GOP slams $15 billion in Medicaid overpayments

Medicaid has shelled out billions in overpayments to certain healthcare facilities in New York, according to a report from the House Oversight and Government Reform Committee.

The committee, led by Rep. Darrell Issa (R-Calif.), said Medicaid has overpaid state-run facilities for people with developmental disabilities by $15 billion over the past 20 years.

Medicaid's payments just to development facilities in New York "exceeded the entire Medicaid budgets of 14 states," the oversight report says, calling it "inexcusable" that the federal government didn't do more to crack down on the overpayments.

"The failure … suggests an institutional failure and a pattern of irresponsible actions that have cost taxpayers billions," the report says.

The federal Medicaid agency has been aware of the excess payments for years but is still working on a plan to reduce the payments, the report says.

The committee's findings stem from a report by the Health and Human Services Department's inspector general, which uncovered the excess payments in May. The inspector general said Medicaid is paying the New York facilities "the equivalent of" $1.9 million per patient per year, according to the GOP report.

The report says the overpayments occurred because of the formula Medicaid uses to pay developmental centers. The facilities can keep almost two-thirds of their payments after patients leave their care, but patients often transition to other facilities financed by Medicaid — meaning "taxpayers are paying twice" for the same patient, the GOP charged.

The Centers for Medicare and Medicaid Services has acknowledged the error, saying it stems from a payment formula adopted in 1994. The formula was initially intended to ensure that as a development center lost patients, its Medicaid payments wouldn't drop low enough to cut into facilities' fixed operating costs.

But the the formula "effectively inflated the starting point" for rate calculations every year based on "apparently incorrect" assumptions about costs, CMS said in testimony prepared for an Oversight subcommittee hearing Thursday.

"When approving the reimbursement methodology, it is not clear if CMS completely understood how the State would implement the new methodology or the methodology’s future impact if actual operating costs were to shrink dramatically year over year," the testimony states.