NYS's $1.3 Billion Medicaid Problem

Pasting in full story from today's Wall Street Journal since not everyone may have access.

The federal government has demanded that New York state pay back nearly $1.3 billion in Medicaid money distributed in 2010, prompting a rebuke from Gov. Andrew Cuomo's administration and a promise to appeal the decision.

At issue are the costs of caring for about 1,300 developmentally disabled people—about $2 million per patient in 2013—in nine state facilities from Staten Island to Rochester. New York's Medicaid program is among the nation's most expensive.

New York state and the federal government agreed on a payment plan in 1990. But after the Poughkeepsie Journal published a series of stories in 2010 about the extraordinary costs of the state's so-called intermediate-care facilities, the U.S. Centers for Medicare and Medicaid Services—the agency, often called CMS, that administers the program—started its own investigation. It found that New York was making exceptionally high Medicaid payments to the facilities, which are run by the state's Office for People with Developmental Disabilities.

A subsequent review by federal Medicaid officials found that New York couldn't justify some of its reported costs, lacked proper internal controls, didn't comply with federal reporting requirements and had an unreliable fiscal report from 2010-11, among other issues. A separate U.S. Department of Health and Human Services inspector-general probe in 2012 found the amount charged by New York to be excessive.

Medicaid spending in New York was roughly $52.5 billion in fiscal 2013, about half of which was borne by the federal government.

CMS told New York officials last week that it would seek nearly $1.3 billion from the 2010 fiscal year alone, and possibly more once further reviews of the 2011 and 2012 fiscal years are complete. New York officials have 30 days to respond with a plan to fix its Medicaid spending issues.

The request cuts against Mr. Cuomo's image as a Medicaid reformer, an issue he took on in his first year in office with a panel that made recommendations to save money that were ultimately signed into law.

It also comes after Mr. Cuomo's deal in May allowing New York to spend $8 billion in federal Medicaid savings over a five-year period, a pot of money seen as helping Brooklyn hospitals on the verge of closure. It isn't clear how the Medicaid office's request for reimbursement would affect that.

The New York State Department of Health said Tuesday it would appeal the federal demand, saying it would have "untold negative consequences on the state's health-care system."

"Under this administration, Gov. Cuomo proactively redesigned a wasteful and inefficient Medicaid program that was sanctioned by [the U.S. Department of Health and Human Services] and prior administrations," said Bill Schwarz, an agency spokesman.

The Medicaid review and request for repayment are part of the federal government's work to ensure proper Medicaid spending, officials at the CMS said in a written response to questions.

"We will continue to work with New York state officials to address issues outlined in this report in order to strengthen the financial management of the Medicaid program," said Courtney Jenkins, a Medicaid spokeswoman.

The request for repayment was welcomed by congressional Republicans on Capitol Hill, where New York's expensive Medicaid system has drawn attention.

"We applaud CMS's action, and we encourage CMS to recover the full amount due the federal taxpayer for both 2011 and 2012," said U.S. Rep. James Lankford (R., Okla.) at a hearing of the House Oversight and Government Reform Committee.

Federal auditors also said New York has used some of its share of Medicaid money each year for general spending for a broad number of state disability programs. A Republican-led congressional oversight panel accused New York of fraud last year, allegedly overcharging Medicaid $15 billion over two decades. New York officials have said the panel's conclusions were wrong.

New York has plans to close the state-run intermediate-care facilities for the developmentally disabled this year.