to hire an independent vendor who specializes in this kind of work to review Medicaid eligibility. Since January, the independent vendor has reviewed nearly 419,000 case files of individuals currently enrolled in Medicaid. Of those, the vendor identified more than 210,000 that were ineligible for benefits, which amounts to more than 50 percent of all cases reviewed so far. Another 47,000 cases reviewed so far this year were eligible for some benefits, but enrolled in the wrong program. For example, some individuals enrolled in Medicaid may only qualify for programs with greater cost-sharing. Overall, the review has yielded an eligibility error rate of more than 61 percent.

When HFS receives a recommendation from Maximus to cancel benefits for a particular case, the state gives the enrollee an additional 20 days to submit documentation showing they are still eligible for benefits. The state then removes individuals from the program after verifying that they are no longer eligible.

Unfortunately, the American Federation of State, Municipal and County Employees has initiated a legal challenge which may slow or halt this progress. AFSCME wants the state to terminate its contract with the expert vendor reviewing eligibility and instead hire new dues-paying state workers to do the job. Never mind the fact that state workers’ failure to do the job adequately prompted the state to hire an independent vendor in the first place. With another 347,000 cases currently pending review, and thousands more on the way, this challenge becomes all the more worrisome.

Illinois may not be typical, but some states are surely as bad as Illinois in managing the program. The problem is immense and may approach $100 billion in waste and fraud, according to this JAMA study from 2012 (abstract only):

The need is urgent to bring US health care costs into a sustainable range for both public and private payers. Commonly, programs to contain costs use cuts, such as reductions in payment levels, benefit structures, and eligibility. A less harmful strategy would reduce waste, not value-added care. The opportunity is immense. In just 6 categories of waste—overtreatment, failures of care coordination, failures in execution of care processes, administrative complexity, pricing failures, and fraud and abuse—the sum of the lowest available estimates exceeds 20% of total health care expenditures. The actual total may be far greater. The savings potentially achievable from systematic, comprehensive, and cooperative pursuit of even a fractional reduction in waste are far higher than from more direct and blunter cuts in care and coverage. The potential economic dislocations, however, are severe and require mitigation through careful transition strategies.

The study included both Medicare and Medicaid expenditures.

Not all of that is fraud. What the Illinois auditor found was that the problem was mostly bureaucratic incompetence and laziness. “Annual” reviews of eligibility would be given every 5 years. Placing recipients in the wrong program, giving them too much in benefits. The auditor found more than $12 million in benefits was dispersed to dead people. With 2.7 million Illinois residents receiving Medicaid benefits, those mistakes start to add up quickly.

The problems with Medicaid and MCO’s must be addressed now. There are 7 million new Medicaid clients as a result of Obamacare’s expansion of the program. One can imagine the utter waste of taxpayer money involved in vastly expanding what amounts to a broken program.

That $14 billion in improper Medicaid payments is just the tip of the iceberg. More must be done to combat the problems in Medicare and Medicaid fraud before both programs bankrupt us.