Poor Data Quality in CA Medicaid Drives $4B in Improper Payments

November 06, 2018 - California's Medicaid program, Medi-Cal, made over $4 billion in improper payments to cover benefits for ineligible beneficiaries because of poor data quality and insufficient oversight, according to a new report from state auditors.

The majority of the improper payments, totaling $3 billion from 2014 to 2017, were made by the state’s Department of Health Care Services to ineligible beneficiaries.

Auditors identified nearly 453,000 beneficiaries that were marked as eligible for Medicaid benefits even though county-level records recorded members as ineligible. The state also identified an additional 54,000 members that were inappropriately marked as ineligible for Medi-Cal benefits when they should have received benefits.

Additionally, over $1 billion in improper payments were made to providers for inappropriate fee-for-service claims.

The external auditors stated that a lack of oversight and significant administrative challenges in the Medi-Cal system were the primary reasons for the improper payments.

“Upon examining the data for these beneficiaries from 2014 through 2017, we found that 57 percent of these discrepancies had persisted for more than two years,” said California State Auditor Elaine M. Howle.

“Many of these discrepancies resulted from Health Care Services failing to ensure that counties had evaluated the Medi-Cal eligibility of beneficiaries transitioning from other programs. One reason counties failed to complete those evaluations promptly was because of the implementation of the federal Patient Protection and Affordable Care Act which created a backlog of Medi-Cal applications and eligibility redeterminations.”

California’s Statewide Automated Welfare System (SAWS) experienced varying degrees of administrative problems with three different member eligibility platforms.

SAWS’s three eligibility programs, including the LEADER replacement system, CALWorks Information Network, and the Consortium IV system, collectively review eligibility for over 10 million beneficiaries each year.

The auditors found that the LEADER system inappropriately added 229,248 Medicaid beneficiaries and paid over $2.1 billion in inappropriate managed care premiums and fee-for-service claims.

CALWorks added 172,968 members that didn’t qualify for Medicaid and paid $1.5 billion in improper claims and premiums. The Consortium IV system provided 51,175 beneficiaries with benefits and paid approximately $406 million in improper payments.

The auditors also identified extreme instances of improper or erroneous payments made to single beneficiaries. In one example, the auditors identified $383,635 in claims made to a deceased beneficiary from 2013 to 2018.

The discrepancies in county-level Medicaid data collected by SAWS created complications within the state’s Medi‑Cal Eligibility Data System (MEDS). The data issues exacerbated administrative challenges for the state’s Medicaid program.

“Because payments to managed care plans and fee‑for‑service providers are based on information contained in MEDS, inaccurate eligibility information in MEDS could generate inappropriate Medi‑Cal payments for these beneficiaries,” the auditors explained.

MEDS also did not effectively address administrative concerns for counties since the MEDS reporting and alerts system is not intuitive enough for county-level administrators to use the data.

“Although MEDS alerts are important, counties may not resolve all discrepancies if they only address the cases flagged by these alerts in their systems,” the auditors said. “For example, Stanislaus County eligibility workers do not typically continue to work on cases related to beneficiaries who have been discontinued in the county system, so they are unlikely to open these cases and thus encounter MEDS alerts for these beneficiaries.”

State auditors recommended that the state’s Department of Health Care Services should implement a new administrative structure that monitors and sanctions counties that don’t resolve known data discrepancies. In addition, the auditors advised the state to implement a new user-friendly electronic system to provide comprehensive alerts and administrative reports.

The state agreed with the findings and plans to implement the administrative recommendations in the near future but may not do so by the recommended December 31, 2018 deadline.

“[The Department of] Health Care Services agreed with our recommendations and indicated that it plans to implement them," the auditors said. "However, Health Care Services stated that it could not commit to implementing all of them within our recommended time frames."