NEWS RELEASE
For Immediate Release
Contact: Steve Halvonik 717 787-1381

Auditor General Jack Wagner Says $3.3 Million in Improper Medicaid Payments Issued by State's Welfare Department

Calls on DPW to immediately tighten
oversight of Medicaid eligibility reviews

HARRISBURG, Jan. 28, 2009 – Auditor General Jack Wagner said today that the Pennsylvania Department of Public Welfare, through its county assistance offices, failed to make proper Medicaid eligibility determinations on more than 1,600 Medicaid applicants between January 2005 and March 2008, resulting in $3.3 million in improper payments made on behalf of ineligible recipients.

“A dollar wasted is a dollar that could have gone to help a truly needy person receive the medical assistance he or she deserves,” Wagner said.  “With the commonwealth facing widening budget deficits, the Department of Public Welfare must do all that it can to monitor the state’s Medicaid program, to make sure all funds are being spent efficiently, effectively, and for their intended purpose. I strongly urge DPW to take immediate steps to tighten its administration and oversight of this vitally important program to ensure that people who are eligible for Medicaid benefits will be able to receive every dollar they’re entitled to for their care.”

The audits are the first Medicaid eligibility audits completed by Wagner’s department.

Many of the improper eligibility determinations were due to DPW’s failure to verify recipients’ age, disability and family relationship requirements, and to promptly review recipients’ financial and other eligibility information.  Wagner’s auditors found errors in 1,648, or 14.1 percent, of 11,698 Medicaid cases selected randomly from 513,128 Medicaid cases from 79 county assistance offices in 53 counties.

Medicaid, which is known in Pennsylvania as the Medical Assistance program, is a federal health care program for low income children and families, disabled individuals, elderly and chronically ill adults.

It is funded jointly by the state and the federal government, and is administered by DPW.  For the 2008-09 fiscal year, the program received at total of $14.4 billion in state and federal funds, with the state contributing $6.7 billion of those funds.  Federal regulations require states to ensure timely recipient eligibility determinations and proper issuance of Medicaid benefits.

Wagner said DPW’s policy to review certain income information at six and 12-month intervals, rather than quarterly when the information becomes available on the state’s data information system, contributed to improper eligibility determinations.  The improper eligibility determinations occurred because recipients’ income increases placed them above the eligibility limits. The sooner DPW detects increases in income from ongoing employment, the sooner the recipient can be deemed ineligible and the improper payments can be stopped, Wagner said.

This is especially critical when the recipient is enrolled in a managed care organization to which DPW makes monthly capitation payments for recipients regardless of whether they receive medical services. If a recipient is not in a managed care organization, DPW pays on a fee-for-service basis, only when the recipient actually receives medical services. Of the $3.3 million in improper payments uncovered in Wagner’s audits, $3,171,861 were monthly capitation payments made to managed care organizations.

DPW has 92 county assistance offices in 67 counties that administer benefits such as cash assistance, food stamps, and Medicaid benefits to needy Pennsylvanians. Twenty-five counties fall under the mandatory managed care program for physical health services.  All 67 counties fall under mandatory managed care for behavioral health services.

Wagner’s reports made several recommendations to DPW to correct the deficiencies identified in the audits, including changing its policy of reviewing increases in income only at six and 12-month intervals and improving monitoring to ensure compliance with established internal controls.  Wagner also recommended that DPW follow up with the Pennsylvania Office of Inspector General to see if the improper payments made on behalf of recipients can be recouped.

In initial responses to the audit recommendations, DPW indicated that it is updating its data information system for determining when changes in a recipient’s income must be reviewed, and has secured the services of a forensic accounting firm to review its eligibility processes, including those regarding income determination.  DPW also indicated that overpayments made on behalf of recipients due to improper eligibility determinations will be referred to the Office of Inspector General for possible recoupment.

Wagner’s audit reports of the 79 County Assistance Offices are available in their entirety at www.auditorgen.state.pa.us.  Audits of the remaining County Assistances offices are in process.

Auditor General Jack Wagner is responsible for ensuring that all state money is spent legally and properly.  He is the commonwealth’s elected independent fiscal watchdog, conducting financial audits, performance audits, and special investigations.  The Department of the Auditor General conducts approximately 5,000 audits per year. 

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