Medicaid Funding At Risk In D.C.
July 19, 2007
Yolanda Woodlee, Washington Post Staff Writer
City Has Overpaid Firms $97 Million, According to Audit
The District wasted nearly $100 million over the past five years overpaying health care contractors for services that many Medicaid patients did not receive, a situation that puts the city in danger of losing federal funding, the D.C. Office of the Inspector General said yesterday.
Auditors found that three contractors -- Amerigroup Maryland, D.C. Chartered Health Plan and Health Right -- that coordinate medical services for about 90,000 low-income residents received a total of $96.6 million in "excess payments."
The District lags behind Maryland and Virginia in collecting information and using it to determine payments to the contractors, the inspector general said. The auditors also found that the District gets fewer services per dollar from contractors than do neighboring jurisdictions.
"We paid in profits more than we should have," said William J. DiVello, assistant inspector general. "We're not saying the companies did anything illegal. The District just didn't do a good job monitoring them."
Agency officials did not deny that they overpaid the contractors, but they said the program followed federal guidelines and the methods to determine pay rates for patients were developed by a certified actuarial firm, Mercer Inc.
In a written response to the report, Chip Carbone of Mercer said the rate-setting methodology used in the District is consistent with the methodology used in nearly every other state.
Gregg A. Pane, director of the Health department, said in a written response that the inspector general's office did not give the agency credit for improvements it has made in the Medicaid program over the past few years. Since 2004, he said, the agency has made major reforms and "aggressive management changes in its oversight" of the program.
"Our actions have set the stage for major reforms in how care in a managed care environment will be purchased in the District in the future," Pane wrote. "Not only will rates be competitive but we will ensure a high level of quality and a competitive bidding environment."
The report said the Medical Assistance Administration, which oversees the program, failed to review and renegotiate the contracts of the three companies to ensure that the costs for patients' care matched their medical needs.
The report said one of the agency's major flaws was using a "one size fits all" method to pay for services for each patient.
That means that the District paid the same monthly amount per patient for medical services whether the person was sick or healthy or visited a doctor. If the managed-care contractor did not have to pay a doctor for a patient's treatment, it could keep the money as part of its profits.
If the District continues with this method, the auditors estimated, the agency could pay nearly $52 million more than necessary for patient care to contractors in the next five years.
The District's Medicaid program, which is funded by local and federal dollars, risks losing federal money because it has not provided required information about patients and their health care services, the report said. That information is needed to determine the per-patient monthly rates paid to contractors.
The inspector general criticized city officials for failing to review the contracts annually and then adjusting per-patient spending based on medical services received.
For example, since 2002, Amerigroup Maryland received $74 million more than necessary for patient care, according to the report. An official in the inspector general's office said the company spent 64 cents of every District dollar it received on actual medical care for patients. D.C. Chartered Health Plan was overpaid $17.5 million, and Health Right was paid $5.1 million in excess.
In Maryland, auditors said, Amerigroup spent 77 cents per dollar on patient care. Other managed care organizations in Maryland and Virginia typically spend more than 80 percent on patients, the report said.
