Last year, Rhode Island auditors found a big problem in the small state's $2.6 billion Medicaid program. Its two Medicaid managed-care insurers, Neighborhood Health Plan and UnitedHealthcare, were getting overpaid—by a lot.
Like 30 other states and the District of Columbia, Rhode Island has expanded Medicaid under the Affordable Care Act to people who earn up to 138% of the federal poverty level. And like 38 other states and D.C., Rhode Island pays private insurers monthly lump sums to provide health coverage to the state's poorest residents.
But last year, auditors discovered Rhode Island's Medicaid agency overpaid Neighborhood Health Plan and UnitedHealthcare a combined $208 million, or about 8% of the Medicaid budget. Most of the erroneous payments stemmed from a faulty estimate of costs for newly covered Medicaid beneficiaries, who wound up using fewer medical services than anticipated.
Rhode Island clawed back about $75 million and expects to recoup most of the remaining funds this year, giving credence to the effectiveness of its audit process.
But it is one of only a few states that have instituted effective Medicaid managed-care auditing programs. Regulators say the vast majority of states spend most of their time auditing fee-for-service claims instead.
For those that haven't, “the managed-care organizations are unintentionally benefitting from a significant and extended no-interest cash-flow infusion,” Dennis Hoyle, Rhode Island's auditor general, wrote in his report.
In a scathing 2014 report, the Government Accountability Office said more oversight was needed. The government's oversight agency suggested the CMS require states audit payments both to and by private Medicaid insurers.
“Unless CMS takes a larger role in holding states accountable and provides guidance and support to states to ensure adequate program integrity efforts in Medicaid managed care, the gap between state and federal efforts to monitor managed-care program integrity leaves a growing portion of federal Medicaid dollars vulnerable to improper payments,” the GAO's report said.
The Obama administration responded last week by issuing a final rule for oversight of Medicaid managed care. Regulators and outside auditors will now put more Medicaid insurers under the microscope to ensure federal and state taxpayer dollars are not wasted—the central reason that states moved to managed care in the first place.