Congressional Report Slams NYS Medicaid Program

NYAPRS Note: The US House of Representatives’ Committee on Oversight and Government Reform, led by chairman Darrell Issa (R, California),released a scathing report today entitled “Billions of Federal Tax Dollars Wasted Annually by New York’s Medicaid Program.” Following is the report’s executive summary which highlights NY’s use of Medicaid, reimbursement rates, nonprofit exec salaries and state oversight. The report calls for a number of corrective measures and cautions the state from using requested waiver funds to blunt savings due back to the federal Medicaid program.


New York is in the midst of implementing over 70 recommendations from Governor Cuomo’s Medicaid Redesign Team aimed at improving the quality and outcome of care while reducing costs.


Executive Summary


New York’s spending on Medicaid ($54 billion in 2012 alone)2 is typically the highest of any State in the country by a considerable amount. In fiscal year 2010, New York’s $2,700 per capita Medicaid spending exceeded per capita Medicaid spending in the rest of the country by more than $1,500. According to two witnesses at Congressional hearings during the last Congress, much of New York’s Medicaid spending on long-term care services and supports goes to relatively affluent individuals. According to several other sources, much of New York’s spending is misspent from poor program oversight at both the State and federal level. In fact, during the beginning of his term, Governor Andrew Cuomo called New York’s Medicaid program “bloated” and argued that it “must be reformed to help [New York] [S]tate begin to make ends meet.” This report discusses several problems of waste, fraud, and abuse within New York’s Medicaid program that have been uncovered or highlighted by this Committee, discusses recent developments affecting the integrity of the State’s program, and offers several recommendations aimed at protecting billions in tax dollars from being misspent each year by New York’s Medicaid program.


 In a September 2011 hearing, the Subcommittee on Health Care, District of Columbia, Census and the National Archives heard testimony from an administrator of Medicaid Services in New York City. She stated that it is commonplace for affluent State residents to “artificially impoverish” themselves in order to qualify for Medicaid and have taxpayers pick up the cost of their long-term care services and supports. In April 2012, the Subcommittee held a hearing and received testimony from a doctor in charge of Medicaid eligibility determinations in New York City about how New York’s Medicaid Personal Care Services (PCS) program was beset by inappropriate and fraudulent spending on the magnitude of many hundreds of millions of dollars per year. He testified that despite recent progress, a large amount of inappropriate and fraudulent spending remains.


In a September 2012 hearing, the Subcommittee learned that New York benefited from a complicated payment methodology initially approved more than two decades ago and re-approved dozens of times by the Centers for Medicaid and Medicaid Services (CMS) since. This methodology has resulted in daily payment rates exceeding $5,000 for each institutional resident of New York’s developmental centers, which are well in excess of the allowable rates under federal law. Since these are public institutions, the State receives a large windfall from these excessive rates. The Committee estimates that the federal share of total payments going to the State through these facilities was $15 billion in excess of what is allowable under federal law over the past two decades. Although the State has acknowledged that these rates are nearly five times greater than the actual cost of providing services, New York officials have not been fully cooperative with the federal government’s efforts to reduce these rates to an appropriate and lawful amount. The excessive rates remain in place three years after CMS began asking the State for information about the developmental center payment rates.


The Committee has also uncovered excessive salaries being paid to executives of nonprofit institutions that are nearly completely financed by Medicaid. A simple analysis conducted by the Committee found that at least 15 of these executives received yearly compensation exceeding $500,000 and at least 100 others received yearly compensation exceeding $200,000.


The Committee has learned that several key factors contribute to the large size of New York’s Medicaid program. First, the Committee has learned of a long-standing “if it moves, Medicaid it” governing philosophy. The State has used this philosophy to take advantage of the federal reimbursement of state Medicaid expenditures. Second, many powerful special interest groups in New York benefit from the State’s large Medicaid expenditures and lobby strongly against changes that would reform the State’s program. Third, significant corruption and cronyism in the State has likely impeded meaningful Medicaid budgeting and oversight reforms. For instance, two former State Senate majority leaders have recently been convicted of schemes related to Medicaid or health care fraud. Fourth, there have been several reports that the State is not seriously investigating and prosecuting Medicaid waste, fraud, and abuse. According to a recent report, the Office of Medicaid Inspector General (OMIG), the agency charged with cracking down on waste and fraud in New York’s program, has failed to be effective since Governor Cuomo replaced James Sheehan with James Cox as Inspector General:


