HHS I.G. Audit: 'North Carolina Made Capitation Payments to Managed Care Entities After Beneficiaries' Deaths'

WASHINGTON, Sept. 29 -- The Health and Human Services Inspector General issued the following audit report (No. A-04-16-00112) entitled "North Carolina Made Capitation Payments to Managed Care Entities After Beneficiaries' Deaths" filed under the Centers for Medicare and Medicaid Services on Sept. 25:

Report in Brief

Why OIG Did This Audit

Previous OIG audits found that States had improperly paid Medicaid managed care entities capitation payments on behalf of deceased beneficiaries. We conducted a similar audit of the North Carolina Department of Health and Human Services, Division of Health Benefits, which administers the Medicaid program. Our objective was to determine whether North Carolina made capitation payments on behalf of deceased beneficiaries.

How OIG Did This Audit

Our audit covered 37,434 capitation payments, totaling $3.5 million, made from July 1, 2009, through June 30, 2014 (audit period), on behalf of beneficiaries identified by North Carolina as possibly deceased. After matching the Medicaid Management Information System (MMIS) data for these payments to the Social Security Administration Death Master File, we eliminated 3,912 payments, totaling $567,252, either paid before the beneficiary's death or recovered. For each of the remaining 33,522 payments, totaling $2.9 million, we determined the beneficiary's month and year of death from at least two corroborating sources. We identified each capitation payment for monthly coverage after the beneficiary's determined month and year of death, and we summed these to determine total unallowable payments.

What OIG Found

North Carolina made unallowable capitation payments to certain managed care entities on behalf of deceased beneficiaries. Of the 37,434 capitation payments reviewed, North Carolina paid 3,912 before the beneficiaries' deaths or recovered the payments. However, the remaining 33,522 were for monthly coverage after the beneficiaries' deaths, were unrecovered, and were therefore unallowable. Although North Carolina identified and recovered some unallowable payments, it did not always identify and process death information in its eligibility system and MMIS. As a result, North Carolina made $2.9 million (Federal share $1.9 million) in unallowable payments to certain managed care entities for the audit period.

What OIG Recommends and North Carolina Comments

We recommend that North Carolina refund $1.9 million to the Federal Government, identify capitation payments made to managed care entities on behalf of deceased beneficiaries before and after our audit period and refund the Federal share of amounts recovered, and improve the accuracy of eligibility system date of death information and apply MMIS edits as necessary to identify all deceased beneficiaries, prevent all capitation payments for monthly coverage after death, and recover such unallowable payments.

In written comments on our draft report, North Carolina agreed with our recommendations and described actions that it has taken or plans to take to address them. North Carolina plans to work with the Centers for Medicare & Medicaid Services regional office to determine the amount, method, and timing of the refund in our first recommendation. North Carolina implemented MMIS edits to prevent and recover capitation payments made on behalf of deceased beneficiaries, and its contractors reviewed such payments that may have occurred outside of the audit period. North Carolina also plans to continue contractor reviews, enhance information sources for identifying deceased beneficiaries, and streamline tracking and followup processes to ensure appropriate action is taken timely.

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TABLE OF CONTENTS:

INTRODUCTION ... 1

* Why We Did This Audit ... 1

* Objective ... 1

* Background ... 1

- The Medicaid Program ... 1

- Social Security Administration: Date of Death Information ... 2

- Federal and State Requirements ... 2

- North Carolina's Medicaid Managed Care Program ... 2

* How We Conducted This Audit ... 3

FINDINGS ... 4

* The State Agency Made Unallowable Payments to Certain Medicaid Managed Care Entities ... 5

- Unallowable Prepaid Inpatient Health Plan Payments ... 5

- Unallowable Prepaid Ambulatory Health Plan Payments ... 5

- Unallowable Program for All-Inclusive Care for the Elderly Payments ... 5

* The State Agency Did Not Always Identify and Process Death Information ... 6

* Unallowable Capitation Payments ... 6

RECOMMENDATIONS ... 7

STATE AGENCY COMMENTS ... 7

APPENDICES:

