MassHealth Made an Estimated $84,832,094 in Capitation Payments on Behalf of Members Who Were Residing Outside of Massachusetts.

We found that MassHealth made 1,234 capitation payments, totaling $488,770, on behalf of 63 out of the 100 members in our sample. These 63 members were residing in at least one of nine other states or Puerto Rico.

Overview

During the audit period, MassHealth made an estimated $84,832,094 in capitation payments to managed care organizations (MCOs) on behalf of members who were residing in and had enrolled in Medicaid programs in nine other states and Puerto Rico. Specifically, we found that MassHealth made 1,234 capitation payments, totaling $488,770, on behalf of 63 out of the 100 members in our sample. These 63 members were residing in at least one of nine other states or Puerto Rico and had enrolled in, and received all of their healthcare benefits under, the other state’s or Puerto Rico’s Medicaid programs.

By not ensuring that all MassHealth members enrolled in MCOs meet its residency eligibility requirement, we estimate that MassHealth overpaid MCOs by $84,832,094. MassHealth could have used this money to provide additional services to other MassHealth members. The overpayments are indicated in the table below.

State	Number of Members	Number of payments	Amount Paid*
California	7	213	$   94,468
Florida	11	121	53,989
Georgia	5	135	29,785
New Hampshire	4	114	16,217
New Jersey	4	70	17,568
North Carolina	2	31	15,635
Ohio	3	65	10,944
Pennsylvania	5	106	70,212
Rhode Island	7	140	48,901
Puerto Rico	15	239	131,053
Total	63	1,234	$ 488,770

*  Discrepancies in dollar amounts are due to rounding.

 

For 51 (81%) of these 63 members, MassHealth had Public Assistance Reporting Information System (PARIS) data matches that indicated that the members had, in fact, moved to another state or Puerto Rico, but MassHealth continued to make capitation payments on their behalf for periods ranging from 5 to 45 months after the members had moved.

In addition, there were four members for whom we did not have sufficient information to reasonably determine their states of residency because these members did not receive any Medicaid-funded medical services in either Massachusetts or the concurrently paying state during the entire 45‑month audit period. Therefore, we did not include these instances in our $84,832,094 projection. The capitation payments made on behalf of these four members are indicated in the table below.

State	Number of Members	Number of Payments	Amount Paid*
California	1	45	$ 162,153
Florida	1	8	2,089
New Jersey	2	23	7,649
Total	4	76	$ 171,892

*  Discrepancies in dollar amounts are due to rounding.

 

We determined that the remaining 883 capitation payments made on behalf of the members in our sample were for members who were enrolled in MassHealth and residing in Massachusetts. However, because other states and Puerto Rico also concurrently made capitation payments on these members’ behalf, we met with Medicaid officials from these states and Puerto Rico and brought these matters to their attention. These officials stated that they would investigate and resolve any issues with the members in question.

Authoritative Guidance

According to Section 517.002 of Title 130 of the Code of Massachusetts Regulations, “As a condition of eligibility, an applicant or member must be a resident of the Commonwealth of Massachusetts.”

Section 435.403 of Title 42 of the Code of Federal Regulations states the following:

(a) Requirement. The agency must provide Medicaid to eligible residents of the State, including residents who are absent from the State. . . .

(j) Specific prohibitions. . . .

(3)  The agency may not deny or terminate a resident’s Medicaid eligibility because of that person's temporary absence from the State if the person intends to return when the purpose of the absence has been accomplished, unless another State has determined that the person is a resident there for purposes of Medicaid.

Reasons for Issue

MassHealth does not have effective controls to ensure that an individual meets its residency eligibility requirement. Specifically, under its policies, MassHealth does not verify members’ residencies either initially upon enrollment or thereafter for members who were referred to the program from another agency (e.g., the Department of Transitional Assistance). MassHealth officials stated in a meeting with us that it is the referring agency’s responsibility to determine whether the individual meets MassHealth’s residency eligibility requirement. However, in these instances, MassHealth cannot assure that the referring agency has an effective process to verify the member’s residency.

