Audit findings called misleading
Comptroller cites unnecessary payments, health leaders say action has been taken
State health officials say audits of New York’s Medicaid program showing over $700 million in unnecessary payments are misleading and do not ref lect the impact of reforms implemented earlier this year to slow growth in costs.
State Comptroller Thomas P. Dinapoli released five audits of the state Department of Health’s Medicaid program and found roughly $706.6 million in “unnecessary, improper or questionable payments” through various elements of the program. The audits examined spending and operations between January 2014 and the end of 2019.
But health officials argue New York already took action regarding cost overruns for the program through the second iteration of the Medicaid Redesign Team, which offered several recommendations to rein in costs as the state went into budget discussions earlier this year to reconcile a $6 billion deficit largely attributed to Medicaid spending and deferred payments.
“These audits contain a mix of misinformation about Medicaid, suggest potential savings based on past purchases already addressed and recommend that we implement corrective actions that are already under way, including through the ongoing (Medicaid Redesign Team) process,” said Jonah Bruno, a spokesman of the state Department of Health, in an emailed statement Tuesday. “Sending out a single press release with five audits does not strengthen the individual findings of any, but it does create a splashy headline.”
The audits found:
■ Roughly $605 million was spent for unnecessary drug costs from 2016 through 2019, faulting the Health Department for not having sufficient controls and oversight to ensure the most costeffective delivery of pharmacy services under managed care.
■ Nearly $48 million in benefits was improperly paid from Jan. 1, 2014, through March 31, 2019, due to recipients having more than one Client Identification Number, for which only one number should be eligible to receive payments.
■ A collective $16.6 million also was improperly spent on people who are no longer eligible or had terminated their coverage, which includes $11.7 million in payments to 1,096 recipients who had terminated coverage and $4.9 million to 319 recipients who died.
■ Over $8.2 million in improper payments to service providers of Medicaid-eligible recipients between April 1, 2019 and Sept. 30, 2019, for various claims that did not comply with Medicaid policies, had inaccurate information, or should have been billed to other health insurance coverage the recipient had.
■ About $29 million in improper Medicaid payments for drugs dispensed after they were removed from the market for safety or commercial reasons.
While health officials called the methodology behind some of the audits and their findings “flawed and inaccurate,” the comptroller’s office defended the work.
“Audits point out problems that if corrected can save the state money in the future. Audits also point out opportunities where monies that have already been spent can be recovered,” office spokesman Mark Johnson said in an email. “The state Health Department can ignore these facts, but if so they need to explain why they didn’t take sufficient action until the auditors pointed these issues out to them.”
Health Department officials on Tuesday asserted the bulk of the potential savings found in the audits, $605 million, relates to historical costs of pharmacy services under managed care, which they said are “overstated” and have been addressed by the Medicaid Redesign Team earlier this year by shifting the pharmacy benefit from managed care to a fee-for-service program — a plan that goes into effect next April.
The shift will give the department full access to prescription drug costs, optimize collection of manufacturer rebates, centralize negotiating power and promote the use of less expensive but equally effective prescriptions, state officials said.
Tom D’angelo, president of the Pharmacists Society of the State of New York, said he was not surprised by the savings found in the audit, and anticipates more could be found by looking at the overall pharmacy benefit system.
Pharmacy benefit managers (PBMS), or prescription drug middlemen, are unregulated entities hired by insurance companies to determine what drugs they will cover. They are often blamed for rising prescription drug costs. While PBMS were originally formed in the 1960s to help control drug costs and process an upsurge of prescription drugs, the deals struck with manufacturers are made in secret, leading critics to believe they are pocketing the savings rather than passing them on to clients, pharmacies and patients. PBMS are partially reimbursed for any rebates they negotiate.
D’angelo said the shift to a fee-for-service system for pharmacy benefits “will solve some of the problems for the Medicaid system, (but) it will not solve the problems overall when it comes to what’s going on in the industry. This audit scratched the surface of what’s going on. If they took that much money out of the Medicaid system, how much are they taking out of the whole system?”
The Medicaid Redesign Team was tasked by Gov. Andrew M. Cuomo with finding $2.5 billion in Medicaid savings; the panel provided a range of recommendations to trim costs that were adopted in the budget process earlier this year.
While not all the changes have gone into effect, recommendations included nearly $400 million in cuts to hospitals, $715 million in reductions to the state’s long-term care programs, and $71 million in reductions through changes to pharmaceutical practices.
New York is facing a $14.5 billion budget deficit this year, with future years facing deeper deficits estimated at $62 billion through 2024. Dinapoli said the state needs to find savings where it can.
“Hundreds of millions of dollars could be saved with better financial and management controls over the state’s Medicaid program ... our oversight of the program will continue in earnest as (the Department of Health) can do much more to save taxpayer dollars,” he said in a statement.