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

Auditor General Jack Wagner Says Reducing Medicaid Error Rate Would Save Hundreds of Millions of Dollars

Potential savings could help commonwealth with growing budget crisis

HARRISBURG, Pa., Nov. 9, 2010 – Continuing to offer solutions to address the commonwealth’s growing budget crisis, Auditor General Jack Wagner said today that a 10-percent reduction in the Medicaid error rate would save the commonwealth $436 million in fiscal year 2011-12 and a projected $1.9 billion over the next four fiscal years. 

Wagner said his department has completed audits at all of the commonwealth’s county assistance offices and found an average error rate of 15.5 percent.  Auditors found error rates exceeding 40 percent in seven counties.

“With Pennsylvania facing a projected $5 billion budget deficit in fiscal year 2011-12, we must eliminate this wasteful spending,” Wagner said. “These errors can and should be corrected, which would result in a significant sustainable savings to Pennsylvania taxpayers while ensuring that those entitled to the benefits continue to be served.”

This budget-savings suggestion follows Wagner’s previous proposals to fix the flawed funding formula for charter and cyber-charter schools and to offer a commonwealth-wide voluntary retirement incentive program.

Wagner’s auditors found errors in 2,141 of 13,789, or 15.5 percent, of Medicaid cases selected randomly from the 595,046 total cases at the commonwealth’s county assistance offices in all 67 counties.

Many of the improper eligibility determinations were the result of the Department of Public Welfare’s failure to verify recipients’ age, disability, and family relationship requirements, and to promptly review recipients’ financial and other eligibility information. Improper eligibility determinations also occurred because increases in recipients’ income from ongoing employment placed them above the eligibility limits.  

“The sooner DPW identifies these changes in income or other qualifying information, 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 on behalf of 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 $3.7 million in improper payments uncovered in Wagner’s audits, $3.3 million, or 90 percent, were monthly capitation payments made to managed care organizations.

“DPW must stop this money from going out each month to insurance companies for thousands of people who are no longer eligible for the program,” Wagner said. “We can save hundreds of millions of dollars without cutting benefits simply by preventing these improper payments.”

Medicaid, known in Pennsylvania as the Medical Assistance program, is a health care program for low-income children and families, individuals with disabilities, the elderly, and chronically ill adults.  It is funded jointly by the state and the federal government, and is administered by DPW.

DPW’s 88 county assistance offices 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 DPW’s policy of reviewing increases in income from ongoing employment only at six and 12-month intervals and improving monitoring to ensure compliance with DPW’s established internal controls. In response 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.

Wagner’s audit reports of the county assistance offices are available in their entirety at www.auditorgen.state.pa.us.

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 more than 5,000 audits per year.  To learn more about the Department of the Auditor General, taxpayers are encouraged to visit the department’s website at www.auditorgen.state.pa.us.

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