Even when MassHealth does participate in a PARIS data match, agency officials told us that they do not follow up with any members who were flagged by the data match as being enrolled in another Medicaid program unless the member has not received any healthcare services from MassHealth for more than 12 months. If the member has received any services covered by MassHealth during the 12 months before being identified in a PARIS data match, the member’s enrollment is automatically renewed and the PARIS data-match alert is disregarded. MassHealth informed us that, during the automatic renewal process, it uses Accurint to check members’ addresses. However, MassHealth stated that they use this software only to determine whether the address the member provided is an actual address in Massachusetts, not whether the member is actually residing in Massachusetts at that address.

According to MassHealth, Medicaid agencies do not have access to the Transformed Medicaid Statistical Information System (T-MSIS) and must primarily rely on PARIS data matches to detect when an individual may have moved out of the state. However, in our opinion, the PARIS data match process does not appear to be effective in detecting all instances where a member may have moved out of the state; PARIS data matches only detected 51 of the 63 instances that we detected using T-MSIS information.

MassHealth officials stated that, during the period covered by the maintenance of eligibility requirement of the Families First Coronavirus Response Act, when MassHealth found that a member appeared to have left the state (e.g., if it identified that a member had enrolled in another state’s Medicaid program using a PARIS data match), it did not conduct a residency check of the member but rather just moved them to the fee-for-service model. However, we found that, of the 51 instances of a member receiving concurrent out-of-state benefits that MassHealth had identified through a PARIS data match, only 27 members were eventually moved to a fee-for-service model or had their coverage terminated from MassHealth during the audit period.

Recommendations

1. MassHealth should revise its policies and procedures regarding its data matches for member eligibility. Specifically, MassHealth should require that all members flagged by data matches submit documentation to substantiate that they reside in Massachusetts. If the member does not provide this documentation, MassHealth should either pause this member’s coverage or move the member to its fee-for-service model until it can determine whether the member’s coverage should be terminated.
2. MassHealth should investigate and resolve all instances where its data matches indicate that a member is enrolled in another state’s Medicaid program.
3. MassHealth should provide members with written instructions during the annual enrollment process on how to unenroll from MassHealth if they move outside of Massachusetts.
4. MassHealth should consult with the Centers for Medicare and Medicaid Services to see if it can gain access to T-MSIS, which MassHealth can use in its eligibility detection and residency verification process.

Auditee’s Response

The Executive Office of Health and Humans Services (EOHHS) provided the following response:

EOHHS disagrees with the auditor’s conclusion on the basis that it is overly broad. The audit reviewed a sample of 100 MassHealth members and found that for 47 of the members, the members appeared to reside in Massachusetts during all months in which MassHealth made a capitation payment on behalf of the member, but that for 63 of the members, the members appeared to reside in the other state or territory for a least one month for which MassHealth made a capitation payment on behalf of the member. . . . Indeed, for one of the 63 members the audit found that out of 45 months of MassHealth capitation payments made on behalf of the member, MassHealth made one incorrect payment. . . . Since January 1, 2018, EOHHS has terminated over 6000 members determined to no longer reside in Massachusetts based on PARIS match data and a subsequent failure to respond to a request for verification of residency, and has additionally transferred over 35,000 members from managed care to [the fee-for-service model, or FFS] who were identified as no longer residing in Massachusetts based on PARIS match data and a failure to subsequently respond to a residency verification request. Contrary to the auditor’s conclusion of “no” these actions and outcomes demonstrate that EOHHS takes steps to ensure that it does not make capitation payments to MCOs on behalf of members who reside in another state or territory. . . .

EOHHS strongly disagrees with the use of extrapolation in the context of member residency and the unique period covered under this audit. At a high level, the audit did not conclusively determine in which state each member in the 100-member sample resides, but rather made assumptions based on a review of data. Accordingly, because the audit did not include an actual verification of member residency, the reliability of the findings is questionable in the context of extrapolating the audit’s individual residency assumptions to the entire MassHealth managed care enrolled population.

