Feds say state should give back up to $24 million in Medicaid money

Federal auditors recommended that Connecticut refund nearly $1 million in Medicaid payments they say were improperly billed to the federal government, and repay another $23 million unless the state can show those payments were allowable.

In response, the state Department of Social Services agreed to repay $957,943 to the federal government. But Social Services Commissioner Roderick L. Bremby told federal officials that the state doesn’t believe it should refund the $23 million.

At issue in the report released Wednesday by the U.S. Department of Health and Human Services’ Office of the Inspector General is how the state billed the federal government for mental health services known as targeted case management, delivered to people covered by Medicaid, from 2009 through 2011.

The federal government reimburses Connecticut for a portion of its Medicaid spending. The services were provided to people with chronic mental illness by the state Department of Mental Health and Addiction Services or private nonprofit agencies that contract with the department, but DSS – the state’s Medicaid agency – billed the federal government for its share of the costs.

During the time period covered by the report, DSS claimed $68.9 million in payments for targeted case management and received $37 million in federal reimbursement.

The inspector general found that DSS sought federal reimbursement for more than $1.8 million in Medicaid payments for the service that were not allowable.

The bulk of those problematic payments were the result of problems in the monthly payment rates that DSS used to reimburse DMHAS for Medicaid clients who received targeted case management services – and to bill the federal government for its share of Medicaid costs. The rates were calculated by DMHAS, taking into account the cost of providing the services.

But the inspector general found that the rates included costs that had already been accounted for in other Medicaid rate calculations. The calculations used to develop the rates also included costs – such as salaries, wages and service hours – that were higher than what was actually paid, according to the report.

That led DSS to overstate its claims for federal reimbursement by $1.87 million, which led to an overpayment of $945,506 by the federal government, the auditors wrote. Payment rates based on overstated costs dated back to the 2004 fiscal year, the report said.

DSS also claimed reimbursement for duplicate payments – multiple monthly payments for the same clients during the same month – totaling $24,873, leading to federal payment of $12,437, according to the auditors.

And the inspector general raised questions about another $42.6 million in targeted case management claims, suggesting that they could have been overstated.

In its rate calculations, DMHAS included the entire contract cost of programs administered by private providers, even though those programs included both targeted case management services and other, unrelated services, according to the report.

The auditors wrote that DSS was unable to provide adequate documentation to demonstrate how much of those costs were actually the result of targeted case management services that could be billed under Medicaid.

“Accordingly, we were unable to determine the allowability of an additional $42,581,884” in targeted case management reimbursement, the auditors wrote. The federal government reimbursed the state $23 million for those claims.

The auditors recommended that DSS either provide additional documentation to show how much of the $42.6 million was properly billed, or refund the $23 million.

The auditors said DSS had not adequately monitored how DMHAS determined its rates. They also cited inadequate internal controls to identify and prevent duplicative payments.

In a written response included in the audit, Bremby wrote that DSS agreed with most of the recommendations, but disputed the recommendation that the state repay $23 million.

Bremby noted that the state has worked with the federal government to revise how it calculates its payment rates for targeted case management, and was in the process of revising all claims dating back to July 1, 2008, to comply with the new methodology.

The state will also work with federal officials to confirm the validity of Medicaid payments claimed during the 2004 through 2008 fiscal years and will, “to the extent possible,” provide additional documentation and analysis to support the claims, he wrote.

“[H]owever, given the years these claims were originally billed we are uncertain of the availability of such documentation,” Bremby wrote.

“It is the State’s position, however, that expenditures claimed for fiscal years 2004 through 2008 are allowable for Federal Medicaid reimbursement, based upon the information and procedures that existed at that time,” he wrote.

Bremby wrote that the duplicate payments were the result of an isolated event, and that an electronic records system DMHAS implemented in 2014 has controls to prevent duplicate payments in the future.

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