Medicaid Program – Improper Fee-for-Service Pharmacy Payments for Recipients With Third-Party Health Insurance

Issued Date
May 11, 2023
Health, Department of (Medicaid Program)


To determine if Medicaid made inappropriate fee-for-service payments to pharmacies on behalf of recipients who had third-party insurance and, if so, whether appropriate recoveries were made. The audit covered the period July 2016 through June 2021.

About the Program

The Department of Health (Department) administers New York’s Medicaid program. Under the fee-for-service (FFS) payment method, the Department makes Medicaid payments directly to health care providers for services rendered to Medicaid recipients. Many recipients have other third-party health insurance (TPHI) for pharmacy services in addition to Medicaid (e.g., employer-based coverage, Medicare Part D). Medicaid is considered the payer of last resort and, as such, FFS pharmacy providers are required to coordinate benefits with the recipient’s TPHI prior to billing Medicaid for services. The Office of the Medicaid Inspector General (OMIG) contracts with Gainwell Technologies (Gainwell) to identify and recover Medicaid payments made for services that should have been paid for by a recipient’s TPHI. During the audit period, Gainwell’s third-party liability recoveries on FFS pharmacy payments totaled almost $53 million.

Key Findings

We found the Department and OMIG lacked adequate oversight of Gainwell’s recovery process to ensure all available recoveries on FFS pharmacy payments were made. We also found claim processing improvements could be made to prevent TPHI overpayments from occurring. Beginning in 2023, pharmacy services for recipients enrolled in some managed care plans will be covered by FFS; therefore, timely corrective actions in response to the audit are critical to help ensure significant future recoveries. During the audit period:

  • Gainwell did not bill TPHI carriers for the recovery of over $28.8 million in pharmacy claims where Medicaid paid as the primary insurance for recipients who had TPHI coverage. We identified areas for improvement in Gainwell’s processes for recovering claims. For example, Gainwell used an incorrect claim field as the basis for excluding pharmacy claims from its recovery process, resulting in $12.6 million in claims that were improperly excluded. Gainwell acknowledged the error and began billing TPHI carriers. However, because OMIG did not monitor these Gainwell processes, $5.1 million couldn’t be recovered because it was outside the allowed recovery period.
  • Third-party insurers denied over $8.6 million in claims Gainwell submitted for recovery. While the denials were for reasons that could potentially be rectified, Gainwell’s follow-up action to get payment on those claims was limited.
  • Neither the Department nor OMIG reconciled or monitored Gainwell’s recoveries by comparing claims Medicaid paid for recipients with TPHI drug coverage to claims reviewed and recovered by Gainwell. These reviews are important, as shown by the audit whereby we made Gainwell aware of system weaknesses that improperly excluded claims from its recovery process.

Key Recommendations

  • Review the $28.8 million in pharmacy payments and ensure overpayments are appropriately recovered, prioritizing claims approaching the time limit for recovery.
  • Assess the recoverability of the $8.6 million in payments for pharmacy claims billed to TPHI carriers that did not result in a recovery (due to carrier denials), and ensure all necessary follow-up actions are taken to obtain appropriate recoveries, prioritizing claims approaching the time limit for recovery.
  • Enhance monitoring of the TPHI recovery process for FFS pharmacy claims to ensure the completeness and timeliness of recoveries, including the monitoring of claims that are not billed to TPHI carriers and claims that are billed to TPHI carriers but do not result in a recovery.

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