Medicaid audits reveal $706 million in overpayments

“The state is facing budget gaps of billions of dollars because of the COVID-19 crisis and needs to find cost savings wherever it can,” DiNapoli said in a statement Monday. “Hundreds of millions of dollars could be saved with better financial and management controls over the state’s Medicaid program. In recent years, my auditors have identified billions of dollars in waste in the program. Our oversight of the program will continue in earnest as DOH can do much more to save taxpayer dollars.”

The state’s Medicaid program provides healthcare to low-income New Yorkers, or those with special health needs who receives federal, state and local funding. The state Medicaid program had roughly 7.3 million recipients for the fiscal year ended March 31, 2019, when Medicaid claim costs totaled about $67.4 billion.

The DOH pays healthcare providers for Medicaid pharmacy services directly for each dispensed drug, or fee-for-service; or through managed care, where the department contracts with managed care organizations to pay providers, according to the comptroller’s office.

The comptroller criticized state health officials for failing to establish sufficient oversight and control with managed care payments, which led to the unnecessary payments. The department has worked to ensure efficient and cost-effective pharmacy services for New Yorkers dependent on Medicaid with the FFS model, according to DiNapoli’s office.

Auditors found DOH missed opportunities to lower costs on pharmacy services delivered through Medicaid managed care because officials did not ensure the use of the lowest net cost drugs, according to the comptroller. Auditors estimate $605 million was spent in unnecessary drug costs from Jan. 1, 2016, through Dec. 31, 2019.

“These audits contain a mix of misinformation about Medicaid, suggest potential savings based on past purchases already addressed and recommend that we implement corrective actions that are already underway, including through the ongoing MRT II process,” DOH Director of Public Information Jonah Bruno said in a statement Monday. “Sending out a single press release with five audits does not strengthen the individual findings of any, but it does create a splashy headline.”

Auditors identified $29 million in improper Medicaid payments for drugs dispensed after they had been removed from the market for safety or commercial reasons. Medicaid managed care organizations made improper payments to pharmacies totaling $27.2 million and the state’s coordinating electronic payment system, eMedNY, made improper FFS payments to pharmacies totaling $1.8 million.

Nearly $1.5 million of the improper FFS payments occurred because DOH had not received the drugs’ termination dates at the time the claims were processed.

In each audit, DiNapoli recommended the DOH review auditors’ findings and recover any possible funds, according to the comptroller’s office.

Medicaid applicants are assigned a unique Client Identification Number and enrolled in managed care or FFS Medicaid. Recipients may have more than one assigned CIN while receiving benefits, but only one number has active eligibility to prevent duplicate payment.

DiNapoli’s auditors found DOH made $47.8 million in improper payments for recipients with multiple unique Client Identification Numbers from Jan. 1, 2014, through March 31, 2019.

Gov. Andrew Cuomo convened the state’s second Medicaid Redesign Team in January to help close a projected $6.1 billion gap in the 2020-21 executive budget. The team was tasked to find ways to scale back $2.5 billion in Medicaid spending and voted on the recommended changes March 19, which included provisions to slash millions of dollars to hospitals statewide.

The Medicaid Redesign Team enacted a budget proposal included in the Legislature’s 2020-21 spending plan to transition the pharmacy benefit program from managed care to a fee-for-service model, which goes into effect April 1.

The MRT II redesign and budget proposal addressed potential savings for pharmacy services, according to a DOH spokesperson.

“...The MRT-enacted budget proposal to transition of the pharmacy benefit to FFS will provide the Department with full visibility into prescription drug costs, optimize the collection of manufacturer rebates, centralize the Medicaid programs negotiating power and promote the use of less expensive, equally effective prescription drugs when medically appropriate for all Medicaid members,” according to DOH. “The department, along with our partners in the Office of Medicaid Inspector General, works tirelessly to increase efficiency in the Medicaid program, prevent overpayments, and recoup funds where appropriate, including through the ongoing MRT II process.”

New York State of Health, the state-run health plan marketplace under the DOH, determines Medicaid eligibility for New York residents, families and small businesses.

DiNapoli’s auditors also found weaknesses in the State of Health that caused improper transmissions of eligibility and enrollment information to eMedNY, and lacking eligibility and enrollment data that resulted in $11.7 million in improper payments on behalf of 1,096 recipients who had terminated coverage in NYSOH.

The audits revealed another $4.9 million in improper and questionable payments for 319 recipients who died.

eMedNY processed over 244 million claims, resulting in payments to providers of more than $35 billion during the six-month period ended Sept. 30, 2019. More than $8.2 million in improper payments including $3.2 million for clinic, practitioner, managed care capitation, pharmacy, inpatient, durable medical equipment and dental claims did not comply with Medicaid policies; $2.9 million for maternity and newborn birth claims contained inaccurate information, such as the diagnosis code or newborn’s birth weight; and $1.1 million in claims should have been billed to other health insurance coverage that recipients had at the time of treatment.