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February 15, 2013

Oversight Committee finds rampant fraud and abuse in New York Medicaid program

By Michelle L. Oxman, JD, LLM

In a report entitled, “Billions of Tax Dollars Overspent on New York’s Medicaid Program,” the House Committee on Oversight found that the state’s Medicaid program outspends the per capita national average by more than 2:1 and that oversight by state agencies, including the Department of Health and the Medicaid Inspector General, and the federal government have been inadequate to stop ongoing abuses. The Committee made six specific recommendations to correct widespread problems in several areas of the program.

Developmental centers. Perhaps the most costly problem was the state’s methodology for reimbursement of facilities serving individuals with developmental disabilities. The Health Care Financing Administration (HCFA, now known as CMS), approved a state methodology, which has been amended several times, under which these developmental centers were paid far more than similar facilities in other states. By 2011, the centers were paid $5,000 per resident per day pursuant to state plan amendments (SPAs) approved by CMS. New York’s payments to these centers exceeded the amounts other states spent on all forms of long-term care. According to the report, in the 1990’s, the state agency serving the developmentally disabled recommended that all of the centers be closed by 2000, but then Governor George Pataki reversed the plan, largely “because the centers generated so much revenue for the state.” In addition, the Committee report found that the state had resisted federal requests for relevant documents to investigate the payments for more than two years.

Other findings of abuse. The Committee found that the Medicaid agency approved personal care services, i.e., assistance with activities of daily living such as grooming, shopping, and cleaning, and 24-hour home care, in disregard of the eligibility requirements, resulting in per beneficiary expenditures up to $150,000 per year. In addition, in the last decade, several state legislators were convicted of fraud, bribery, or theft involving federally funded healthcare programs.

New York’s eligibility rules for long-term care assistance facilitated a Medicaid “estate planning industry.” The Committee found that some wealthy New Yorkers who received long-term care assistance had nonexempt assets of $500,000 or more. New York’s “spousal refusal” law allows the spouse of an institutionalized individual simply to disclaim any legal responsibility for his or her care. The legislature has twice refused to pass Governor Cuomo’s proposals to eliminate the spousal refusal option.

The Committee’s recommendations. The Oversight Committee made six recommendations to address its concerns. They included: (1) an independent audit of New York’s Medicaid program, including the Medicaid Inspector General; (2) reduction of the rates paid to developmental centers by 80 percent and recovery of the payments that exceeded federal limits; (3) elimination of the spousal refusal option; (4) strict adherence to eligibility requirements for personal care services; (5) close scrutiny of the state’s waiver application that would allow it to retain $10 billion of savings from the restructuring of its Medicaid financing; and (5) legislation to cap compensation of executives of nonprofit organizations receiving Medicaid funds below $200,000.

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