December 8, 2009

Legislators to review audits critical of Medicaid, disabilities payments

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By Len Lazarick
Len@MarylandReporter.com

Substantial problems with payments, controls and other monitoring by the state’s huge Medicaid health insurance program will get an airing Tuesday by the General Assembly’s Joint Audit Committee.

Legislative auditors found major issues with the use of an outdated computer system at the Medical Care Programs Administration. The system is set to be replaced within the next two years, but is not equipped to handle the huge loads of claims that now come before the agency.

The auditors said there were also significant problems with the offices that review $1.5 billion in payments to medical providers, and also highlighted inadequate training for claims processors and supervisors. There was also insufficient staffing in the 60-person unit handling paper claims, which had a backlog of over 53,000 claims, many more than two months old.

The auditors also found that at least $1.4 million was overpaid to providers but suspected there were more overpayments that were not caught by a post-payment review process that “needed significant improvement.”

A contractor that was supposed to audit payments to hospitals had not done so for five years, and the contract with the outside auditor had lapsed.

The legislators will also be reviewing a report highly critical of the Developmental Disabilities Administration. Auditors found it had failed to collect more than $3 million in federal reimbursement and overpaid providers $3.6 million, as MarylandReporter.com reported last week. Both Medicaid and DDA are part of the Department of Health and Mental Hygiene, which has the largest single budget in state government.

Tuesday’s hearing could be contentious since the department argued with some of the findings by the auditors, although they agreed substantially with others. Some of the problems with federal reimbursement go back 10 years, auditors said.

Both Medicaid and Developmental Disabilities use a computer system with software that is 30 years old, costly to maintain and designed to handle claims of about $300,000 a month, not the tens of millions they process now, Alison Mitchell, an analyst in the Department of Legislative Services, reported.

“The department can only get limited information out of [the system], and DHMH has difficulty amending the system to address changes to the programs.”

The department is currently seeking funds from the U.S. Centers for Medicare and Medicaid Services (CMS) to replace the computer system, with 90 percent of the costs — typically $40 million to $80 million in other states — to to be covered by the federal government.

Despite the deficient software, a CMS test of 1,591 claims totaling $3.9 million found errors of only $14,193, primarily “due to providers that did not submit adequate documentation to support the claims,” the auditors said. This was an error rate of 1.04 percent, well below the published national error rate of 8.9 percent.

However, auditors found one case in which a computer programming edit incorrectly processed claims without a needed manual review. The Medicaid administration later reviewed $5.3 million of these claims, and said it recovered $1.4 million in overpayments in mid-November.