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NEWS from the Office of the New York State Comptroller
Contact: Press Office 518-474-4015

DiNapoli: Medicaid Audits Find More Than $700 Million in Unnecessary Costs and Overpayments

September 21, 2020

New York State Comptroller Thomas P. DiNapoli today released five audits of the Department of Health’s (DOH) Medicaid program that identified approximately $706.6 million in unnecessary, improper or questionable payments and made several recommendations for improving the program.

“The state is facing budget gaps of billions of dollars because of the COVID-19 crisis and needs to find cost savings wherever it can,” DiNapoli said. “Hundreds of millions of dollars could be saved with better financial and management controls over the state’s Medicaid program. In recent years, my auditors have identified billions of dollars in waste in the program. Our oversight of the program will continue in earnest as DOH can do much more to save taxpayer dollars.”

The New York State Medicaid program is a federal, state, and locally funded program that provides a wide range of health care services to individuals who are economically disadvantaged or have special health care needs. For the State Fiscal Year ended March 31, 2019, New York’s Medicaid program had approximately 7.3 million recipients and Medicaid claim costs totaled about $67.4 billion.

Medicaid Program: Cost of Pharmacy Services Under Managed Care

DOH uses two methods to pay health care providers for Medicaid pharmacy services: fee-for-service (FFS), where DOH pays providers directly for each drug dispensed; and managed care, where DOH contracts with managed care organizations to pay providers for pharmacy services. Under FFS, DOH has taken a number of actions to help ensure pharmacy services are provided in an efficient and economical manner. However, it has not established sufficient controls and oversight to ensure the most cost-effective delivery of pharmacy services under managed care. DiNapoli’s auditors found DOH missed opportunities to lower costs on pharmacy services delivered through Medicaid managed care because officials did not ensure the use of the lowest net cost drugs. As a result, for the period Jan. 1, 2016 through Dec. 31, 2019, auditors estimated $605 million was spent for unnecessary drug costs.

Medicaid Program: Improper Medicaid Payments Involving Fee-for-Service Claims for Recipients With Multiple Client Identification Numbers

Each Medicaid applicant is assigned a Client Identification Number (CIN), a unique identifier, and is enrolled in either managed care or FFS Medicaid. While recipients may have more than one CIN assigned during the time they are in receipt of benefits, only one CIN should have active eligibility at a time to prevent duplication of payments. DiNapoli’s auditors found DOH made $47.8 million in improper payments on behalf of recipients with multiple CINs for the period Jan. 1, 2014 through March 31, 2019.

Medicaid Program: Accuracy of Medicaid Eligibility Determined by NY State of Health (NYSOH)

NYSOH is the state-run health plan marketplace under DOH where individuals, families, and small businesses can enroll in Medicaid and other health insurance plans. An individual’s Medicaid eligibility and enrollment information is transmitted from NYSOH to the eMedNY claim payment system. DiNapoli’s auditors identified weaknesses in NYSOH that caused improper transmissions of eligibility and enrollment information to eMedNY, and a lack of eligibility and enrollment data reconciliations between NYSOH and eMedNY that resulted in $11.7 million in improper payments on behalf of 1,096 recipients who had terminated coverage in NYSOH and another $4.9 million in improper and questionable payments was identified for 319 recipients who died.

Medicaid Program: Claims Processing Activity April 1, 2019 Through Sept. 30, 2019

DOH’s eMedNY computer system processes Medicaid claims submitted by providers for services rendered to Medicaid-eligible recipients, and it generates payments to reimburse the providers for their claims. During the six-month period ended Sept. 30, 2019, eMedNY processed over 244 million claims, resulting in payments to providers of more than $35 billion. Auditors identified over $8.2 million in improper payments including: $3.2 million for clinic, practitioner, managed care capitation, pharmacy, inpatient, durable medical equipment, and dental claims that did not comply with Medicaid policies; $2.9 million for maternity and newborn birth claims that contained inaccurate information, such as the diagnosis code or newborn’s birth weight; and $1.1 million for claims that should have been billed to other health insurance coverage recipients had.

Medicaid Program: Improper Medicaid Payments for Terminated Drugs

Auditors identified $29 million in improper Medicaid payments for drugs dispensed after they had been removed from the market for safety or commercial reasons. Medicaid managed care organizations made improper payments to pharmacies totaling $27.2 million and the eMedNY system made improper FFS payments to pharmacies totaling $1.8 million. Nearly $1.5 million of the improper FFS payments occurred because DOH had not received the drugs’ termination dates at the time the claims were processed.

In each audit, DiNapoli recommended DOH review the findings and recover any funds possible.


Department of Health audits

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