MEDICAID'S IMPROPER PAYMENT RATE FOR FY 2018

DHHS has published its annual Agency Financial Report for FY 2018. The report provides an overview of improper payments in the Medicaid program, root causes for the payments, and corrective actions. In line with the agencies goal of reforming, strengthening, and modernizing the nation's healthcare system, HHS cites improved processes and technology solutions to strengthen the integrity of Medicaid and lower the program's improper payment rate.

IMPROPER PAYMENTS REDUCED 

Each year DHHS has set targeted improper payment rates. Despite not achieving their goal in the previous two years, the review does indicate a reduction. The improper payment rate in FY 2017 was 10.10 percent and in FY 2018 it was lowered to 9.79 percent. HHS says that the reduced rate is a result of the department's implemented strengthened reduction and recovery efforts.

MEDICAID'S CALCULATIONS AND FINDINGS

The report estimates that Medicaid improper payments made by recipients of federal funding amounted to $36.25 billion in 2018. The root cause categories for payments made in error included the inability to authenticate eligibility and access data ($11.6 billion), administrative or process errors ($16.6 billion), and insufficient documentation ($7.6 billion).

• National Medicaid gross improper payment estimate = 9.79 percent ($36.25 billion)
• National Medicaid net improper payment estimate = 9.63 percent ($35.67 billion)
• Medicaid FFS improper payment rate = 14.31 percent
• Medicaid managed care improper payment rate = 0.22 percent

ELIGIBILITY DISCOVERIES AND CORRECTIVE ACTIONS

To prevent future improper payments and improve eligibility verification processes, states found vulnerabilities in their systems and procedures with Eligibility Review Pilots. After evaluating Medicaid plans, the pilots identified eligibility errors stemming from caseworker and system vulnerabilities. The most notable discoveries were that states did not properly establish income of beneficiaries and there was insufficient documentation to make eligibility determinations. Much of the documentation needed was missing.

The corrective actions to help resolve these program weaknesses concentrate on training, system solutions, and improved processes for managing documentation. Specifically, the efforts include:

• Conducting provider training sessions and meetings with provider associations
• Issuing provider notices, bulletins, newsletters, alerts, and surveys
• Implementing improvements and clarifications to written state policies highlighting documentation requirements
• Performing additional provider audits to determine areas of vulnerability and target solutions

PROVIDER DISCOVERIES AND CORRECTIVE ACTIONS

The department's financial report shows that errors as a result of non-compliance involving provider screening, enrollment, and national provider identifier (NPI) requirements have been a major contributor to Medicaid's improper payments. The majority appeared either in instances where the information required from a claim was absent or states did not enroll providers with the appropriate process.

However, state compliance has improved and the program's FFS improper payment rate lowered 2.06 percent last year. The report also found that improper payments cited on claims of revalidated providers who were not properly screened at revalidation was a new major contributor to the rate. HHS will measure all states for provider revalidation compliance in FY 2020.

In order to reduce these process or system errors, state corrective actions consist of:

• Implementing new claims processing edits
• Switching to a more advanced claims processing system
• Continuing to implement provider enrollment process improvements to make it easier for ordering and referring providers to enroll in the program

HHS CITES THE NEED FOR MEDICAID IT SOLUTIONS

In order to reduce Medicaid's improper payments, the report recognizes the value of implementing IT solutions at the state level. States will need to update and improve their program's systems in order to be more efficient and strengthen integrity. HHS has authorized federal funding in nine states to implement analytics technologies that will be integrated into the state Medicaid Enterprise Systems. The state systems workgroup will also routinely meet to review program vulnerabilities and how they affect measuring improper payments.

HHS has also established a plan to update the data systems for Medicaid to alleviate state burden and improve the quality of data. The agency's hope is that by making use of technology solutions, Medicaid will have a more comprehensive data structure and improved oversight.

One effort, specifically, is the development of the Transformed Medicaid Statistical Information System (T-MSIS). T-MSIS will obtain high-quality data and minimize data requests from states. The system will aid in the submission of timely claims data, expand the MSIS dataset, and enable HHS to review the quality of submissions in real-time. Since August 2018, 48 states, Washington D.C., and Puerto Rico have started submitting T-MSIS data.


