Medicaid's New $3 Million Liability

Last month, Arkansas Medicaid agreed to repay the federal government $3 million in compensation — due to mistakes in health care provider payments that were originally made in 2013 and 2014. These mistakes came from two areas within a particular Medicaid payment program: the Department of Human Services (DHS) calculated payments amounts incorrectly, and providers falsely claimed to be eligible for the payments.  The federal government looked at a sample of payments in the audited program; it then used this sample to estimate how much Arkansas Medicaid should repay. Whether or not payments will be recouped from providers is unclear.
These Medicaid mistakes came to light after the federal Office of Inspector General (OIG) audited $73 million in supplemental payments made by Arkansas Medicaid. The Arkansas Medicaid supplemental funds program increased payments to providers for certain kinds of basic medical care. The goal of this payment program was to entice more providers to provide basic care by means of higher payment rates. Arkansas Medicaid made these supplemental payments in addition to the standard payment rate to providers. The supplemental payments ended after two years; rates then dropped back to the standard Medicaid payment rate.
Arkansas’s Medicaid supplemental program was selected at random by OIG for audit after the supplemental payment program ended. The federal OIG conducts dozens of Medicaid audits around the country; programs and states are selected at random.
OIG audited a sample of the total supplemental payments to estimate overall Arkansas program performance.  Were payments following state and federal laws? Were payments calculated correctly? Of the 120 sampled payments, 104 of the sample had incorrect payment amounts, payments to ineligible providers, or both — for an error rate of 87%.  OIG concluded that the $73 million in Arkansas Medicaid supplemental payments program was riddled with errors. Using its smaller sample, OIG then estimated an error rate for the $73 million program, and ultimately asked Arkansas Medicaid to pay back $3 million for likely errors.
In fact, OIG estimated that Arkansas Medicaid improperly received $7.1 million in federal funds. But it asked for repayment of only $3 million. In its report, “Arkansas Did Not Make Payments in Accordance With Federal Requirements,” OIG states:

On the basis of our sample results, we estimated that Arkansas improperly received at least $7.1 million in additional Federal share, of which we will recommend recovery of approximately $3 million.

OIG could have been much more aggressive in trying to reclaim money from Arkansas Medicaid. OIG requested recoupment only of the smaller recoverable amount, not the total amount that Arkansas improperly received. Only some of the improper payments are considered recoverable in 2017. The estimated total dollar amount of improper payments is $11 million, while only $3.7 million is considered recoverable by OIG. OIG then arrived at a conservative estimate of $2.8 million. According to OIG statistical analysis, there is a 95% chance that Arkansas Medicaid improperly received more than this amount from the federal government. But OIG is willing to settle for a conservative loss estimate when recouping these federal funds.
DHS has already agreed to repay the $3 million federal loss identified by the OIG report. DHS Deputy Director Dawn Stehle signed a letter agreeing to pay the money back to the federal government on August 11, 2017.  This $3 million repayment to the federal government does not appear on the legislature’s Claims Commission agenda for this year. These recoupments may lie outside of the Claims Commission’s authority.
DHS may want to recoup some of the missing funds from providers. Providers were allowed to self-determine whether or not they were eligible for the payments. Federal regulations allowed such self-determination.  However, 16 of the 120 providers sampled, or 13%, were not eligible to receive the supplemental payments. Other cases of payment error, however, were caused by DHS itself, due to calculation errors or to medical coding errors.
It will be interesting to see if DHS recoups payments or asks taxpayers for additional money in order to cover the cost of its mistakes. These federal repayments do not go through the ALC Claims Commission, although these payment requests seem similar to other issues before that legislative committee. We asked Amy Webb of DHS about this question; we’ll update the blog if and when she gets back to us.

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