Medicaid Program - Medicaid Managed Care Organization Fraud and Abuse Detection

Issued Date
July 15, 2016
Health, Department of (Medicaid Program)


To determine if United HealthCare and Amerigroup made payments to ineligible health care providers and whether these managed care organizations established and implemented adequate Special Investigation Units to detect, prevent, and follow up on instances of fraud and abuse. Our audit covered the period January 1, 2011 through December 31, 2014.


Through its Medicaid managed care program, the Department contracts with managed care organizations (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. Based on December 2014 data, Medicaid managed care provided coverage to 4.7 million members of the over 6 million enrolled in Medicaid. At the time of the audit, there were 53 MCOs that offered 81 different plans; United HealthCare (UHC) and Amerigroup were among the largest plans.

In 1998, managed care accounted for just 8 percent of New York State Medicaid expenditures. By 2013, managed care’s share of Medicaid expenditures rose to 50 percent. New York’s goal to shift the majority of Medicaid services and enrollees to managed care could increase managed care’s share of Medicaid expenditures to 90 percent or higher by the end of 2016.

Despite this operational shift, the State remains legally responsible for ensuring that MCOs comply with State and federal Medicaid regulations. For example, State oversight of MCOs must ensure that: enrollees receive needed services; MCOs fulfill contractual obligations for program quality; only eligible health care providers and enrollees participate in Medicaid; and MCOs report accurate and timely encounter claims (claims from providers that MCOs paid) and enrollee, provider, and financial data. Correspondingly, MCOs are responsible for ensuring that managed care payments are not made to ineligible health care providers. In addition, MCOs are required to have effective compliance programs, including full-time Special Investigation Units (SIUs) dedicated solely to the prevention, detection, and investigation of fraud and abuse.

Key Findings

  • During our audit period, UHC and Amerigroup made improper and questionable payments totaling more than $6.6 million attributable to providers who were excluded from the Medicaid program. Initially, our audit testing identified $1.1 million (of the $6.6 million) in payments related to such providers. For instance, payments totaling $57,568 were made to pharmacies for medications that were prescribed by providers (physicians) who were deceased on the dates the prescriptions were purportedly written. In another example, $43,217 was paid to a pharmacy that was excluded from Medicaid due to abusive billing practices. Also, through our initial testing, we were unable to determine the full extent of MCO payments attributable to excluded providers because many MCO encounter claims (totaling about $445 million) lacked certain information. Therefore, we shared our findings with the Department, which performed a supplemental review of a portion of these deficient claims and identified an additional $5.5 million in questionable payments attributable to excluded providers.
  • Recoveries of improper payments by UHC’s and Amerigroup’s SIUs were very limited. For example, while the premiums paid to UHC increased annually, from approximately $930.9 million in 2011 to more than $1.4 billion in 2013, its recoveries actually decreased each year – and in 2013, its SIU recovered only $58,500 from fraud and abuse detection activities. We further note that both MCOs underreported their SIU recoveries to the Department. Additionally, there may be a disincentive for MCOs to report these recoveries because they are factored into the premium rate calculation and could result in reduced premiums.
  • There is considerable risk that UHC and Amerigroup did not adequately staff their SIUs. With minimal staffing, the MCOs had limited ability to identify and recover fraudulent and improper payments, which increased the risk that Medicaid paid for improper claims. To illustrate, 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’s and Amerigroup’s SIUs had only 1.74 and 2.58 full-time equivalent staff, respectively, dedicated to New York’s Medicaid program.
  • New York’s Medicaid program has no specific requirements or criteria for SIU staffing levels. However, New Jersey, for example, required its MCOs to maintain a minimum investigatorto- enrollee ratio of at least 1:60,000. In comparison, in 2013, UHC’s ratio was 1:255,234 and Amerigroup’s ratio was 1:199,173 for New York State Medicaid. Thus, the amount of staff that UHC and Amerigroup dedicated to SIU work was proportionally far less than New Jersey’s program.
  • The SIU staff at both MCOs received inadequate annual training.

Key Recommendations

We made 11 recommendations to the Department, including:

  • Ensure improper MCO payments to ineligible providers are appropriately 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.
  • 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.

Other Related Audits/Reports of Interest

Department of Health: Improper Fee-for-Service Payments for Pharmacy Services Covered by Managed Care (2014-S-5)
Department of Health: Improper Managed Care Payments for Certain Medicaid Recipients (2010-S-66)

Andrea Inman

State Government Accountability Contact Information:
Audit Director: Andrea Inman
Phone: (518) 474-3271; Email: [email protected]
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236