New report on Maryland Medicaid finds areas for cost savings

By Barbara Pash

Maryland’s Medicaid program is both above and below the national average for payment errors, according to a new independent study, which also gave several suggestions to improve efficiency.

The study, “Independent Report on Medicaid Cost Savings: Payment Errors, Eligibility Errors, and Utilization Review,” was commissioned from The Lewin Group by the departments of Health and Mental Hygiene and Human Resources. The General Assembly mandated the study last year, and will use the independent assessment for the fiscal year 2011 budget.

The report was submitted last week to Sen. Edward Kasemeyer, chairman of the Senate Budget and Taxation Committee, and Del. Norman Conway, chairman of the House Appropriations Committee.

Overall, the report gave Maryland Medicaid high marks. John Folkemer, deputy secretary for health care financing at the Department of Health and Mental Hygiene and the state’s director for Medicaid, Folkemer said he was pleased but not surprised.

“We felt that with the resources we had, we were doing an effective job, and this study confirmed that,” he said.

Maryland Medicaid serves some 900,000 people, with the $6.2 billion annual cost split roughly 50/50 between the state and the federal government. The report gave examples of hypothetical savings. For example, when addressing improper payments, the report stated that if just one percent of annual payments are too high because of errors, the amount of taxpayer money wasted would be more than $57 million.

The report compared Maryland Medicaid figures with other states and identified individual cases in the state program for potential savings.

Folkemer said that when the agency looked into some of the claims errors identified in the report, it found they were not really errors and had been paid appropriately. The agency is pursuing other information the report uncovered.

“Where [the report] identified claims and errors, we will go through them with a fine-tooth comb,” he said.

Comparing Maryland Medicaid to other states for payment errors, the report found that claims payment errors were very infrequent, but present. The report analyzed fiscal year 2007 figures, and found Maryland’s payment error for fee-for-service was 1.1%, far below the national average of 8.9%.

On the other hand, Maryland’s error rate for ineligible payments was 7.7%, compared to a national average of 2.9% in FY 2007. “Errors appear to be attributable to staffing challenges and technological limitations,” the report stated.

The report claimed Maryland Medicaid makes $20 million of improper payments annually, including recoveries from the Medicaid Fraud Control Unit. Folkemer said the figure is a “target,” not an actual dollar amount, that the researchers have come up with.

”They have done an estimate and they are suggesting there could be money to recover, but we would need additional staff” to determine that, he said.

The report found some specific examples of improper or excessive payments, including:

  • Identifying more than 12,000 claims with a total cost of $2.6 million that could not be matched to an eligible individual.
  • Several assisted living providers appear to have been paid for days of service when Medicaid recipients were hospitalized. The value of potential recovered funds is $57,000. Folkemer said the Health Department’s inspector general is investigating possible fraud.
  • Identifying a small number of individuals who appear to be overusing pharmacy and emergency department service. The report stated that if the program could reduce prescription drug use among “high utilizers” by two percent, Medicaid could save $1.4 million a year.

Folkemer said some of the report’s suggestions on ways to save money on the $6.2 billion annual program are being pursued and, when feasible, implemented.

But many of the suggestions require additional staff, he continued, and the department needs to analyze whether program savings are worth extra personnel cost.

The report dealt not only with the present but with the future. When the federal health care reform law goes into full effect in 2014, the number of Maryland Medicaid beneficiaries will jump significantly. Folkemer said Medicaid estimates 170,000 new enrollees in the Maryland Medicaid program.

The federal government will be picking up the tab for them, at least for a few years, Folkemer said. From 2014 to 2016, the federal government will pay 100% of the additional cost. This percent will gradually drop until 2020, when federal funding will account for 90%.

“We’re not expecting this to be a huge expense to the state,” Folkemer said.

About The Author

Len Lazarick

Len Lazarick was the founding editor and publisher of and is currently the president of its nonprofit corporation and chairman of its board He was formerly the State House bureau chief of the daily Baltimore Examiner from its start in April 2006 to its demise in February 2009. He was a copy editor on the national desk of the Washington Post for eight years before that, and has spent decades covering Maryland politics and government.

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