June 5, 2006

State owes $86.6m to the US, audit says

Medicaid overcharges blamed on lax oversight

By Michael Levenson, Globe Staff   

State Medicaid officials repeatedly violated federal laws and regulations and must return $86.6 million to the US government, a new federal audit has found.

The audit, by the inspector general for the US Department of Health and Human Services, found that from 2001 to the first quarter of 2004, state Medicaid officials overcharged the federal government for services provided by the state Department of Social Services. The audit found that the violations did not involve willful misconduct, but resulted instead from lax oversight.

In all of the reported violations, state Medicaid officials billed the federal government for care that was not directly related to arranging medical services. The audit documented hundreds of thousands of instances of those improper claims over the period studied, times when the state overcharged Medicaid by amounts ranging from $209 to $295.

State Medicaid officials labeled the audit ``seriously flawed and erroneous" and said they would contest the findings in a reply to the federal government that they plan to submit at the end of the month.

In one example cited by Inspector General Daniel R. Levinson, the state billed federal Medicaid officials for a social worker who called a child's school, asking that the child be allowed to return to class. In another reported violation, the state billed Medicaid for a social worker who accompanied a child to court.

``We attribute these unallowable costs to the state agency's lack of procedures for ensuring compliance with Medicaid requirements," Levinson wrote in his 13-page report, a copy of which was obtained by the Globe. ``The state must comply with all federal requirements."

Beth Waldman, the state Medicaid director, said the federal government had reached an agreement with the state in 1994 to allow Massachusetts to bill for such services.

``We believe that they are allowable under the regulations that [the federal government] worked with us to put in place and that they understood that at the time," Waldman said in an interview yesterday. ``So, if they want to change them, that's fine, but you can't do it retrospectively, and you can't do it through an audit."

Waldman sounded a skeptical note, saying she ``would not be surprised" if the federal government brushed aside the state's reply and demanded return of the $86.6 million. It would then be up to the Legislature to decide how to handle the hit to the state budget, she said.

``Eighty-six million dollars is a lot of money; there's no doubt about that, but there's not going to be an impact on the kids," because the services under review have already been provided, Waldman said. ``It would be a hit to the General Fund."

Michael Widmer -- president of the Massachusetts Taxpayers Foundation, a budget watchdog group -- said he did not believe that $86.6 million would present a major problem for the state. He stressed that the annual state Medicaid budget is around $7 billion, of which $3.5 billion comes from the federal government. ``Even if this goes against the state, it's certainly manageable," Widmer said.

The audit examined a branch of state care known as targeted case management. According to federal officials, targeted case management should provide a child with access to medical services. Allowable expenses might include a social worker who arranges a ride for a child to a doctor's appointment, federal officials said. But the rules forbid billing Medicaid for nonmedical care, such as a visit to a foster home to discuss a child's schoolwork.

In one of several examples cited, Levinson wrote of two state social workers who visited a child's home to talk about budgeting and parenting, an example, he said, of a service that was not related to arranging for medical care.

In its review, federal auditors interviewed state officials and examined state social services contracts.

The audit found that the total amount of overcharges was $171.2 million, about half of which, $86.6 million, was paid for by the federal government.

The report found that in fiscal year 2002, the state billed the federal government 267,902 times for services that were not related to arranging medical care, overcharging the federal government by $237 dollars each time. That totals $63.5 million. In fiscal 2003, the state made 316,626 claims on the federal government, overcharging by $295 each time, the audit said. That totaled $93.4 million. And in the first quarter of fiscal 2004, the state made 66,398 claims on the federal government, overcharging by $209 each time, the audit said. That totaled $13.9 million.

The questionable claims, the audit said, included salaries for DSS employees who were providing welfare and child protection services that were not related to medical care. Examples cited by the inspector general included instances in which the state billed Medicaid for DSS workers who were making referrals to district attorneys, developing service plans for special-needs children, participating in and preparing for legal proceedings, conducting investigations, and trying to find homes to place children.

In addition to returning the $86.6 million, Levinson said the state must work with the federal government to resolve another $27 million in disputed Medicaid charges, about half of which was paid for by the federal government. He also recommended that the state establish stronger procedures to ensure that it does not violate laws and regulations again.

Waldman said the federal government must clarify its rules, which she called confusing. ``We believe [the federal government] still needs to come out with regulations that explain when you can and can't use targeted case management money," she said. 

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