In May 2014, the Government Accountability Office (GAO) released a report calling for increased oversight of Medicaid managed care spending (the report can be found here). GAO reported that “Most state and federal program integrity officials we interviewed told us that they did not closely examine Medicaid managed care payments, but instead primarily focused their program integrity efforts on [fee for service] claims.”
Program integrity officials focused on fee for service claims despite the fact that two-thirds of Medicaid beneficiaries received some of their services from managed care organizations (MCO) at the time of the report’s release.
Why is this? States see a quicker return on investment in identifying fee for service overpayments, causing them to overlook MCOs. Still, while managed care audits may not result in immediate returns, they can save states money long term.
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Medicaid Fee for Service vs. Managed Care
The Washington State Auditor’s Office released a Medicaid managed care audit just prior to the release of the GAO report (the audit can be found here). This audit exhibits some of the program integrity challenges that are inherent with Medicaid managed care.
A stated purpose of the audit was “…to determine if the state had controls in place to effectively oversee the organizations in charge of providing health care and to prevent overpayments.” The audit found that the Health Care Authority’s oversight of MCOs allowed MCOs to overpay selected providers.
But here is where things get tricky. What do these overpayments mean to the state?
With fee for service, the state pays providers directly. Identified overpayments result in providers paying the state back. The state sees an immediate return on its program integrity investment.
However, with managed care, the state has already paid the MCO. The provider would not be responsible for paying the state back, but rather the MCO. The state sees no immediate return on its program integrity investment. Sure, a repayment may have an impact on the managed care organization’s bottom line, or could figure into future capitated payments. But if past overpayments are factored into managed care capitated payments, the overpayments are already “baked in.”
Said another way, MCOs have little incentive to identify overpayments on their own because their payments already factor in the overpayments. And for the state, identified overpayments may take years before they yield reductions in managed care payments. The Washington State Auditor’s Office report concluded that inappropriate payments in 2010 could have potentially affected 2013 managed care premium rates. The state must wait 4 years before it sees a return on investment!
Learn How Medicaid Managed Care Audits Can Reduce MCO Payments
The news is not all bad, however. Integrity Management Services (IntegrityM) has experience with Medicaid program integrity, including auditing Medicaid managed care organizations (MCOs). And although it requires an investment, IntegrityM can work with states to lower MCOs payments in the long run. Click here for more information on our audit offerings.
Contact IntegrityM today to speak with an expert about Medicaid Managed Care Audits. Call (703) 535-1400 or click here to contact us online.