While DHHS is working to reform, strengthen, and modernize the nation's healthcare system, their recent report identified vulnerabilities that compromise the Medicaid program's integrity. Improper payments are costing billions of dollars and continue to occur due to obsolete systems, processes, and low-quality data. To achieve reduced improper payment rates in the future, the Medicaid program will need to implement innovative technology solutions.

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CA RFP FOR FFS RX BENEFIT MANAGEMENT

In January, California's newly appointed Governor  Governor Gavin Newsom authorized an executive order to significantly reform health care in the state. Executive Order N-01-19 introduced a number of actions and budget proposals to decrease the cost of prescription drugs and health care. One proposal, specifically, shifts all pharmacy services for Medi-Cal managed care to a fee-for-service (FFS) model.

Pharmaceutical drugs are one of the key drivers of growing health care costs. Last year the state's individual market experienced a 10% increase in health care costs and reports suggested the drug manufacturers planned to increase pricing in 2019.

FFS RX BENEFIT

At the moment, Medi-Cal acquires drugs with the aid of public and private purchasers that negotiate with manufactures independently. Under the FFS model, California would become the largest single payer of pharmaceutical drugs and the state would have increased bargaining power to negotiate prices with manufacturers.

Governor Newsom stated, "We will use our market power and our moral power to demand fairer prices for prescription drugs. And we will continue to move closer to ensuring health care for every Californian."

RFP # 19-96125

In July, DHCS sent out a request for proposals for managing the FFS pharmacy benefit. RFP # 19-96125 is requesting proposals for the takeover, operation, and ensuing turnover of administration of the FFS pharmacy services. Entities including commercial businesses, nonprofit organizations, state or public universities that fulfill the qualification criteria are eligible for submission.

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COST AVOIDANCE TECHNOLOGY FOR MEDICAID

Aside from climbing health care costs and increased spending from the program's expansion, Medicaid is losing billions of dollars a year from improper payments. Protecting the integrity of the Medicaid program has become a top priority for the Centers for Medicare and Medicaid Services (CMS). CMS and individual states are looking to technology for cost avoidance solutions to protect the program from fraud, waste, and abuse.

T-MSIS  

Earlier in the year, CMS and the US Comptroller General met with the Senate Homeland Security and Governmental Affairs Committee to go over the agencies initiatives to curb fraud, waste, and abuse. Administrator Verma testified and presented a variety of solutions geared toward audits, but in addition, she emphasized the importance of data optimization.

According to CMS, enhancing data will "drive toward better health outcomes and improve program integrity, performance, and financial management in Medicaid and CHIP."

Verma went on to present the Transformed Medicaid Statistical Information System (T-MSIS). The system partners with states to implement advanced analytics and technologies in the collection of health services data. T-MSIS monitors submitted key information such as beneficiary eligibility, beneficiary and provider enrollment, service utilization, claims and managed care data, and expenditure data. This data will make it possible for states to operate more efficiently and reduce costs.

At the moment, states access federal databases for data matching and the identification of improper payments. However, the data is not current, available, complete, or accurate. While T-MSIS is still being developed and is years away from completion, Medicaid plans will continue to lose billions of dollars.

MAIS

Each state is required to pursue the recovery of erroneous payments but they lack the technology and data to do so. Rhode Island and Texas have resorted to technology to strengthen and improve their Medicaid programs. Both states have enrolled in the Medical Assistance Intercept System (MAIS).

States submit Medicaid recipient records into the MAIS database and they are then matched daily with personal injury and workers' compensation insurance claims. The system identifies and provides plans with matches and outreach services. States can then issue a lien to the insurer using the data from these matches. MAIS can also file with the insurers on the state's behalf. At the time of settlement, Medical claims are then collected by the state.

Rhode Island started employing MAIS in 2013 to intercept payments for reimbursement to it's Medicaid program. All insurance companies who do business in the state were required to participate in the program.

According to the state, "The MAIS program and Rhode Island's Executive Office of Health and Human Services (EOHHS) hit a new total of $25 Million in liens in April 2019. Achieving an exceptional increase of 25% since lien amounts were last reported [in September], MAIS has exceeded expectations and continues to grow in both scale and scope with a record single lien of $2.6 million."

This year, Texas became the second state to implement the MAIS program. It is using MAIS as a cost control initiative and expects to offset medical assistance costs in the state.