Moreover, the audit findings do not constitute a representative sample of the overall MassHealth managed care enrolled population. Nearly half of the 63 members in the audit finding were under 18 years of age during the audit period. Pursuant to MassHealth regulations, the residency of a child is where the child’s parent or caretaker is a resident. . . . See [Section 503.002(B)(2) of Title 130 of the Code of Massachusetts Regulations]. . . . Notably, the residency status of children is subject to more variability than adults, where children of divorced or unmarried parents may frequently shift between parent homes, and where each parent may reside in a different state. Based on the data relied upon by the auditor that formed the basis of its individual residency assumptions, it is not clear that any of the children in the audit findings were not residents of Massachusetts during the period of the audit. As a result, EOHHS disagrees with the inclusion of children without considering the residency of their responsible parent(s) or caretaker(s) in the audit findings and further believes that extrapolation based on audit findings that skew towards children and that therefore are not representative of the residency status of the overall MassHealth managed care enrolled population is not appropriate.

Additionally, the 100-member sample does not appear to be a representative sample of MassHealth capitation payments. As stated in the draft report, capitation payments vary greatly according to the rating and specific needs of each member. . . . Indeed, there is a wide difference in the cost of monthly capitation payments depending on the rating category a member falls within and where they reside in Massachusetts. For example, for [the Boston Medical Center HealthNet Plan] in Rate Year 2021, the monthly capitation amounts range from as low as $231.58 per month for a member in Rating Category I and living in Western Massachusetts to as high as $13,548.24 per month for a member in Rating Category VI and living in Eastern Massachusetts. Currently 54% of MCO enrolled members are in [Rating Category I]. . . . While the draft report acknowledges the existence of varying capitation payment amounts, the report indicates that the audit focused on a 100-member sample that is not drawn from all MassHealth MCO members but rather the highest dollar amounts of capitation payments. By focusing only on the highest dollar amounts (as opposed to apportioning the sample in a manner that reflects the distribution of MassHealth members in each MCO rating category) the outcome of the 100-member sample does not appear representative of the overall MCO population and will greatly inflate the dollar amount of the extrapolated finding. Accordingly, EOHHS strongly disagrees with the use of extrapolation in this instance as it results in a misleading conclusion about the fiscal impact of any error in continuing to provide capitation payments for a certain percentage of members who may no longer reside in Massachusetts.

Finally, EOHHS notes that the audit period overlapped with a global pandemic during which member residency fluctuated more than normal and during a period in which EOHHS’ ability to reduce member enrollment was limited by federal law, two factors that strongly limit the appropriateness of using extrapolation for this audit. . . .

EOHHS agrees with [the first] recommendation in part. EOHHS disagrees with this recommendation to the extent that it fails to acknowledge that in the first two years of the audit period (2018 and 2019) EOHHS had policies and procedures in place that required members to submit documentation to substantiate that they reside in Massachusetts and those policies included terminating coverage for members that failed to substantiate that they reside in Massachusetts. During this period, EOHSS terminated the MassHealth eligibility of over 6,000 members identified through the PARIS match process and who subsequently failed to respond to a request for residency verification.

As noted above, in early 2020, EOHHS suspended its practice of terminating member eligibility based on PARIS match data and member’s subsequent failure to respond to a residency verification request. This change was made to comply with the [Families First Coronavirus Response Act’s maintenance of eligibility, or FFRCA’s MOE] requirements and to not jeopardize the approximate $3.3 billion in increased federal match the state has received through the FFCRA.

In the summer of 2021, as an alternative measure that was compliant with the FFCRA’s MOE requirements, EOHHS developed and implemented a new policy and procedure to identify members enrolled in a MassHealth managed care plan and shift them to FFS if they were identified through PARIS data as potentially no longer residing in Massachusetts and the member subsequently failed to respond to a request for residency verification.

