State audit finds $1B in 'unnecessary' Medicaid premium payments

Niagara Gazette

Jun 13, 2018

The payment of Medicaid managed care premiums that the New York State Comptroller's Office deemed "unnecessary" has cost the state big bucks in recent years.

An audit released by New York State Comptroller Thomas DiNapoli on Wednesday determined that the state Department of Health paid $1.28 billion for Medicaid enrollees who already had private insurance over a nearly six-year period.

DiNapoli chalked up the costly payments to "glitches" in the health department's payment system and "other problems" that led to what he described as "unnecessary spending."

“The department needs to improve its procedures and stop this waste of taxpayer money,” DiNapoli concluded.

Medicaid, a federal, state and locally funded program managed by DOH, provides a wide range of health care services to those who are economically disadvantaged or have special health care needs. For the state fiscal year ended March 31, 2017, New York’s Medicaid program had roughly 7.4 million enrollees and claims totaling $58 billion, according to the comptroller's office.

Under managed care, Medicaid pays managed care organizations (MCOs) a monthly premium for each enrolled Medicaid recipient and the MCOs arrange to provide medical services. As of Aug. 2017, according to state auditors, 4.4 million people were enrolled in mainstream managed care plans – about 2.5 million were enrolled through New York State of Health (NYSOH), New York’s online health insurance marketplace and the remainder were enrolled through other means.

DiNapoli's office indicated that many Medicaid recipients have additional sources of health care coverage while noting that DOH’s policy is to exclude Medicaid recipients from mainstream managed care when they have concurrent comprehensive third-party health insurance. When the Medicaid managed care provider and the third-party provider are the same, the state can remove the recipients from managed care retroactively and recover the unnecessary premiums paid to the MCO, according to rules in the Medicaid Managed Care Model Contract. Auditors found that was the case for $26.9 million of the premium payments.

About $70.6 million of the premiums were paid to MCOs that were related through some form of ownership (such as parent, subsidiary, or affiliate) to the third-party insurer.

DiNapoli suggested officials at the state department of health should review these relationships to confirm if the premiums are recoverable.

DiNapoli’s auditors noted, however, that $1.17 billion (about 3.2 million premiums), which represented about 91 percent of the unnecessary premiums paid during the audit period of Jan. 1, 2012 to Sept. 1, 2017, are not recoverable (according to the model contract) because the MCO and third-party insurer are not related.

DOH often learns of enrollees’ third-party coverage after the coverage has taken effect. Of the $1.28 billion in payments, auditors determined Medicaid paid more than $691 million in premiums while enrollees’ third-party coverage was in effect, but not known by DOH. To prevent premium payments from being made – especially unrecoverable premiums – DOH should identify third party coverage immediately.

Medicaid also paid more than $591 million (of the $1.28 billion) in inappropriate managed care premiums despite knowledge of the enrollees’ third-party coverage. Since June 2016, DOH has improved payment controls that use third-party insurance information to prevent such improper premium payments; however, these efforts only target NYSOH-enrolled recipients, auditors concluded. DOH has not put similar controls in place with regard to non-NYSOH-enrolled recipients, according to the audit.

In releasing his office's findings, DiNapoli recommended that the department of health:

• improve monitoring efforts to assist in the prevention, detection and recovery of inappropriate managed care premiums;

• implement controls to remove non-NYSOH-enrolled recipients with comprehensive third-party health insurance from managed care;

• review the managed care premiums identified and recover unnecessary payments; and

• change the model contract language to allow the recovery of unnecessary premiums from all MCOs regardless of the relationship with recipients’ third-party insurer.

DOH officials generally agreed with most of the audit recommendations and indicated that certain actions have been and will be taken to address them.

DiNapoli’s auditors worked with New York City Human Resources Administration and Nassau County to identify Medicaid enrollees with comprehensive third-party health insurance and disenroll them from Medicaid managed care. As a result, Nassau County disenrolled almost all of its members with comprehensive third-party health insurance from managed care. Further, based on the audit work, the county plans to develop reports to identify and remove such enrollees from managed care.

Auditors are also working with New York City in conjunction with the Medicaid Inspector General’s office and DOH to help resolve the issue there, DiNapoli's office said.

In May of 2018, DOH requested the methodology that auditors used to identify enrollees with concurrent Medicaid managed care coverage and comprehensive third-party health insurance. The Medicaid Inspector General’s office is currently engaged in a “clean-up project” to disenroll members from managed care who had comprehensive third-party health insurance during January of 2018.