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NEWS from the Office of the New York State Comptroller
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DiNapoli: Managed Care Companies Wasting Millions in State Medicaid Dollars

July 15, 2016

United HealthCare and Amerigroup, managed care organizations (MCOs) that contract with the Department of Health (DOH) to provide health services under the state’s Medicaid program, made at least $6.6 million in improper and questionable payments to ineligible providers over a four-year period, including almost $60,000 in payments to pharmacies for medications that were prescribed by deceased doctors, according to an audit released today by State Comptroller Thomas P. DiNapoli.

“These organizations are being entrusted to manage public health dollars and are costing taxpayers millions in questionable payments,” DiNapoli said. “My office will continue to work with the state Department of Health to ensure the improper payments are recovered and steps are taken to make sure tax dollars are not being wasted.”

DOH contracts with MCOs to coordinate the care for enrolled Medicaid beneficiaries. In exchange, MCOs receive a monthly premium payment for each enrollee. In 2014, New York state’s Medicaid claim costs totaled more than $51 billion, of which managed care premiums comprised nearly $27 billion. At the time of DiNapoli’s audit, there were 53 MCOs that offered 81 different plans. United HealthCare (UHC) and Amerigroup were among the largest.

Managed care’s share of Medicaid expenditures has been growing in recent years with the state aiming to shift most Medicaid services and enrollees to managed care. DOH, however, remains legally responsible for ensuring that MCOs comply with state and federal Medicaid regulations.

DiNapoli’s auditors discovered more than $1.1 million in payments from Jan. 1, 2011 through Dec. 31, 2014 that should not have been made by the MCOs, including $57,568 in inappropriate payments for medications prescribed by deceased providers and $43,217 paid to a pharmacy that was excluded from the Medicaid program due to abusive billing practices.

Auditors were unable to determine the full extent of the payments UHC and Amerigroup made to excluded providers because claims totaling about $445 million, were missing important information. Using the analysis from DiNapoli’s auditors, DOH identified an additional $5.5 million in questionable payments.

Additionally, DiNapoli’s auditors found that UHC and Amerigroup made very limited efforts to recover improper payments. For example, premiums paid to UHC increased annually, from approximately $930.9 million in 2011 to more than $1.4 billion in 2013, but its recoveries decreased over the same time period. In 2013, it recovered only $58,500 from fraud and abuse detection activities.

Both MCOs also underreported their recoveries to DOH. There may be a disincentive for MCOs to report these recoveries because they are factored into the rate calculation and could result in reduced premiums.

Auditors also found UHC and Amerigroup did not provide adequate staffing in their Special Investigation Units (SIUs) to prevent and recover improper payments. In 2013, UHC enrolled about 444,000 Medicaid recipients and paid about 15.2 million encounter claims. The same year, Amerigroup enrolled about 514,000 recipients and paid about 16.6 million encounters. Despite these high transaction volumes, UHC and Amerigroup had only 1.74 and 2.58 full-time equivalent SIU staff, respectively, dedicated to New York’s Medicaid program.

In New Jersey, MCOs are required to maintain a minimum investigator-to-enrollee ratio of at least 1:60,000. In New York, which has no such requirement, UHC’s ratio was 1:255,234 and Amerigroup’s ratio was 1:199,173. Auditors found that the SIU staff at both MCOs received inadequate annual training.

DiNapoli made 11 recommendations to DOH, including:

  • Ensure improper MCO payments to ineligible providers are  recovered, determine if the MCOs’ recoveries have an impact on the monthly managed care premium rate calculations, and adjust the premiums as appropriate;
  • Strengthen steps to oversee and monitor MCOs to ensure that only eligible providers are reimbursed; and
  •   Take steps to establish appropriate criteria for SIU staffing levels, adequate training requirements for the SIU staff, and a process for ensuring consistency and accuracy in reporting SIU activities and recoveries.

DOH officials agreed with most of the recommendations and indicated that certain actions have been and will be taken to address them.

Read the report Medicaid Managed Care Organization Fraud and Abuse Detection, or go to: http://www.osc.state.ny.us/audits/allaudits/093016/14s51.pdf