Since implementation of this process, MassHealth has transitioned over 35,000 members from managed care to FFS who were identified through a PARIS match as possibly no longer living in Massachusetts and who subsequently failed to respond to a request for residency verification. The total cost avoidance from this initiative since implementation is conservatively estimated at $65 million.

In addition to the PARIS match, for members who may no longer reside in Massachusetts, MassHealth’s Health Insurance Exchange (“HIX”) eligibility system periodically checks a LexisNexis database to confirm that members’ addresses are considered Massachusetts residency. This match occurs any time the member’s address is updated, including with new applications, as well as any changes for existing members. If the address is not considered a Massachusetts residence, the HIX system will generate a request for information (RFI) for the member to confirm residency. If the member fails to respond to the RFI after all federally required outreach is unsuccessful their eligibility is closed (except during the [2019 coronavirus] Public Health Emergency per federal guidelines, as noted above.) . . .

EOHHS agrees with [the second] recommendation. The MassHealth program has and will continue to investigate all instances where its data matches indicate a member is enrolled in another state’s Medicaid program. For all PARIS matches, this includes investigation in the form of a data inquiry to determine if the member is likely to reside in Massachusetts, such as checking whether the member resides in a Massachusetts long-term care facility or has had a recent FFS claim or MCO encounter. . . .

EOHHS agrees with [the third] recommendation. EOHHS further notes that on the initial MassHealth application, the MassHealth renewal form, and the MassHealth website, members or potential members are instructed that they are required to inform MassHealth of any change in information listed on their MassHealth application, which includes any changes in residency and address. If a member moves out of state and informs MassHealth as instructed, they will be disenrolled. . . .

EOHHS agrees with [the fourth] recommendation. EOHHS will consult with [the Centers for Medicare and Medicaid Services, or CMS] to ascertain whether it can obtain access to the Transformed Medicaid Statistical Information System (T-MSIS) data. . . .

EOHHS further notes, however, that CMS did not concur with [the fourth] recommendation in an October 2022 [Office of Inspector General, or OIG] report titled NEARLY ALL STATES MADE CAPITATION PAYMENTS FOR BENEFICIARIES WHO WERE CONCURRENTLY ENROLLED IN A MEDICAID MANAGED CARE PROGRAM IN TWO STATES. In the report the OIG made the same recommendation to CMS, CMS’s response to the recommendation was as follows: “CMS does not concur with this recommendation. CMS appreciates the information provided in the OIG's report and understands the intent behind the recommendation. Because Medicaid is jointly funded by states and the federal government, and is administered by states within federal guidelines, both CMS and states have key roles as stewards of the program and work closely together to carry out these responsibilities, The PARIS Interstate Match already allows states to compare eligibility with other state Medicaid programs to identify beneficiaries that may be concurrently enrolled in more than one state. Most states are already relying on this system and investing resources to use it, and the addition of T-MSIS monitoring could prove redundant, inefficient, and confusing to states, especially considering the existing statutory and regulatory framework underlying state monitoring of concurrent enrollments through PARIS.” . . .

As noted above, EOHHS believes this additional data source may be beneficial in assisting it to more quickly identify MassHealth MCO enrolled members that are simultaneously enrolled in another state or territory’s Medicaid MCO program and who may no longer be residing in Massachusetts in order to transition them to FFS while working to determine their Massachusetts residency.

As noted above, EOHHS appreciates this audit of capitation payments and appreciates the opportunity to utilize these findings as a vehicle towards improving the MassHealth program’s oversight of its member eligibility processes.

