Report  Annual Report Medicaid Audit Unit for March 15, 2020 through March 12, 2021

The Office of the State Auditor (OSA) receives an annual appropriation for the operation of a Medicaid Audit Unit (the Unit) for the purposes of preventing and identifying fraud, waste, and abuse in the MassHealth system and making recommendations for improved operations. The state’s fiscal year 2021 budget (Chapter 227 of the Acts of 2020) requires that OSA submit a report to the House and Senate Committees on Ways and Means by no later than March 12, 2021 that includes (1) “all findings on activities and payments made through the MassHealth system;” (2) “to the extent available, a review of all post-audit efforts undertaken by MassHealth to recoup payments owed to the commonwealth due to identified fraud and abuse;” (3) “the responses of MassHealth to the most recent post-audit review survey, including the status of recoupment efforts;” and (4) “the unit’s recommendations to enhance recoupment efforts.”

For fiscal year 2021, the appropriation for the Unit was $1,274,449. This amount represents an approximately 3% increase over the Unit’s fiscal year 2019 appropriation of $1,234,674. OSA submits all costs (direct and indirect) associated with running the Unit to the Executive Office of Health and Human Services (EOHHS) to be included in its in quarterly filings with the Centers for Medicare & Medicaid Services for federal cost sharing. In federal fiscal year¹ 2020, OSA submitted a total of $1,155,719 to EOHHS for consideration for the state’s program integrity, allowing the state to obtain a 50%, or $577,860, reimbursement of these costs.

This report, which is being submitted by OSA in accordance with the requirements of Chapter 227, provides summaries of four performance audits of MassHealth enrollment centers, involving the following:

• proper verification of the income of MassHealth walk-in applicants
• revocation of benefits from MassHealth members who were found not to be financially eligible for services

It also provides summaries of six MassHealth provider audits involving the following:

• adult foster care (AFC) providers (four audits)
• group adult foster care providers (two audits)

This report details findings that identified potential missed opportunities for $1,060,470 of cost savings in the administration of the AFC Program, as well as $1,155,719 of improper payments to eldercare service organizations providing unauthorized services. The report also describes corrective actions MassHealth is taking as a result of six audits whose findings were issued at least six months ago for which follow-up surveys have been completed and MassHealth has taken actions, including recouping funds. MassHealth and our other auditees reported action or planned action on six (75%) of our eight audit recommendations, which will improve operational efficiency and effectiveness.

EOHHS administers the state’s Medicaid program, known as MassHealth, which provides access to healthcare services annually to approximately 1.9 million eligible low- and moderate-income children, families, seniors, and people with disabilities. In fiscal year 2020, MassHealth paid more than $17 billion to healthcare providers, of which approximately 50% was Commonwealth funds. Expenditures, including administration costs, for the Medicaid program represent approximately 36% of the Commonwealth’s total annual budget.

Heightened concerns over the integrity of Medicaid expenditures were raised in January 2003, when the US Government Accountability Office (GAO) placed the US Medicaid program on its list of government programs that are at “high risk” of fraud, waste, abuse, and mismanagement. At that time, GAO estimated that between 3% and 10% of total healthcare costs were lost to fraudulent or abusive practices by unscrupulous healthcare providers. Based on these concerns, OSA began conducting audits of Medicaid-funded programs and, as part of its fiscal year 2007 budget proposal, submitted a request to establish a Medicaid Audit Unit within its Division of Audit Operations dedicated to detecting fraud, waste, and abuse in the MassHealth program. With the support of the state Legislature and the Governor, this proposal was acted upon favorably and has continued in subsequent budgets. Since that time, OSA has maintained ongoing independent oversight of the MassHealth program and its contracted service providers. Audit reports issued by OSA have continued to identify weaknesses in MassHealth’s controls to prevent and detect fraud, waste, abuse, and mismanagement in the Massachusetts Medicaid program as well as improper claims for Medicaid services.

OSA uses data analytics in all audits conducted by the Unit. By so doing, our auditors can identify areas of high risk, isolate outlier providers, and in many cases perform reviews of 100% of the claims under audit, thus significantly improving the efficiency and effectiveness of our audits. Moreover, in many cases, data analytics has enabled the Unit to fully quantify the financial effects of improper payments, whether they involve 1 claim or 10 million. The use of data-analytics techniques has enabled the Unit to (1) identify greater cost recoveries and savings, (2) isolate weaknesses in MassHealth’s claim-processing system, and (3) make meaningful recommendations regarding MassHealth’s system and program regulations to promote future cost savings, improve service delivery, and make government work better.

A PDF copy of the Annual Report for the Medicaid Audit Unit is available here.

1. The 2020 federal fiscal year is October 1, 2019 through September 30, 2020.