ProTPL 

Outside of government-sponsored programs, there are a number of recovery services; however, none of them effectively reduce improper payments. More than a decade ago, Syrtis Solutions recognized the need for cost avoidance in the Medicaid program and created ProTPL, a real-time, prospective TPL solution for payers of last resort.

Formerly, plans would attempt to maintain data of each beneficiary to coordinate claims correctly. The constant flux of member eligibility, the complexity of coordinating benefits (COB), and the lack of quality data made this extremely challenging. The result was that claims were regularly paid in error and plans had to turn to 'pay and chase' to recover funds. The recovery efforts of these improper payments were also very costly.

The ProTPL program minimizes the need for post-payment recovery with accurate, useful, and real-time ePrescribing eligibility data. The tool seamlessly integrates into Medicaid plans existing processes and immediately decreases improper claims and the need for 'pay and chase.'

Lawmakers, government agencies, and plan administrators are focused on protecting the integrity of the Medicaid program and are turning to technology solutions to do so. Even though recovery efforts are necessary, Medicaid plans recognize that cost avoidance makes more sense. The technology needed to successfully cost avoid is now available from Syrtis Solutions.

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MEDICAID COSTS PUT EMPHASIS ON RECOVERY EFFORTS AND COST AVOIDANCE

In 1965, Title XIX of the Social Security Act established the Medicaid program to provide health care coverage to low-income individuals. Over time it has developed into one of the nation's largest payers for health care, covering one out of five Americans. In FY 2017, the jointly funded program made up 9.5% of federal spending. Because of Medicaid expansion and climbing health care costs, the program has become an even greater component of state budgets. To ensure that the program meets its goals and objectives, legislatures and plan administrators are working to improve program integrity by resolving its vulnerabilities.

COB Challenges

There are presently 56 unique Medicaid programs and each state is responsible for administering its program while remaining compliant to federal guidelines. These broad requirements give states the flexibility to determine covered populations, services, delivery models, and methods of payment. Additionally, states can also test and implement approaches outside of federal standards by obtaining Section 1115 waivers.

While the ability to tailor individual programs helps states meet their individual needs, problems emerge in the Coordination of Benefits (COB) and Third Party Liability (TPL), which is "the legal obligation of third parties to pay part, or all of the expenditures for medical assistance furnished under a Medicaid state plan."

Factors including the complexity of COB and TPL, the continuous flux of the Medicaid population, and uncoordinated eligibility data between federal and state systems leave the Medicaid program vulnerable to improper payments.

Medicaid Expansion Creates Added Complexity

Medicaid expansion has experienced intense debate after the Affordable Care Act revised Medicaid eligibility in 2010. Two years later, the Supreme Court ruled expansion optional and since then 37 states have chosen to expand their eligibility requirements. While more individuals are eligible for coverage, the increased population size has also added to the complexity of the program and emphasized the need for improved program integrity and recovery processes. Existing vulnerabilities, such as improper payments, must be resolved with effective cost avoidance solutions to help ensure the program's sustainability.

$36.2 Billion In Improper Payments

A High-Risk Issue from the Government Accountability Office (GAO) reported, "Medicaid covered about 75 million people in fiscal year 2018, at an estimated cost of $629 billion--$ 393 billion of which was paid by the federal government. CMS has projected that Medicaid spending will grow at an average rate of 5.7 percent per year from fiscal years 2017 through 2026. In fact, Medicaid spending is expected to reach $1 trillion by fiscal year 2026."

The GAO estimated that improper payments represented 9.8 percent ($36.2 billion) of Medicaid spending in 2018.

Medicaid has been on the GAO's high-risk list since 2003 due to the lack of federal oversight, it's size, and the complexity of the program. As health care costs increase and program eligibility expands, it is becoming a significant expenditure for the federal government and state budgets. Plan administrators need to implement cost avoidance technology solutions in order to save their plans money.

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CMS AUDITS MEDICAID IMPROPER PAYMENTS

Recent reporting from the HHS OIG and the Louisiana Auditor General have indicated a high rate of Medicaid improper payments as a result of inaccurately determining Medicaid eligibility. The Senate Finance Committee wrote CMS on March 1st to inform the agency of their concerns over the apparent lack of effort in recovering misspent federal money within the Medicaid program. They emphasized, "that the government needs to do more to uphold Section 1903(u) and safeguard the integrity of the Medicaid program."