Auditor’s Reply

EOHHS claimed that the conclusion of the audit is overly broad in its response. Our reply is as follows:

Our Response	Comments
EOHHS misinterpreted the audit objective.	The audit examined concurrent capitation payments made to MCOs for members residing out-of-state that were flagged by United States Department of Health and Human Services’ Office of Inspector General (HHS OIG).
EOHHS did not directly explain why MassHealth made ineligible payments.	MassHealth made ineligible payments for 63 individuals out of a sample of 100 tested. EOHHS did not respond to our review of these concurrent capitation payments.
EOHHS overstated the effect of MassHealth’s residency eligibility verification steps.	The 12-month healthcare service criteria that MassHealth uses to filter eligibility of individuals is overly broad and risks missing individuals who recently moved out of the state and are therefore ineligible to receive MassHealth benefits. Using the 12-month healthcare service criteria, MassHealth failed to send residency verification letters to 24 out of the 63 individuals flagged by the PARIS data match as having moved out of the state. MassHealth’s use of Accurint is ineffective for determining residency as it only confirms whether or not an address is in Massachusetts. The software does not verify that an individual lives at the address they submitted to claim residency eligibility.

EOHHS disagreed with the sample the Office of the State Auditor (OSA) used, claiming that the sample was not representative of the overall MassHealth MCO-enrolled population. Our reply is as follows:

Our Response

Comments

EOHHS misrepresented the rigorous statistical methods OSA and HHS OIG used to create and test the sample.

OSA and HHS OIG used a sound sampling methodology to define and refine the population from 31,720 MassHealth members to a sample of 100. The sample was not drawn from capitation payments based on the highest dollar amount as claimed by EOHHS. MassHealth recipients who were minors were flagged by HHS OIG in PARIS data matches because ineligible payments were made on their behalf. OSA agrees that minors may have greater variability in their residency because they may move between parents’ or guardians’ homes; however, MassHealth should have taken additional steps to verify residency with the members’ parents or guardians. MassHealth should have ensured that its members, regardless of age, resided in Massachusetts, by catching simultaneous enrollment in healthcare (Medicaid) programs in other states or Puerto Rico.

 

EOHHS disagreed with OSA’s use of error extrapolation and claimed that OSA relied on assumptions without verifying observed data. Our reply is as follows:

Our Response	Comments
EOHHS misstated the methods that OSA and HHS OIG used to determine whether MassHealth made ineligible capitation payments for individuals living in another state.	MassHealth made ineligible payments on behalf of 63 individuals out of a sample of 100 tested. OSA verified the following information with the Medicaid agencies of nine other states and one territory: (1) the month and year of the capitation payments made by that state; (2) the total amounts of payments and per-individual payments made by that state; and (3) the dates of enrollment in that state’s Medicaid program. OSA further confirmed that the 63 members in the audit finding received healthcare services in that state or territory while MassHealth was making capitation payments to MCOs on behalf of those same individuals.
EOHHS misrepresented the rigor of the statistical methods used to extrapolate to the targeted population.	OSA used a conservative and statistically sound approach for extrapolation by limiting the population to only those members for whom MassHealth made five or more consecutive concurrent capitation payments in at least one of the 10 other states and territories.

 

 

 

EOHHS notes that the audit period overlapped with the coronavirus pandemic and that it was limited by federal law in its ability to reduce MassHealth enrollment. Our reply is as follows:

Our Response

Comments

EOHHS missed opportunities to verify residency given greater fluctuations in residency.

MassHealth did not send address verification letters to 24 of the 63 individuals flagged by PARIS data matches. Given greater fluctuations in residency because of the pandemic, MassHealth should have taken additional steps to verify the residency of members who were flagged in PARIS data matches. MassHealth was not prohibited by the FFCRA MOE to move ineligible individuals to the fee for service model. MassHealth could have taken these measures to prevent concurrent payments on behalf of individuals who moved from Massachusetts and enrolled in another Medicaid program.

 

EOHHS claimed it had policies and procedures in place that require individuals to submit documentation to substantiate their residency. Our reply is as follows:

Our Response	Comments
EOHHS had insufficient policies and procedures regarding its residency verification process.	MassHealth failed to send address verification letters to 24 of the 63 individuals flagged by PARIS data matches. MassHealth should have taken additional steps to verify the residency of members who were flagged in PARIS data matches.

 

We strongly urge the swift implementation of our recommendations.

Date published:	June 28, 2023