OIG: States' Improper Medicaid Capitation Payments Up 60% in 2020

Auditors say the increase coincided with an overall increase in Medicaid enrollment during the first year of the pandemic.

The value of improper Medicaid capitation payments made by states to managed care providers for beneficiaries who were already enrolled in Medicaid programs in other states increased by 60% between 2019 and 2020, the first year of the coronavirus pandemic, federal auditors say.

The Department of Health and Human Services Office of the Inspector General found that 47 state Medicaid agencies made improper capitation payments for beneficiaries enrolled in Medicare and living in other states totaling $117 million in August 2020, compared with $73 million in August 2019.

Volume-wise, OIG says capitation payments to MCOs were made for 208,254 concurrently enrolled beneficiaries in August 2019 and 327,497 concurrently enrolled beneficiaries in August 2020.

"The significant increase in these payments from August 2019 to August 2020 coincided with an overall increase in Medicaid enrollment during that time, and new federal requirements and flexibilities that were available to states during the COVID-19 public health emergency," OIG says.

Auditors compared Centers for Medicare and Medicaid Services' Transformed Medicaid Statistical Information System (T MSIS) data from 45 States, the District of Columbia, and Puerto Rico and identified all August 2019 and August 2020 capitation payments made by two states for the same beneficiary. The audit covered $145.7 million and $234.2 million in Medicaid capitation payments for August 2019 and August 2020, respectively, made by states for beneficiaries who were concurrently enrolled in Medicaid managed care in two states during July through September 2019 and July through September 2020.

"Two states often made capitation payments for the same Medicaid beneficiary in part because states did not have full access to data they needed to identify beneficiaries who were concurrently enrolled in another state," the audit says. "Therefore, CMS does not take all available steps, either directly or through the states, to identify and prevent state capitation payments for non-resident beneficiaries."

Auditors recommend that CMS monitor beneficiaries' concurrent Medicaid MCO enrollments, rather than rely upon individual states to do so and provide states with T-MSIS national enrollment data to help them check their rolls for redundancies.

CMS acknowledge the problem with the double payments, but did not concur with the recommendations and says that T-MSIS monitoring could prove "redundant, inefficient, and confusing to states." Instead, the agency said it will continue to rely on states and provide guidance and technical help as needed.