Medicaid could have paid hundreds of millions too much for patient care, welfare payments and children’s health while underpaying recipients for food stamps.
By Rose Hoban
A new report from State Auditor Beth Wood finds the Department of Health and Human Services continues to struggle with monitoring federal programs, complying with federal and state regulations and paying providers of care.
According to the audit, released Monday morning, the state’s Medicaid program may have overpaid providers by as much as $835 million and the federally funded State Children’s Health Insurance Program by as much as $81 million.
DHHS officials contend the audit’s estimates are overstated.
“It isn’t someone sending in fake claims where there was something done that wasn’t provided,” said Medicaid head Dave Richard. “It’s not something where somebody jacked up a rate that was inappropriately paid.”
This is the first year in which Wood’s office is calculating possible monetary projections to go along with annual federal compliance audits.
Job’s not finished until the paperwork’s done
In the fiscal year ending June 30, 2015, the department processed more than 127 million payments for services, totaling about $11 billion in state and local dollars. At the time, Medicaid covered health care for about 1.8 million children, some of their parents, people with disabilities and low-income seniors receiving long-term care.
Auditors looked at a sample of 396 payments out of those 127 million claims and found that 50 of the claims had overpayments totaling $4,288.
When extrapolating out that rate of excess payment over the entire program, Wood maintained “the likely total errors are $835 million,” with a range of as high as $1.2 billion and as low as $492 million.
Richard argued the number is more an accounting issue than money that’s available to be taken back from providers. He said the audit reflects things like the absence of documentation submitted by the tens of thousand of providers who deliver Medicaid services.
“If they don’t provide us with documentation immediately, it doesn’t mean that they didn’t provide that service as intended; we believe that service was provided,” Richard said. He pointed out that it’s difficult to get all of the programs’ providers to fill out every form correctly in a timely manner.
But if all the documentation isn’t complete, payment could be improper, the state auditor contended.
Richard also claimed these kinds of documentation issues are “the issue that every state agency in the country faces.”
According to a release from DHHS, the department will “continue its efforts to educate providers about documentation standards and will target education and training to specific provider types if they are consistently having issues.”
Richard argued that part of the number came from a time lag created by changes in policy, and that those issues get resolved over time.
Lawmakers often ask for changes to Medicaid rates paid to providers and then book those savings into the state budget. But it can take up to a year, or more, for federal officials to approve these state plan amendments; meanwhile, the state continues to pay providers at the old, higher rate.
Sometimes the state attempts to recoup those payments already made to providers after the new rates get approved. That was the case in early 2015, when the state attempted to recoup a year’s worth of payments from thousands of primary care providers up to a year after they’d delivered care.
According to the audit, these types of errors due to retroactive rate changes, along with “improper payment methodology,” could comprise as much as $72 million of the $835 million total.
Get a PERM
Richard argued a better measure of how North Carolina’s Medicaid program was doing comes from a federal Payment Error Rate Measurement, or PERM, audit done every three years, where investigators compare states to one another.
In that audit, Richard noted, other states had an 8.2 percent average error rate, whereas North Carolina’s rate was only 6.7 percent. Nonetheless, that could represent up to $500 million in potential payment errors.
He also said North Carolina’s error rate is improving year over year.
“We always want to improve. But I want to be clear that we’re not outliers in this process in North Carolina,” Richard said.
In their response to the audit, agency officials also cited PERM data as evidence of lower overpayments to providers in the State Children’s Health Insurance Program, or SCHIP. Wood’s analysis said compliance, documentation and rate-change issues under that program mean DHHS potentially overpaid about $81 million.
One issue cited throughout the agency’s response to the audit is that when a provider overbills by an amount less than $150, DHHS does not routinely pursue the money.
“Due to the extensive appeal rights afforded providers when the Department seeks to recoup overpayments collection for an error less than $150.00, [it] has the potential to cost the Department in excess of $500.00,” the response reads.
Many of the billing problems cited by the auditors were for overpayments less than that amount. But with 127 million claims paid out, that could quickly add up.
Not just Medicaid
The audit also found continuing problems generated by the state’s NC FAST enrollment and management information system. The computer system is intended to make it easier for county social service workers to enroll recipients in a variety of benefit programs, but since early 2014 there have been problems with payments from the Supplemental Nutrition Assistance Program, or food stamps.
During the 2015 fiscal year, NC FAST processed about $2.4 billion in payments to 1.2 million North Carolina households. Wood found the system overpaid some recipients, sent duplicate payments to some and underpaid others. In all, the errors accounted for about $352,000 in mistaken payments.
Wood also cited documentation and security problems in the NC FAST system, some of which, “due to their sensitivity, are reported to the Department by separate sensitive letter.”
Payments made in 2 percent out of 972 cases for Temporary Assistance for Needy Families, commonly known as welfare, found overpayments.
“Even though sample results identified only $16,872 in questioned costs, if tests were extended to the entire population, questioned costs could be significant to the program,” Wood wrote.
The audit also found continued problems in payments made by vocational rehabilitation programs run by the state, including failure to “support accurate and timely eligibility determinations for the program,” errors in claims processing and mistakes in calculating payments that could total as much as $4.7 million.
In response to the issues in the vocational rehabilitation program, the agency noted that in a 2013 audit the error rate was 39 percent, but that “for SFY 2015 the error rate has been drastically reduced to 5.6 percent in a larger sample.”