The state has failed to put enough resources into curbing fraud, waste and abuse in its Medicaid health insurance program, resulting in tens of millions of dollars in losses annually, a state auditor’s report released Friday shows.
"Hawaii’s detection and enforcement activities lag far behind national averages," the report said, citing a 2011 Centers for Medicare and Medicaid Services finding that improper payments from Hawaii’s Medicaid and Children’s Health Insurance programs totaled $66.9 million.
The Department of Human Services, which administers the Medicaid program for 301,000 low-income residents, has not developed a plan to govern its fraud and abuse detection program and has not been proactive in establishing formal policies and procedures for remedying fraud, the audit said.
In addition, the report criticizes DHS for not dedicating enough resources for Medicaid fraud investigations and said it has only three "financial integrity" staffers who send leads to the attorney general’s Medicaid fraud control unit.
"These deficiencies increase the risk that the state will fail to identify abusive practices and potential fraud in its Medicaid program, exposing the state to unnecessary Medicaid costs from ongoing fraud and abuse and unrecovered improper payments," the audit said.
In 2010 Hawaii recovered just $241,000 from Medicaid fraud, compared with the average of $49 million for all states. Hawaii’s total expenditures for fraud detection totaled $858,000, substantially lower than the national average of $8.4 million.
"Hawaii’s overall comparison is so low that there needs to be more effort put here," said Jan Yamane, acting state auditor. "We need to do a better job."
On a positive note, the auditor’s report said Hawaii’s Medicaid program fares well when compared with other states in terms of administrative costs. The audit said DHS has managed to control its costs on a per-enrollee basis in the face of growing Medicaid enrollment. In 2010 Hawaii’s per-enrollee costs were 19 percent lower than the national average.
DHS had a budget of $2.3 billion in 2012, the single largest state agency budget. Medicaid spending reached more than $1.6 billion in 2012, up from $1.5 billion in 2010. More than half of the Medicaid budget comes from the federal government, with the state paying the difference. The report said that state contributions to the Medicaid program have nearly doubled over the past five years.
DHS Director Patricia McManaman said in a written response to the auditor that the department is taking steps to eliminate fraud, specifically through a new $95 million eligibility system called Kolea, which aims to connect with federal data hubs and the state Department of Labor and Industrial Relations to verify income and reduce errors.
"DHS believes that no fraud, waste and abuse is acceptable. The Med-QUEST staff is dedicated to providing timely access to quality care for beneficiaries, while assuring proper oversight of taxpayer dollars," she said. "Since the 2011 federal report was issued, the DHS has implemented new systems, processes, screening and enrollment requirements, contractual requirements for health plans, and launched a new eligibility system … all with the goal of reducing fraud and waste."
DHS also is seeking funds from the Legislature this year for an additional investigator, fraud auditor and program integrity manager, and to build an asset verification system to improve program integrity, she added.
Medicaid beneficiaries are renewed annually for medical coverage through a process called passive renewal in which residents are only required to return forms if their eligibility status has changed, a policy put in place to ensure continuous coverage for families with children. Recipients are automatically renewed for another year if they don’t respond to the annual query.
In 2013 there were roughly 89,000 passive renewal recipients with an estimated cost per beneficiary of more than $2,000 per year. The auditor, applying an error rate of 10.5 percent, estimates $19.6 million in erroneous payments for this group alone.
DHS has tried in the past to change the passive renewal policy that began in 2004, but the Centers for Medicare and Medicaid Services denied its requests, citing federal regulations that prohibit changes that would make eligibility standards more restrictive, the report noted.
DHS expanded the Medicaid program more than a year ago to align with President Barack Obama’s Affordable Care Act. The expansion eliminated the asset limit for most enrollees as of Jan. 1 and raised income levels for eligibility, which has resulted in an increase of about 18,000 recipients, the department said.
Read the report at files. hawaii.gov/auditor/Reports/2014/14-02.pdf.
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