OIG Reports CMS has Not Recovered More Than $1 Billion in Medicaid Overpayments

The Office of Inspector General (OIG) recently determined that the Centers for Medicare and Medicaid Services (CMS) has recovered the majority of Medicaid overpayments that issued during the fiscal years of 2000 to 2009, but millions of dollars are still uncollected from overpayments. As a result, the OIG’s report performed a detailed analysis of the amounts that are still outstanding as well as what steps CMS can take to collect on these amounts.

The Purpose of the OIG Audit

The OIG performed the audit as a follow up to its previous review. As part of its review, the OIG wanted to determine whether the CMS recouped the overpayments that were identified in previous reports.

How the OIG Performed the Review

The OIG reviewed CMS’s efforts to collect overpayments identified in previous reviews. For the purposes of the study, the OIG selected only the overpayments that it had recommended for recovery. This amount included overpayments identified in 77 current audits and $188.6 million in seven previous audits.

Overview of OIG Audits for Medicaid Payments

Medicaid Program Title XIX of the Social Security Act created Medicaid, which provides medical assistance to both the disabled as well as low-income families. Medicaid is administered jointly by the federal and state governments.

CMS is responsible for auditing the program at a federal level. All audit recommendations in final reports by the OIG are required to be cleared within six months of the date that a final report is issued. While CMS may agree with an OIG recommendation to recoup overpayment, CMS might ultimately decide to recoup a different amount than what OIG recommended.

If a state agrees in writing to refund an overpayment to CMS or OIG, the state will refund the expenditure on its next Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program form. If a state does not agree with CMS or OIG, CMS will contact state officials to discuss the findings of the audit. If CMS ultimately agrees with the state’s position, CMS will follow certain procedures to close the recommendation. If CMS does not agree with the state’s decision, CMS will initiate the disallowance process.

How the Review was Conducted

The OIG reviewed CMS’s attempts to collect overpayments that were identified in 313 audit reports from 2010 to 2015 as well as 10 reports from 2004 to 2009. For these audit reports, the OIG reviewed only the overpayments that it recommended for recovery and with which CMS agreed. To decide whether CMS recovered the overpayments in agreement with federal regulations, the OIG reviewed a number of relevant supporting documents.

The Findings of the OIG Review

More specifically, the OIG found that the CMS failed to collect $1.6 billion in identified overpayments. Additionally, CMS failed to make sure that correct Medicaid overpayment reporting occurred on the Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program Form. The OIG has also been able to determine that $2.7 million because CMS disposed of documents before the overpayment amounts could be recouped. The collection of overpayment amounts helps to make sure that funds are effectively used to perform authorized activities.

CMS has Not Recovered All Overpayments Agreements

Federal regulations state that an overpayment includes the amount paid by a Medicaid agency to a provider that is in excess of the amount that is allowed for services and which is required to be refunded. In accordance with the Medicare statute, the Secretary of Health and Human Services has the duty to recover the federal government’s share of Medicaid from an overpayment to a state. In accordance with the Federal Claims Collection Act of 1996, CMS is required to “aggressively” recover the federal government’s share of overpayments.

CMS has Not Recovered All Current Outstanding Payments

At the conclusion of the OIG’s report, CMS had not yet recovered $1.6 billion in overpayments related to 77 current audits. State agencies have not agreed to refund the overpayments that are still unpaid. Currently, CMS is in discussion with state official regarding the findings of audits.

CMS has Not Recovered All Outstanding Overpayments

At the time OIG finished its report, CMS has still not recouped $188 million in overpayments related to seven audits. The reason that CMS has not yet recouped these amounts is that state agencies have not agreed to return these overpayments.

CMS Policies Lack Time Windows for Recovery of Overpayments

One of the reasons why CMS has not recovered all overpayments included in this review is that CMS policies and regulations do not include timeframes for the recovery of overpayments. OIG maintained that the prompt recovery of overpayments helps to make sure that federal funds are effectively used for authorized activities and covered services.

CMS has Not Ensured States Correctly Report Medicaid Overpayments

When states report Medicaid overpayments through the pertinent mechanisms, CMS does not make sure that the entities report the overpayments correctly. As a result, states are believed to incorrectly report overpayments at a frequency of 25 times out of 269 overpayments. These incorrect reporting occurrences happen even though CMS provides training to states about how to correctly report overpayments. This, in turn, makes it much more challenging for CMS to properly identify and verify overpayments.

CMS did Not Retain Documentation to Support Overpayment Recovery

CMS’s current policy requires the retention of quarterly expenditure reports and related documents for six years and three months after the period that is covered by accounts. Because not all entities follow these guidelines, CMS is sometimes unable to obtain the source documents that are necessary to verify the identified overpayments. CMS was unable to provide documents supporting eight of the overpayments to OIG for purposes of its report.

OIG’s Recommendations to CMS

Given the current situation, the OIG has made recommendations that the CMS perform the following steps:

• Develop policies and procedures to improve the timeliness of recovering overpayments in situations in which the state disagrees with CMS recommendations.
• Develop regulations to improve the discussion of matters with state officials regarding audit findings and obtaining documentation to substantiate the state’s position.
• Recover the remaining $1.6 billion due the federal government in overpayments from the current period.
• Recover the $188 million due the federal government in overpayments from the prior period.
• Require states to submit corrected documentation to identify recovered overpayments when reports are incorrectly made.
• Verify that future overpayments are correctly reported on the appropriate documentation.

CMS has agreed with OIG’s recommendations and plans to take prompt action to address OIG’s findings. CMS has already issued disallowance letters for the outstanding overpayment amounts. CMS has also stated that it will continue efforts to collect the federal portion of the remaining overpayment amounts. Additionally, CMS has stated that it is researching options to improve the timeliness of discussion of matters with state representatives. CMS has also commented that it has begun to verify that overpayments are properly recorded.