Recovering Managed Care Overpayments for Pharmacy Services on Behalf of Recipients With Third-Party Health Insurance (Follow-Up)

Issued Date
January 31, 2024
Health, Department of (Medicaid Program)


To determine the extent of implementation of the six recommendations included in our initial audit report, Medicaid Program: Recovering Managed Care Overpayments for Pharmacy Services on Behalf of Recipients With Third-Party Health Insurance (Report 2020-S-39).

About the Program

Many of the State’s Medicaid recipients receive their services through managed care, where the Department pays managed care organizations (MCOs) a monthly premium for each enrolled recipient and, in turn, MCOs are required to pay for the Medicaid services their recipients require, such as pharmacy services. Many recipients have other third-party health insurance in addition to Medicaid (e.g., employer-based coverage or Medicare Part D). Medicaid is considered the payer of last resort and, as such, MCOs are required to coordinate benefits with the recipient’s third-party health insurance prior to paying for Medicaid services. The Office of the Medicaid Inspector General (OMIG) contracts with Health Management Systems, Inc. (HMS) to identify and recover Medicaid payments made for services that should have been paid for by a recipient’s third-party health insurance.

The objective of our initial audit, issued on July 13, 2022, was to determine whether Medicaid overpayments for pharmacy services on behalf of managed care recipients who had third-party health insurance were appropriately recovered. The audit covered the period from October 2015 through May 2020. The audit determined the Department and OMIG lacked adequate oversight of the third-party liability recovery process. HMS had not billed third-party health insurance carriers for the recovery of about $292 million in pharmacy claims that MCOs paid as the primary insurance for recipients who, according to the Medicaid claims processing system, had third-party health insurance drug coverage.

Key Findings

The Department made some progress in addressing the problems we identified in the initial audit report, but additional actions are still required. Although some recoveries have been made, the Department and OMIG have not taken action on most of the Medicaid managed care pharmacy payments identified in the initial report. OMIG and HMS have taken some corrective steps to improve the third-party recovery process going forward. Of the initial report’s six audit recommendations, three were partially implemented and three were not implemented.

Key Recommendations

Officials are given 30 days after the issuance of this report to provide information on any actions that are planned to address the unresolved issues discussed in this follow-up.

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