dinapoli-3448167State Comptroller Thomas DiNapoli accentuates the negative in a new audit of the state’s Medicaid managed care program, faulting two participating insurers for “wasting millions of state Medicaid dollars.” But he omits two important pieces of context.

First, the comptroller’s report lacks a sense of proportion. After combing Medicaid claims paid by UnitedHealthcare and Amerigroup over a four-year period, DiNapoli’s office said it found “at least $6.6 million in improper and questionable payments to ineligible providers .. including almost $60,000 in payments to pharmacies for medications that were prescribed by deceased doctors.”

Of course, any level of fraud is a bad thing. But the $6 million identified by the audit represents less than one-tenth of 1% of the claims paid by the two companies during the audit period. For comparison, the U.S. General Accounting Office estimates that improper payments accounted for 6.7 percent of nationwide Medicaid spending in 2014.

Are the managed care companies doing a better or worse job at catching fraud than traditional, fee-for-service Medicaid (in which the state directly reimburses providers)? It’s a relevant question the audit does not address. But when The New York Times analyzed traditional Medicaid spending in 2005 – using only a laptop computer and off-the-shelf software – it found evidence of rampant fraud, including $7 million in questionable claims from a single dentist.

Second, the audit fails to clearly explain who suffered the $6 million hit: It was the insurers, not the state.

A great virtue of Medicaid managed care is that it shifts risk and liability from taxpayers to the private sector. The state pays each managed care company a fixed premium per month per enrollee. The company then becomes responsible for paying claims. If the company fails to catch fraud, it eats the loss.

Since the state sets premiums based on how much companies have paid out in the past, the audit raises the concern that unidentified fraud could lead to inflated rates in future years. But that would be true of any fraud detection effort with a success rate less than 100 percent.

Meanwhile, there’s strong evidence that Medicaid managed care is saving taxpayers money overall. During the period covered by the audit, the share of New York Medicaid recipients enrolled in managed care jumped from 68 percent to 76 percent. Over that same period, the state’s per-enrollee spending declined from $10,432 to $8,630.

Despite the relatively small scale of the inappropriate payments – and the lack of direct harm to the state – DiNapoli urges a strong response from the state. His audit calls on the Health Department to require, as part of its contracts with managed care companies, that they hire a minimum number of staff dedicated to fraud recovery.

The audit notes that New Jersey requires plans to employ at least one full-time recovery person for every 60,000 Medicaid recipients enrolled, while the ratios at UnitedHealthcare and Amerigroup were several times lower than that. What the audit does not say is whether the New Jersey rule resulted in more recoveries.

This is one recommendation that the Health Department rejected outright:

“Plans need to have the flexibility to allocate resources to utilize various program integrity tools, including pre-payment and post-payment activities,” the department wrote in its response to the audit. “Plans and other payers have found that preventing inappropriate payments is more cost effective than attempting to recoup inappropriate payments.”

About the Author

Bill Hammond

As the Empire Center’s senior fellow for health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

You may also like

A Medicaid Grant Recipient Sponsors a Pro-Hochul Publicity Campaign

While much of the health-care industry is attacking Governor Hochul's Medicaid budget, at least one organization is rallying to her side: Somos Community Care, a politically active medical group in the Bronx that recently r Read More

A Politically Active Medical Group Gets $29 Million in ‘Distressed’ Provider Funds

State officials awarded $29 million in 'distressed' provider funding to a politically active medical group in the Bronx, state records confirm. a network of physicians and other he Read More

Albany Lawmakers Push a $4 Billion Tax on Health Insurance

Legislative leaders are proposing an additional $4 billion tax on health insurance plans in the upcoming state budget – but withholding specifics of how it would work. Read More

Loss of Patients and Revenue Foreshadowed Downsizing for SUNY Downstate

The SUNY-owned hospital in Brooklyn facing a newly announced downsizing plan has seen its patient volume and revenue plunge over the past decade, according to a review of its financial reports. Read More

How a Medicaid Program To Improve Nursing Home Care Ended Up Paying for Union Benefits

New York State's budget-making process sometimes works like a closed loop, as interest groups on the receiving end of state spending reinvest a portion of their proceeds to lobby Albany for still more money. Read More

How Eliminating the Medicaid ‘Gap’ Would Perpetuate Inequity in Hospital Funding

A change in Medicaid reimbursement currently being pushed by New York's hospital industry appears likely to benefit high-end hospitals proportionally more than safety-net institutions, a review of hospitals' financial repor Read More

Hochul’s ‘Straight Talk’ on Medicaid Isn’t Straight Enough

Arguably the biggest Medicaid news in Governor Hochul's budget presentation was about the current fiscal year, not the next one: The state-run health plan is running substantially over budget. Read More

Despite Lingering Shortages, New York’s Health-Care Workforce Is Bigger Than Ever

The state's health-care workforce is recovering unevenly from the pandemic, with persistently lower employment levels in some areas and robust growth in others. This mixed pattern c Read More