Maryland misspent $28M of ObamaCare grants

Maryland’s health officials are disputing a yearlong federal investigation that found the state misspent nearly $30 million during the rollout of Obama under former Democratic Gov. Martin O'Malley.

Federal auditors had asked Maryland’s state health board to repay the grants because it inflated its enrollment figures when asking for and using federal funds, according to a report released Friday.

The damning report creates new problems over Maryland’s already embattled healthcare exchange, which flopped in 2013 under O’Malley's leadership. The potential presidential candidate left office in 2015.

The wasted federal dollars are likely to inflame Republicans in Congress who have long urged the federal government to recoup funding for failed state exchanges like Maryland's and Oregon's, though the misspent money in this case is not directly related to website.

Maryland’s yearlong audit found two major accounting problems.

The first was a 37 percentage point difference between estimated enrollment and the actual enrollment, which auditors said amounted to an extra $15 million for Maryland. Another $12 million was misallocated because of flawed Medicaid enrollment estimates, they said.

Maryland officials argued that any inconsistencies were the result of unclear federal guidelines, which they said did not require updated enrollment figures. While the state agreed with several recommendations involving tighter controls over enrollment data, exchange officials said they would not refund the federal grant dollars.

The federal auditors defended their findings and continued to urge state officials to refund the money.

“We maintain that all of our findings and recommendations are valid,” the auditors wrote in the final report.

The Centers for Medicare and Medicaid Services (CMS) said Friday that it will review the findings and issue guidance "as needed," an agency spokeswoman wrote in a statement.

Maryland's newly elected governor, Republican Gov. Larry Hogan, is still reviewing the report but stressed that the state board – which is controlled by O'Malley appointees – doesn't have the power to decide whether to return the funds.

"The decision to repay this money is up to the governor’s office," the governor's spokesman Doug Mayer said Friday afternoon.

Maryland has spent a total of $122 million on its exchange between 2011 and 2014. The state announced in 2014 that it would abandon its costly exchange infrastructure and replace it a copy of Connecticut’s.

It was the first state to scrap its problematic exchange, followed soon by Oregon. The bad news was compounded after reports that senior leaders in Maryland had known that the healthcare exchange was unprepared for its launch but failed to heed the warnings.