By Sherri M. Schroeder, J.D.
An audit revealed a data processing error caused the state to improperly claim over $1.9 million in enhanced federal Medicaid reimbursement.
A recent audit by the HHS Office of Inspector General (OIG) of almost 580,000 Medicaid beneficiaries in Colorado shows that the state claimed reimbursement for services to some beneficiaries who were enrolled in the new adult group created by the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) but who later became ineligible for Medicaid coverage. As a result, Colorado improperly claimed and received $1,959,216 in federal reimbursement for 1,543 beneficiaries past the termination dates of their Medicaid eligibility (OIG Report, A-07-17-02807, October 2, 2020).
Background. The ACA established an enhanced federal reimbursement rate of 100 percent through calendar year 2016 for Medicaid services provided to nondisabled, low-income adults without dependent children (the new adult group), gradually decreasing to 90 percent by 2020. Colorado, as an expansion state, was entitled to receive this new rate for Medicaid services provided to individuals whom it enrolled under its new adult group category as newly eligible. The Medicaid program in Colorado is administered by its State agency, which uses the Medicaid Management Information System (MMIS) to process payments and maintain beneficiary eligibility and enrollment information. However, this was a legacy system that did not have the capability to separately identify distinct Medicaid eligibility groups and assign different federal medical assistance percentages (FMAPs). Therefore, the State agency developed a Structured Query Language (SQL) script to identify the different Medicaid eligibility groups, including the new adult group, and to assign the applicable FMAP for each of those groups.
The SQL script used both eligibility data that existed in the claim at the time the State agency adjudicated the claim and supplemental eligibility span data to create a population code, which the script then assigned to the claims to identify the different Medicaid eligibility groups. The eligibility data that existed in the claim at the time of adjudication transferred directly from the Colorado Benefits Management System (CBMS) into the MMIS each night. However, due to a data processing error, the CBMS data did not always transfer correctly to the MMIS through the normal automated process. For some beneficiaries in the new adult group, a change in eligibility determination from eligible to ineligible that occurred in the CBMS did not transfer correctly to the MMIS. Consequently, these individuals were showing as eligible in the MMIS past their termination date, causing the State agency to improperly claim reimbursement for them. Although the eligibility determinations were correctly made, the automated systems did not implement those determinations correctly.
"Vanishing" eligibility spans. State agency officials claimed that the beneficiaries were, in fact, eligible for Medicaid at the times of service. When agency staff retroactively adjusted a beneficiary’s eligibility span to change the individual’s status from eligible to ineligible, the CBMS removed the original eligibility span and replaced it with the adjusted eligibility span. When the CBMS transferred the adjusted eligibility span to the MMIS, it replaced the original span in the CBMS with the new eligibility data (reflecting the beneficiary’s ineligibility), and the original span "vanished." Therefore, the retroactive adjustment changed the eligibility status to ineligible in the eligibility span data, but at the time that a claim was paid, the MMIS was still seeing only the original span, which showed the beneficiary’s status as ineligible.
The auditors, however, concluded that the data match between the MMIS, the CBMS, and the information in five of 10 case files chosen randomly from the 1,543 beneficiaries identified as ineligible but for whom the State agency was reimbursed showed that the improper payments occurred not because of vanishing eligibility spans but rather because of a data processing error in which eligibility data from the CBMS did not always correctly transfer.
Pilot programs claim. The State agency also claimed the identified errors were not subject to disallowance because they were part of the Medicaid and Children’s Health Insurance Program (CHIP) pilot programs established as part of the ACA. As such, the agency claimed that CMS guidance and a proposed rule had suspended financial recoveries for errors identified through the eligibility pilot programs. The auditors disagreed, stating that their audit did not focus of the accuracy of eligibility determinations, which was the purpose of the pilot reviews, but rather on the errors identified as relating to newly eligible beneficiaries whom the State agency properly determined to be ineligible for the Medicaid program but erroneously retained as eligible in the MMIS.
1903(u) eligibility reviews. The State agency claimed that even if the errors were not considered to be Medicaid and CHIP eligibility review pilots, the audit is an eligibility review pursuant to section 1903(u) of the Medicaid Act, which requires the review of Medicaid eligibility to identify erroneous payments. As a 1903(u) review, the auditors must prove that the State agency exceeded the 3 percent threshold that would subject it to disallowances under that section. As its error rate did not exceed 3 percent, the agency claimed that no refund is due. In response, the auditors countered that the identified errors were data processing errors, not eligibility errors, so the 3-percent threshold did not apply.
Flawed methodology? The State agency claimed that the audit’s methodology was limited because a sample size of only five from 1,543 beneficiaries identified as being in error was used. The agency also claimed that its explanation of "vanishing" eligibility spans would have been identified if all of the 1,543 beneficiaries had been reviewed. The auditors refuted this claim, stating that its review of 10 case files in the CBMS during its reliability assessment of the data, as well as its review of the five case files in the CBMS that were sampled to determine whether retroactive adjustments changed the beneficiaries’ eligibility status, showed that this error occurred due to a data processing error. Therefore, the data match accurately identified ineligible beneficiaries who continued to receive Medicaid services after the State agency made its determination.
Recommendations and response. The OIG recommended that Colorado refund over $1.9 million to the federal government for payments made for beneficiaries who were not eligible for Medicaid at the time of service, identify additional improper payments and refund those, and establish adequate system controls to ensure that the determinations correctly transfer between systems. The Colorado agency disagreed with the first two recommendations and maintained the validity of the claims. The agency explained steps it had taken to improve the systems controls since the term of the audit.
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