New York State Allegedly Overbilled $15 Billion for State-Operated Facilities for Developmentally Disabled

On May 17, 2012, the U.S. Department of Health and Human Services, Office of Inspector General (OIG) released a report that found Medicaid overpayments to New York State-operated developmental centers. The OIG concluded that, in 2009, State-operated  facilities for the developmentally disabled received $1.7 billion in Medicaid payments in excess of the reported costs of these facilities. The Medicaid rates paid to these New York State-operated facilities were ten times higher than the rates paid to private Intermediate Care Facilities in New York, which the OIG found comparable. The OIG determined that these overpayments had occurred for two decades and that they are still occurring in 2012. In fact, in fiscal year 2011, the daily payment rate to New York’s developmental centers was $5,118, which represented a 24 percent increase since 2009 and means that State-run developmental facilities are being paid approximately $1.9 million per year for each individual patient. This surprising increase was triggered by the formula for Medicaid payment rates for patients in developmental centers, which allows State-operated facilities to collect roughly two-thirds of the total Medicaid payment after an individual who has left the facility.

On September 20, 2012, the House Committee on Oversight and Government Reform issued a report titled The Federal Government’s Failure to Prevent and End Medicaid Overpayments which found that New York overbilled the federal government $15 billion over the past 20 years for developmentally disabled Medicaid patients in State-operated facilities. This report cited “overwhelming evidence” that the federal government failed to adequately review or question New York’s excessive reimbursement requests. This led to excessive payments to New York developmental centers to such a degree that these payments actually exceeded the entire Medicaid budgets of 14 other states during the same time period. The report lays much of the blame on the Centers for Medicare and Medicaid Services (CMS) for is termed an “institutional failure and a pattern of irresponsible actions that have cost taxpayers billions.” The House Committee reminds CMS of the “dire budget situation faced by the nation” and asserts in its report that these overpayments made to New York State are illegal and must stop immediately.

At a recent Congressional Hearing before the Committee on Oversight and Government Reform, Penny Thompson, the Deputy Director of the Center for Medicaid and CHIP Services referred to New York’s reimbursement rates “excessive and inappropriate” and pledged that CMS would cut the reimbursement rate to New York State. Federal officials are now reporting to House lawmakers that New York’s Medicaid rates for these services will be cut by 80 percent. This will reduce New York’s Medicaid reimbursements more than $1 billion a year.

This post was contributed by Kurt Bratten.

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