OIG Audit Says Alabama Inappropriately Took Medicaid Funds
HHS'
Office of the Inspector General released a final audit report on May 4 "accusing" the
Alabama Medicaid Agency of "manipulating a funding system" for public hospitals and has recommended that the state refund $237 million to the federal government, the Birmingham News reports. However, state officials "disputed" the report. "We believe the report by the inspector general's office is wrong," Carrie Kurlander, a spokesperson for Gov. Don Siegelman's (R) office, said (Parks, Birmingham News, 5/23). According to the report, the Alabama Medicaid Agency in FY 1998 made "unauthorized changes" to the way it computed "enhanced payments" it was entitled to under the Medicaid loophole. Under the loophole, states pay city- or county-owned care facilities more than the actual cost of health services, and as a result receive additional matching funds from HCFA than they would otherwise and then require the facilities to return the extra state funds. The state then sometimes pays the facilities a small fee for participating, and uses the funds for health and/or non-health-related items (Kaiser Daily Health Policy Report, 1/3). As a result, $240.4 million in "excessive payments" were made to hospitals over a four-year period. Federal auditors said that the state should repay $168.3 million in federal funds for the audit period and an additional $68.7 million in federal funds distributed after the audit ended. The auditors noted that the practice, designed to "offset" $70 million a year in cuts to public hospitals, "didn't result in the hospitals actually getting more money." In addition, the Alabama Medicaid Agency required public hospitals -- not the state -- to "put up" matching funds "in advance" to receive federal funds, then the state paid the funds back to the hospitals, in addition to the federal match, auditors said in an accompanying report. "Once the state made the payments, the facilities returned approximately 28.5% of the federal share of the payments to the state," the audit report said, adding, "Because 28.5% of the federal funds was returned, it did not appear the state actually incurred an expense related to these enhanced payments." Alabama Medicaid Commissioner Mike Lewis admitted that "money flowed back and forth" under the enhanced payment system. "There are intergovernmental transfers that are involved in this. That's true," he said, but he "insisted" that the Alabama Medicaid Agency "acted properly." State lawyers plan to reply to the audit. After receiving the reply, HCFA will "determine what action to take" (Parks, Birmingham News, 5/23). To view a copy of the OIG report, click here.
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