U.S. Begins New Audit As Cuomo Tries To Deal With $15 Billion In Medicaid Overcharges
State To Lose $1.1B A Year In Funding After Feds Find Overcharging
By James M. Odato Albany Times Union February 3, 2013
Gov. Andrew Cuomo is confronting a multibillion-dollar problem that will result in a substantial loss of Medicaid funding for a variety of hospitals and providers. While the impact on the health care industry's workforce could begin as soon as April, the complications for state budgets might linger for years.
The fiscal predicament rises from the federal government's finding that for 20 years New York overcharged Medicaid an estimated $15 billion for the care of developmentally disabled people in what federal investigators described as a system of massive waste and illegal billing. A new audit by a team of federal health agency officials is about to begin, according to state and federal officials.
As Cuomo plans amendments to the budget he introduced Jan. 22 - a fiscal plan that includes $56 billion in expenditures for Medicaid - the state Department of Health is being pressed by federal regulators to figure out how to sustain a cut of $1.1 billion in Medicaid funding per year starting April 1 while also repaying for some of the years of excessive payments.
Effective April 1, the federal Center for Medicare and Medicaid Services has cut reimbursement rates for spending on the 1,000 patients in the state's 11 development centers such as O.D. Heck in Niskayuna, and for the 99,000 patients not in institutions. Those cuts will result in $800 million less for institutional costs and $300 million less for the non-institutional population - but the $1.1 billion in reduced funds will likely be spread among the non-related providers within New York's sprawling health care industry.
DOH Commissioner Nirav Shah said last week that negotiations with CMS are ongoing and are unresolved on payment requirements.
In a separate interview, state Medicaid Director Jason Helgerson said it is likely that the loss of up to $1.1 billion in annual Medicaid funding will require adjustments in aid to an array of recipients, not just those associated with the care of the developmentally disabled, and that a plan might be unveiled within a few weeks when Cuomo amends his proposed budget for next year. Helgerson said it would be "draconian" to apply the cuts only to the programs that received the excessive Medicaid payments, and wrong to shortchange services for some of New York's most vulnerable patients.
Helgerson said CMS informed Shah of its "review" of the state Medicaid program for the fiscal year that ran from March 31, 2008, to April 1, 2009, on the "allowability" of charges for institutional care. He said the state is ready to fight if the federal government holds New York liable for payback.
Helgerson said the state is unwilling to reimburse for past overcharges that were reviewed and approved for years by federal regulators, and may use appeals and other avenues to avoid such costs. "We are not conceding that CMS has the right to some sort of... look back, since CMS approved the rate methodology 35 times," he said.
According to people with direct knowledge of discussions, the federal government is leveraging the state's petition for $10 billion in extra Medicaid funding as a reward for its program-tightening initiatives from Cuomo's Medicaid Redesign Team deliberations. Hospitals, union representatives, and other interested parties participated in the MRT plans, which resulted in some cuts in funding and adjustments with the understanding that Cuomo would work for extra aid that would benefit them.
Now that $10 billion is being held hostage by CMS until the developmental center overcharging problem - including some payback - is settled, several sources briefed on the negotiations said.
"We're not in a position to comment on the governor's proposed budget," said Alper Ozinal, a spokesman for CMS. "As with many states, CMS is currently working with New York on a number of issues related to federal reimbursement. These issues are separate and distinct from each other, are handled separately, and the outcomes of each issue are independent."
Helgerson said he has been hoping that the state's initiatives would produce money that would more than make up for lost funding. That reduced funding, he said, must be spread over many recipients of Medicaid.
The issue has representatives of hospital and union groups worried about immediate impacts; some are urging that many areas of the budget absorb some of the expected $1.1 billion in lost Medicaid dollars to spread the pain beyond the health care components, according to several people in the health care industry who spoke on condition of anonymity.
CMS, which is responsible for overseeing Medicare and Medicaid and preventing fraud, waste and abuse in both programs, was criticized in a report last year. The health agency allowed the state to use a formula that provided for state-operated facilities to retain nearly two-thirds of the total Medicaid reimbursement when an individual leaves the facility, a U.S. Health Department's Office of Inspector General report said. That resulted in Medicaid paying twice for individuals who leave the developmental centers, since most of them go to alternate residences that also get Medicaid funds such as group homes, OIG reported. The report found that New York received about $1.5 million per year per resident of a developmental center.
"In addition to the massive waste represented by these overpayments, Medicaid's payments to the developmental centers are also likely illegal because they violate the Medicaid Upper Payment Limit requirement," the U.S. House of Representatives Committee on Oversight and Government Reform reported last year. "Overwhelming evidence suggests that the federal government has failed to question New York State's excessive developmental center payment rates adequately."