The letter declared, "The apparent lack of effort in recouping misspent federal money is problematic. Recent reviews by HHS OIG of beneficiaries made newly eligible by the Patient Protection and Affordable Care Act, also known as Obamacare, found more than seven percent of beneficiaries were potentially ineligible in Kentucky, more than 25 percent were potentially ineligible in California, and more than 30 percent were potentially ineligible in New York. In Louisiana, a state Department of Health audit found an astounding 82 percent of recipients ineligible in a random sample ... Furthermore, if states accidentally enroll an individual as an expansion enrollee instead of a traditional enrollee, states are perversely, and significantly, rewarded for their error, unless the federal government subsequently takes action to recoup those mistakenly paid funds."

As a result, CMS is in the process of carrying out audits on the Medicaid plans of California, New York, Kentucky, and Louisiana. While the agency will not have the power to recoup improper payments detected by the audits, the audits will, "determine whether beneficiary eligibility was adjudicated appropriately for the new adult group and whether services for beneficiaries in the new adult group were assessed the correct Federal Medical Assistance Percentage (FMAP)."

MEDICAID IMPROPER PAYMENTS RECOVERY INITIATIVES

In spite of not having the authority to recover payments made in error, there have been regulatory changes made recently that could allow for some form of recovery. CMS Administrator, Seema Verma, also stated that "CMS does have authority to issue disallowances, and, in certain circumstances, states are required to return overpayments." This authority is part of the Payment Error Rate Measurement program (PERM) that begins in 2022.

Additionally, CMS is also escalating its oversight in relation to eligibility determinations for expansion populations. The agency will seek states to provide, "documentation to clearly articulate how individuals in the Medicaid adult group are accurately determined, categorized, and claimed in state systems to ensure that claims are appropriately applied to the correct eligibility category and ultimately reported at the proper FMAP rate."

Medicaid improper payments are threatening the integrity of the Medicaid program and legislators are concerned. The Senate Committee on Finance reached out to CMS to address the problem. As a result, the agency is conducting a number of audits to ensure that the proper adjudication processes are in place and that states are compliant.

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LEGISLATION FAILS TO LOWER IMPROPER PAYMENTS IN GOVERNMENT-FUNDED PROGRAMS

Legislation like the Improper Payments Information Act (IPIA P.L. 107-300) and Executive Order 13520 looked to address improper payments in government-funded programs. IPIA ordered federal agencies to report on the number of improper payments occurring and lay out what measures are being taken to lower them. Order 13520 worked to pinpoint high-priority programs and increase transparency. Agencies were required to submit projected reduction estimates and specifics on how they would work to obtain them. Despite these pieces of legislation, government-funded programs continue to lose billions of dollars due to payments made in error.

According to the GAO, federal entities estimated about $141 billion in improper payments in 2017. The Congressional Research Service (CRS) also reported and discovered that the 20 high-priority programs identified as a result of Order 13520, accounted for 96% of the $141 billion. In the years ahead, the CRS anticipates that these programs will account for 90% of all improper payments.

STATUTE COMPLIANCE ISSUES

In their improper payment reporting, the GAO has regularly brought up the following four compliance issues:

• Federal entities struggle to collect accurate eligibility data.

• Agencies do not have reliable methods for identifying improper payments.

• Entities fail to steer resources towards compliance efforts mandated by law.

• Agencies go through the motions and see the compliance measures as a way to keep oversight at bay.

Surprisingly, while agencies struggle to comply with statues to report on improper payments, none of them require that agencies decrease payments made in error. Consequently, improper payment rates continue to rise and agencies engage in costly measures to report.

The CRS report specified, "nearly half of the high-priority programs have shown no improvement. Specifically, the error rates for seven programs have increased since they first began reporting data, and the error rate for one program has remained unchanged. Moreover, while the error rates for twelve programs have decreased, the decline has been less than 10% for five programs. In some cases, program error rates have not improved."

IMPROPER PAYMENTS LOWERED WITH QUALITY DATA

To reduce improper payments, the federal government will need to make a focused effort in targeting the root causes for these payments within high priority programs while at the same time implementing technology solutions.

CMS is one agency in particular that successfully implemented existing initiatives and innovative processes, such as its Fraud Prevention System, to deal with improper payments within its programs. Following the compliance efforts established in the Improper Payments Elimination and Recovery Act of 2010 (H.R. 3393), last year CMS reported its lowest improper payment rate in eight years.

