Hawaii DD Division apparently admits to defrauding federal government and state taxpayers

According to a November 16 letter from the Hawaii Department of Health's Developmental Disabilities Division, the program has apparently been caught by federal authorities defrauding Medicaid.  The DD division established new reporting guidelines that went into effect on December 1, and the letter emphatically tells recipients to comply with ongoing federal and state audits.

The news was quietly inserted into a letter that went out to DD waiver participants and providers with a headline of "documentation requirements" that was a bit misleading.

The Fray letter states "as a result of the recent Payment Error Rate Measurement audit conducted by CMS, the Med-QUEST Division is implementing new documentation requirements for PAB services."

Last April I reported that CMS was unable to deny rumors that Hawaii's Payment Error Rate Measurement could be as high as fifty percent (it's legally supposed to be between three and five percent).  

(paraphrased from then)  What would a 50% Medicaid payment error rate mean?  It could mean that half of all Medicaid claims are paid twice:  once by either Evercare or Ohana through their capitation payments, and the second time by Medicaid's fee for service program.

Here is how it might happen:

1.  ACS, as the fiscal agent for Hawaii's fee-for-service Medicaid program, charges a fee for every claim they submit.

2.  Hawaii receives matching funds from the federal government to pay these fees for ACS's services, just as they do for the state's aged and disabled program operated by Evercare and Ohana.

3.  ACS could be billing the state for claims incurred by patients served by Evercare and Ohana.

4.  ACS would then be receiving federal (and state) funds for claims that are the responsibility of Evercare and Ohana and which are included in the calculations for the monthly per person payments (capitation payment) they receive.  Evercare (UnitedHealth) and Ohana (Wellcare) are retaining their full capitation payments, hence the double payments.

What that means for Hawaii is that suddenly our Medicaid budget could be half of what it should be.  For example, since the state's total Medicaid budget for FY2010 is about $1.4 billion, then suddenly the state might have only $700 million to spend.

Out of that comes the fifteen-to-twenty percent net operating profit UnitedHealth and Wellcare skim off the top of their state capitation fee payments.  That's at least another $92,000,000. 

So from the original annual budget of about $1.4 billion,  only about $608 million is left to spend on actual services for Hawaii's Medicaid population.

When services are cut, the Medicaid profits aren't cut, and the capitation fees not only are not reduced, at least here in Hawaii they've been increased several times by means of "contract amendments".    The Medicaid company cries poor and that it is a victim of rising medical costs, to justify increases in the capitation fees paid by the states.

This is why Hawaii's Medicaid waiver program for our aged and disabled population experienced a thirty-six percent increase in the death rate of participants within its first year of operation.