October 9, 2020

NYS Medicaid Audits of State Department of Health Identify $706.6 Million in Unnecessary Overpayments While the State is Faced With Budget Gap in the Billions

The New York State Office of the State Comptroller (“OSC”) recently announced that five audits of the State Department of Health’s (“DOH”) Medicaid program identified approximately $706.6 million in “improper or questionable payments.” After such findings, OSC provided several cost-saving recommendations to DOH.

The DOH administers the State’s Medicaid program and utilizes two different methods of payment for Medicaid services. The fee-for-service (“FFS”) method makes payments to health care providers directly using a claims processing system called eMedNY. Alternatively, the managed care method entails payments to managed care organizations (“MCOs”) who arrange care for Medicaid recipients and reimburse their network providers. Further, every person who applies for Medicaid benefits receives a unique Client Identification Number (“CIN”) and can have more than one CIN if they have both a FFS enrollment and a MCO enrollment. However, only one of these numbers should be active at a time to avoid duplicate payments to the same person. OSC found Medicaid made $47.8 million in payments on behalf of Medicaid recipients with multiple CINs.

In another audit, OSC found that while DOH has taken steps to ensure that economically efficient pharmacy services are provided under FFS, they failed to ensure that the pharmacy services provided through MCOs were using the lowest net cost drugs. In fact, the audit found that DOH does not require that MCOs use the most cost-effective drugs nor does DOH give them assistance in figuring out which drugs are most cost-effective. As a result, OSC estimates that $605 million in unnecessary costs were incurred by the Medicaid program.

Additionally, three additional audits concerning eMedNY uncovered $53.8 million in improper payments made by the State.

Improper payments were made by eMedNY and MCOs to pharmacies for drugs that were dispensed after they were terminated, or taken off the market, due to safety or commercial reasons. These improper payments were the result of a lack of communication on the part of DOH who should have communicated the termination date claim rejection policy to the MCOs and because, in some instances, DOH had not received drug termination dates from the Center for Medicare and Medicaid Services (“CMS”) when the claims for the drugs were being processed. OSC recommends that DOH monitor and instruct MCOs to decline payment for drugs that have been terminated.

OSC discovered that various payments made through eMedNY were for claims that do not comply with Medicaid policies, processed claims with inaccurate information, and processed claims that were billed at a higher level of care when a lower level of care was actually provided. Further, OSC identified 21 Medicaid providers who were charged with or found guilty of violating laws or regulations pertaining to health care programs.

The State also made improper payments to recipients who had terminated their coverage in New York State of Health (“NYSOH”), the State’s health plan marketplace, but were still listed as covered in eMedNY because inaccurate or untimely information was sent to the system by NYSOH. Due to a lack of reconciliation between eMedNY and NYSOH, improper payments were made on behalf of 1,096 recipients and 319 deceased recipients. OSC recommends that DOH make appropriate recoveries, resolve the differences between NYSOH and eMedNY, and prioritize these actions so that these overpayments do not happen again.

The State Comptroller, Thomas P. DiNapoli, provided that “[h]undreds of millions of dollars could be saved with better financial and management controls over the state’s Medicaid program,” and said there will be continued OSC oversight “as DOH can do much more to save taxpayer dollars.”

For more information, please see OSC’s press release: https://www.osc.state.ny.us/press/releases/2020/09/dinapoli-medicaid-audits-find-more-700-million-unnecessary-costs-and-overpayments

If you have any questions, please contact David R. Ross, Esq., Senior Shareholder, at dross@oalaw.com. Law Clerk Colleen R. Pierson contributed to this article.