Audit: Govt. Overpaid Mass. $106M for Medicaid

A federal audit released Wednesday said the U.S. government overpaid Massachusetts nearly $106 million for Medicaid reimbursements, and recommends that the state be ordered to refund the money.

The report, from the inspector general's office of the U.S. Department of Health and Human Services, determined the state incorrectly calculated reimbursement rates for adjusted claims submitted between October 2008 and December 2010.

State officials have not disputed the findings, but argue that under the same set of rules being applied by the inspector general, Massachusetts would be owed $108 million in additional Medicaid reimbursements for the subsequent January 2011 to September 2013 period - an amount that would more than offset the requested refund.

The federal government typically reimburses the state for 50 percent of medical payments for low-income and disabled residents covered by Medicaid. As part of the federal stimulus law passed after the economic downturn, the Medicaid reimbursement rate was temporarily increased to help states out financially.

During the October 2008 to December 2010 period, the reimbursement rate - formally known as the federal medical assistance percentage - ranged from about 58.8 percent to 61.6 percent in Massachusetts.

At issue were adjustments the state made during that period to claims originally submitted in prior years. When an adjustment resulted in a greater expense, auditors said, the state often sought reimbursement at the temporarily higher percentage for the entire adjusted claim, when that higher rate should only have applied to the increased amount over the original claim.

Of the more than 5.5 million claims reviewed by auditors nearly 2.4 million were processed using the faulty calculation, resulting in the nearly $106 million overpayment.

In one example offered in the report, the state in 2005 paid a $1,716 claim and received a 50 percent federal Medicaid reimbursement of $858. In 2009, the state made an adjusted payment on the same claim of $2,400, which the U.S. reimbursed at the then-rate of 61.6 percent, resulting in a $1,478 federal share.

The higher rate should only have applied to the $684 difference between the original and adjusted claims, which would have resulted in the federal government paying nearly $200 less, the report said.

The findings of the audit and recommendation that the state refund the overpayments were sent to Marilyn Tavenner, administrator of the U.S. Centers for Medicare & Medicaid Services (CMS).

In a July 3 letter responding to an earlier draft of the audit, state Medicaid director Kristin Thorn indicated Massachusetts would agree to the inspector general's findings provided CMS accept the state's assertion that it should receive $108 million in additional reimbursements for the period in which the rates were being reduced back to 50 percent. The net result of such a scenario would actually be a $2 million gain for the state.

CMS deferred action on the state's request, according to Thorn's letter. The inspector general's office said it would work with CMS to evaluate whether Massachusetts was indeed owed the $108 million it claims, but added that a preliminary review turned up "calculation errors" by the state.

In 2012, a similar audit of Maine's Medicaid program resulted in that state being ordered to refund $9.2 million to the federal government, and prompted reviews in other states.