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The state of Indiana paid approximately $ 1.1 million in Medicaid-related payments 2016 and 2017 to managed-care organizations (MCOs) on behalf of beneficiaries who were dead, according to federal auditors reported by the U.S. Department of Justice.
The audit, conducted by the Department of Health and Human Services Office of Inspector General (OIG) and released on February 13, 2020, revealed that the state of Indiana “made in a random sample of 100 so-called capitation payments to MCOs. 95 illicit payments.”
The Office of the Minister of Justice found:
Indiana made payments on behalf of deceased beneficiaries. We confirmed that 70 of the 71 beneficiaries in connection with the 100 capitulation payments in our stratified random sample were deceased. Of the 100 capitulation payments, Indiana made 95 unauthorized payments totaling $ 79,403 ($ 58,773 federal share). Based on our sample results, we estimate that Indiana made payments totaling at least $ 1.1 million ($ 862,097 federal share) to MCOs on behalf of deceased beneficiaries during our audit period.
Indiana did not always fully process information about the deaths of Medicaid recipients in MMIS. Although the state authority’s authority system interacted with federal and state data exchanges identifying the date of death, the state authority did not specify the death date in the MMIS for 48 of our sample recipients. In addition, the government agency did not recover the capitulation payments for 22 sample recipients who had a death date in MMIS.
The organizations that received the illegal payments are part of the Medicaid Managed Care healthcare delivery system.
“Medicaid agencies and managed care organizations (MCOs) that accept a set per member and monthly (capitation) payment for these services,” the Medicaid program website states. MCOs use capital payments to manage healthcare costs, usage and quality.
OIG concluded that the government agency made payments on behalf of deceased beneficiaries. OIG confirmed that 70 of the 71 beneficiaries associated with the 100 capitulation payments in our sample had died. Of the 100 capitulation payments, the government agency made 95 unauthorized payments totaling $ 79,403 ($ 58,773 federal share).
The government agency did not recover any of the 95 capitulation payments sampled. Based on the test results, the DOJ estimated that the government agency made payments totaling at least $ 1.1 million10 ($ 862,097 federal share) to MCOs on behalf of deceased beneficiaries for service dates during the audit period.
Yet aspects of the system have been plagued by problems, with the Indiana report following in the footsteps of others who similarly found that some states had erroneously paid capital payments on behalf of the deceased.
Similarly, a review released in September 2019 found that Illinois paid an estimated $ 4.6 million to MCOs to cover deceased Medicaid recipients. Illinois Medicaid Administrator Doug Elwell acknowledged the findings in a written response to the audit, saying that government agencies would try to recover the incorrect payments and repay them to the federal government.
Similarly, Indiana Medicaid Director Allison Taylor said in a written response to the review that the state agrees with the report’s conclusions and will seek to recover the payments.
There are currently more than 71 million people covered by Medicaid, the social networking program created five decades ago and expanded by President Barack Obama through the Affordable Care Act, commonly known as Obamacare. The Trump administration has sought to reform the system, recently announcing that it would test allowing state Medicaid programs to limit the health benefits and coverage of prescription drugs to certain patients in exchange for changing the way federal government grants to states.
The failure of the state authority
The contract between the state agency and MCOs required compliance with the provisions of the Indiana Hoosier Healthwise and Healthy Indiana Plan MCE Policies and Procedures Manual, which states that beneficiaries’ registration will terminate in the event of death and that payments to MCO will be adjusted for retroactive depreciation of beneficiaries.
The government agency did not always process Medicaid recipients’ death information or restore capital payments in MMIS. When the government agency processes death information correctly, MMIS uses that information to identify a beneficiary who has died, stop future capitulation payments and initiate the recovery process for capitulation payments made after the beneficiary’s month of death.
What OIG is recommended
The Office of the Attorney General recommended that Indiana:
- repay $ 862,097 to the federal government;
- identify and recover unauthorized payments made to MCOs during our audit period on behalf of deceased beneficiaries, which we estimate to be at least $ 1.1 million;
- identify payments made on behalf of deceased beneficiaries before and after our audit period, and repay the federal portion of amounts recovered; and
- ensure that the date of death is added to the MMIS and that capitulation payments made after the death of the beneficiaries are restored;
Unauthorized payments for beneficiaries who had a date of death
Date of death was registered in MMIS for 22 of the 70 deceased beneficiaries. Nevertheless, the state authority made unauthorized payments on behalf of these deceased beneficiaries. The government agency stated that it would conduct further research to determine why it did not recover the 27 payments for these beneficiaries.
The OIG estimated that Michigan made unauthorized capital payments totaling at least $ 39.9 million ($ 27.5 million federal share) to managed care units on behalf of deceased beneficiaries during our audit period. Of the 100 capitulation payments in the stratified random sample, Michigan made 99 unauthorized payments totaling $ 117,746 ($ 79,348 federal share).
The unauthorized payments occurred because Michigan did not always identify and process the death information of Medicaid recipients. Although Michigan’s MMIS and authorization systems interacted with state and federal death records identifying dates of death, Michigan did not always identify these dates of death in its MMIS system, and the MMIS system and authorization system did not share dates of death with each other. Michigan also did not recover payments due to dates of death that were not immediately identified in its MMIS system.
The OIG recommended that Michigan (1) repay $ 27.5 million to the federal government; (2) identify and recover unauthorized payments made to managed care units during our audit period on behalf of deceased beneficiaries, which OIG estimated at at least $ 39.9 million; and (3) identify capital payments made on behalf of deceased beneficiaries before and after the audit period and repay the federal portion of the amounts recovered.
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Barry Zalma, Esq., CFE, now limits his internship to the position of insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry. He is available at http://www.zalma.com and email@example.com.
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