Report  Annual Report Medicaid Audit Unit for March 2, 2024 through February 28, 2025

Introduction

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 2025 budget (Chapter 140 of the Acts of 2024) requires that OSA submit a report to the House and Senate Committees on Ways and Means by no later than February 28, 2025 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 2025, the appropriation for the Unit was $1,440,504. This amount represents an approximately 2.9% increase over the Unit’s fiscal year 2024 appropriation of $1,399,658. 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 for federal cost sharing. In federal fiscal year 2024, OSA submitted a total of $1,622,790 to EOHHS for consideration for the state’s program integrity, allowing the state to obtain a 50%, or $811,395, reimbursement of these costs.

This report, which is being submitted by OSA in accordance with Chapter 140 of the Acts of 2024, provides a summary of the following performance audits of MassHealth: (1) a review of capitation payments made to members with multiple Medicaid identification numbers (IDs), (2) a review of telehealth adult day health (ADH), and (3) a review of telehealth adult foster care (AFC) and group adult foster care (GAFC). This report also details an estimated $27,259,164 of potential cost savings we identified in the MassHealth program.

Background

EOHHS administers the state’s Medicaid program, known as MassHealth. This program provides access to healthcare services annually to approximately two million eligible children, families, seniors, and people with disabilities, all with low and moderate incomes. In fiscal year 2024, MassHealth program expenditures totaled $20.1 billion, of which approximately 39% was paid by the Commonwealth. Medicaid program expenditures represent approximately 33% 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. This unit would be dedicated to detecting fraud, waste, and abuse in the MassHealth program. With the support of the Massachusetts Legislature and the Governor, this proposal was approved 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 ways MassHealth can strengthen its 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 1 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.