The agency's Fraud Prevention System is an IT solution that takes advantage of data analytics to detect when mistakes or intentional behavior may result in improper payments or indicate fraud. CMS says that the system will yield a 20% savings increase.

According to the agency, "CMS employs multi-faceted efforts to target the root causes of improper payments, with an emphasis on prevention-oriented activities. Actions to prevent and reduce improper payments include: policy clarifications and simplifications; prior authorization initiatives that ensure applicable coverage, payment, and coding rules are met before services are rendered; a targeted probe and educate medical review strategy that focuses on outlier providers, limits the number of medical records requested, and puts emphasis on education and assistance in correcting claims errors; and provider education on Medicare policy."

Legislation has helped to bring the problem of improper payments into focus for agencies and government officials. Having said that, the statues directed by legislation are costly and primarily revolve around compliance and reporting as opposed to reducing improper payments. In order to stop improper payment rates from rising further, agencies need to look to innovate quality data solutions to identify and prevent fraud, waste, and abuse.

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HB 3388 SEES SIGNIFICANT CHANGES

2019 has been a busy year for healthcare legislation in Texas and one proposal, in particular, intended to carve out PBM's altogether. House Representative J.D. Sheffield (R) introduced HB 3388 on March 6th in an attempt to reform the delivery of prescription drugs to a fee-for-service model for Medicaid and various other public benefit programs. However, during its time in the House, it went through a series of significant changes.

INTRODUCED HB 3388

Initially, HB 3388 was directed toward the delivery of outpatient prescription drug benefits. It proposed extreme changes such as:

• Replacing the vendor drug program with a fee-for-service delivery model.

• HHSC would eliminate any requirement to pay fees included in the capitation rate or other amounts paid to MCOs related to the provision of outpatient prescription drug benefits.

• If HHSC contracts with a claims processor to administer the outpatient prescription benefit program, HHSC would then reimburse the claims administrator for the prescription drugs and a contracted administrative fee.

• HHSC would apply clinical prior authorization requirements state-wide and use prior authorizations to regulate unnecessary utilization.

• HHSC contracts with MCOs would be changed to prohibit the MCO from providing outpatient prescription drugs by December 31, 2019, and would restrict an MCO from developing, implementing, or maintaining an outpatient pharmacy benefit plan for recipients beginning on the 180th day after the date HHSC begins providing outpatient prescription drug benefits.

COMMITTEE SUBSTITUTE

During its time in the House, the bill's focus shifted and the committee's substitute did not include any provisions from the original. CSHB 3388 changed course and focused on the reimbursement of prescription drugs under Medicaid and CHIP rather than the delivery of drug benefits. Under the revised version:

• MCOs providing services under Medicaid or CHIP would be mandated to reimburse retail and specialty pharmacies a minimum of the lesser of the reimbursement amount for the drug in the vendor drug program, including a dispensing fee that is not less than the dispensing fee under the vendor drug program, or the amount claimed by the pharmacy or pharmacist, including the gross amount due or the usual and customary charge to the public for the drug.

• MCOs would be required to reimburse pharmacies that dispense a prescription drug at a discounted price under Section 340B of the Public Health Service Act not less than the reimbursement amount for the drug under the vendor drug program, including a dispensing fee that is not less than the dispensing fee under the vendor drug program.

• HHSC would perform a study every two years to analyze Texas pharmacies' actual acquisition costs and dispensing cost.

• Bill 3388 would take effect on March 1, 2020.

Supporters of the bill believe that pharmacies would get fairer reimbursement of prescriptions filled for Medicaid and CHIP. They point out that the bill would improve transparency since it would use NADAC as a pricing benchmark. It would also not affect which drugs the programs covered.

On the other hand, opponents say that the bill has the potential to raise state costs by changing reimbursement methodology. Their position is that PBMs help to negotiate the best possible deals and protect patients from being prescribed unnecessary medications. They are concerned that the bill would negatively affect patient outcomes while increasing ER visits and opioid prescription rates and decrease medication adherence.

HB 3388 was voted on in the House on May 4th and it has been referred to the Health and Human Services Committee. If the bill is approved it will surely impact healthcare within the state. While the revised bill does not include a pharmacy carve out, it's a clear indication that lawmakers are focused on rising healthcare and prescription drugs costs and what they can do to remedy the problem.

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