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Medicaid Accidentally Overpays $88M to Alabama

8:44 AM, Aug 29, 2013 • By JERYL BIER
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The state of Alabama received bonus payments from Medicaid for 2009 and 2010 that were a stunning 13 times higher than the state was eligible for.  So says the inspector general (IG) for Health and Human Services in a report released on Wednesday.

Instead of $7.1 million, Alabama received $95.3 million in performance bonuses related to the Children's Health Insurance Plan (CHIP) for the years in question.  As a consequence, the state now owes the federal government a refund of about $88 million.

The overpayment was not the result of a complicated series of errors or deliberate misrepresentation, but rather a very simple error, as the report spells out:

The State agency overstated its current enrollments because, rather than reporting a monthly average enrollment of qualifying children, it reported to CMS [Centers for Medicare & Medicaid Services] the total number of all qualifying children that had been enrolled in its program for each year reviewed.

In other words, even children who qualified for CHIP for only a few months during the year were counted as if they were qualified the entire year.  That means the number of qualified children was overstated by more than 90,000.

The IG choose to investigate the payments to Alabama because the state received over one-third (34 percent) of all such bonus payments to all states for 2009-2010:

We reviewed the bonus payments that Alabama received for FYs 2009 and 2010 because the amounts of the payments were relatively high compared with those of other States receiving bonus payments.  Alabama received $95 million (34 percent) of the $281 million in bonus payments made to all States for these 2 years.

It is unclear why this imbalance did not raise any red flags at CMS prior to the IG's audit.

According to a report on the Alabama-based website al.com, the state of Alabama wants to work out a repayment plan for the $88 million with the federal government.  The state's health office Dr. Don Williamson is quoted as saying that he believes the state Medicaid "acted in good faith" when filing for the refunds.

Initially, Alabama disputed the findings in a May 2013 letter to CMS from acting Alabama Medicaid commissioner Stephanie McGee Azar:

"Alabama Medicaid believes that it qualified for the bonuses at issue," according to the letter dated May 17, 2013. "CMS has worked closely with Alabama Medicaid in preparing the state's yearly bonus application in compliance with federal requirements since the State's first submission in 2009."

The bonus payments were authorized in the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA).  According to the report [emphasis added]:

[Q]ualifying States may receive bonus payments for FYs 2009 through 2013 to offset the costs of increased enrollment of children in Medicaid.  A State is eligible for a bonus payment if it increased its current enrollment of qualifying children (current enrollment) above the baseline enrollment of qualifying children (baseline enrollment) for a given year as specified in CMS guidance.  A State must also have implemented at least five of the Medicaid enrollment and retention provisions specified in CHIPRA. 

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