New audits are rare, investigations are stalled and productivity [at OMIG] is meager. Current and former employees are complaining privately and publicly about the Office of Medicaid Inspector General, calling it a highly politicized, dysfunctional, mismanaged and ineffective agency where many of the 500 or so employees have little to do.3


The problems highlighted by the Committee in this report certainly do not represent a comprehensive audit of New York’s Medicaid program. For instance, in addition to the Committee’s findings, the Office of the Inspector General (OIG) at the Department of Health and Human Services (HHS) has uncovered ten instances over the past decade in which the State has improperly claimed at least $50 million in federal Medicaid dollars. Moreover, in the past four years, the federal government has successfully sued New York for unlawful Medicaid expenditures twice, recovering more than $600 million. In totality, the large number of failures within New York’s Medicaid program proves that a full, independent audit of the State’s entire program is certainly warranted and long overdue.


 Governor Cuomo’s administration has been proactive in addressing some of the problems discussed in the report. For example, early last year, Governor Cuomo issued an executive order which limits executive compensation at Medicaid-financed institutions to less than $199,000. Moreover, it appears the State has had some initial success with reducing waste, fraud, and abuse within New York City’s PCS Medicaid program. However, it is clear that much more reform is needed. Neither New York taxpayers, nor federal taxpayers who finance over half of New York’s Medicaid spending, can afford to continue to support the billions of dollars misspent annually by New York’s Medicaid program.


 While national Medicaid reform will require compromise and cannot happen overnight, our Committee recommends six specific actions that should be taken immediately to reduce Medicaid waste, fraud, and abuse in New York’s program and save both federal and New York State taxpayers billions of dollars each year:


• Excessive federal payments to New York for its State-operated developmental centers must end immediately, and an appropriate portion of previous overpayments must be recovered.


• The Department of Health and Human Services must ensure that the baseline from which New York is calculating its savings from recently submitted waivers does not include the excessive overpayments received by the State through the development centers. HHS must also have both auditors and budget experts verify the State’s estimates for the impact of these waivers.


• New York’s Personal Care Services Program must only enroll individuals who meet the eligibility thresholds required by law.


• New York must aggressively pursue estate recovery against affluent New Yorkers who artificially impoverish themselves or invoke spousal refusal to qualify for Medicaid.


• New York’s legislature must enact into law Governor Cuomo’s executive order that limits compensation of executives at organizations that receive nearly all their money through Medicaid to amounts below $199,000. New York must also aggressively monitor and enforce these limits.


• A complete, independent audit of New York’s Medicaid program must be conducted including an investigation into the accusations that the New York Office of Medicaid Inspector General has become politicized, dysfunctional, and complacent.



 Report Calls NY Medicaid Wasteful


Crain’s Health Pulse  February 5, 2013



A report released today by the U.S. House of Representatives Committee on Oversight and Government Reform slams New York's Medicaid program, identifying billions of wasted tax dollars previously cited by the media and in Congressional hearings.


"The problems highlighted by the Committee in this report certainly do not represent a comprehensive audit of New York's Medicaid program," the report concedes, but it nonetheless makes six recommendations to cut "Medicaid waste, fraud, and abuse in New York's program."


The report, online here <> , highlights key issues that are widely believed to be behind the delay in CMS granting New York's $10 billion Medicaid waiver request. The issues are spousal refusal, and a refuted $15 billion in reimbursement for caring for the developmentally disabled that CMS wants New York to repay. As the report illustrates, some politicians are questioning why New York should get a $10 billion waiver when it owes $15 billion.


Last week, a CMS spokesman said, "we continue to work on reviewing various requests from New York, including this waiver." New York is negotiating a repayment amount, but as of last week CMS had no further information on a new overpayment figure or a timetable for approving the waiver.


"It is imperative," said the new report, that New York "does not use the MRT waiver and other waivers to capture savings that should rightfully accrue to federal taxpayers from the necessary trimming that New York must make to its excessive Medicaid spending."