Report  Annual Report Medicaid Audit Unit for March 2, 2023 through March 1, 2024

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 2024 budget (Chapter 126 of the Acts of 2023) requires that OSA submit a report to the House and Senate Committees on Ways and Means by no later than March 1, 2024 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 2024, the appropriation for the Unit was $1,399,658. This amount represents an approximately 3.0% increase over the Unit’s fiscal year 2023 appropriation of $1,358,812. 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 quarterly filings with the Centers for Medicare & Medicaid Services (CMS) for federal cost sharing. In federal fiscal year 2023, OSA submitted a total of $1,383,626 to EOHHS for consideration for the state’s program integrity, allowing the state to obtain a 50%, or $691,813, reimbursement of these costs.

This report, which is being submitted by OSA in accordance with Chapter 126 of the Acts of 2023, provides a summary of the following performance audit of MassHealth: capitation payments made to ineligible members who reside and receive benefits in another state or territory.

This report details potential missed cost savings of $84,832,094 for ineligible MassHealth members residing and receiving benefits in another state or territory. It also describes corrective actions MassHealth is taking in response to this audit issued at least six months ago, for which follow-up surveys have been completed. MassHealth and the two MassHealth providers who were audited reported actions or planned actions on four (100%) of our four audit recommendations, which will improve operational efficiency and effectiveness.

EOHHS administers the state’s Medicaid program, known as MassHealth. This program provides access to healthcare services annually to approximately 2.4 million eligible low- and moderate-income children, families, seniors, and people with disabilities. In fiscal year 2023, MassHealth paid more than $21.7 billion to healthcare providers, of which approximately 37% was paid by the Commonwealth. 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 Massachusetts Legislature and the Governor, this proposal was acted upon favorably and has continued to be funded in subsequent budgets. Since that time, OSA has maintained ongoing independent oversight of the MassHealth program and its contracted service providers. Since 2007, audit reports issued by OSA have identified 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 doing so, 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 integrity, 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 one claim or 10 million claims. The use of data analytics techniques has enabled the Unit to: (1) identify greater cost recoveries and savings; (2) isolate weaknesses in claim-processing systems, and; (3) make recommendations regarding MassHealth’s system and program regulations to promote future cost savings, improve service delivery, and make government work better.