A: Audit Scope and Methodology ... 8

B: Related Office of Inspector General Reports ... 10

C: Federal and State Requirements ... 12

D: State Agency Comments ... 14

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INTRODUCTION

WHY WE DID THIS AUDIT

The North Carolina Department of Health and Human Services, Division of Health Benefits (State agency) pays Medicaid managed care entities to make services available to enrolled Medicaid beneficiaries in return for a monthly fixed payment for each enrolled beneficiary (capitation payment). Previous Office of Inspector General (OIG) audits/1 found that State Medicaid agencies had improperly paid capitation payments on behalf of deceased beneficiaries. We conducted a similar audit of the State agency, which administers the Medicaid program.

OBJECTIVE

Our objective was to determine whether the State agency made capitation payments on behalf of deceased Medicaid beneficiaries.

BACKGROUND

The Medicaid Program

The Medicaid program provides medical assistance to low-income individuals and individuals with disabilities (Title XIX of the Social Security Act (the Act)). The Federal and State Governments jointly fund and administer the Medicaid program. At the Federal level, the Centers for Medicare & Medicaid Services (CMS) administers the program. Each State administers its Medicaid program in accordance with a CMS-approved State plan. Although the State has considerable flexibility in designing and operating its Medicaid program, it must comply with applicable Federal requirements.

The Medicaid managed care programs are intended to increase access to and improve quality of health care for Medicaid beneficiaries. States contract with managed care entities to make services available to enrolled Medicaid beneficiaries, usually in return for capitation payments.

States report capitation payments claimed by Medicaid managed care entities on the States' Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program (Form CMS64). The Federal Government pays its share of a State's medical assistance expenditures (Federal share) under Medicaid based on the Federal medical assistance percentage (FMAP), which varies depending on the State's relative per capita income as calculated by a defined formula (42 CFR Sec. 433.10). From July 1, 2009, through June 30, 2014 (audit period), the FMAP in North Carolina ranged from 64.60 percent to 74.98 percent./2

Social Security Administration: Date of Death Information

The Social Security Administration (SSA) maintains death record information, including date of death, by obtaining death information from relatives of deceased beneficiaries, funeral directors, financial institutions, and postal authorities. SSA processes death notifications through its Death Alert, Control, and Update System, which matches the information received from external sources against the Master Beneficiary Record and the Supplemental Security Income Record./3

SSA records the resulting death information in its Numerical Identification System (the Numident)./4

SSA then uses information from the Numident to create a national record of death information called the Death Master File (DMF)./5/6

Federal and State Requirements

A capitation payment is "a payment the State agency makes periodically to a contractor on behalf of each beneficiary enrolled under a contract for the provision of medical services under the State plan. The State agency makes the payment regardless of whether the particular beneficiary receives services during the period covered by the payment" (42 CFR Sec. 438.2).

The State agency "will seek full restitution of any and all improper payments made to providers by the Medicaid Program" (10 A North Carolina Administrative Code 22F.0601).

North Carolina's Medicaid Managed Care Program

In 1991 the State agency began operating parts of its Medicaid program using managed care through a primary care case management program, called Carolina ACCESS, to provide beneficiaries with a designated medical home and primary care provider to coordinate care.

Certain Medicaid beneficiaries were enrolled on a mandatory basis, while certain other Medicaid beneficiaries had the option to enroll./7

By 1997 the program expanded statewide as Community Care of North Carolina, which paid 14 community health networks a monthly fee to provide case management, data analysis, and quality improvement and training activities for participating primary care practices.

In 2005 North Carolina began operating a limited benefit, pre-paid program under its 1915(b)/(c) waiver/8 for mental health, developmental disability, and substance abuse services.

Under this waiver, North Carolina used Prepaid Inpatient Health Plans (PIHPs) to manage behavioral health and developmental disability services on a mandatory basis for most Medicaid beneficiaries with behavioral health needs.

In 2008 North Carolina expanded managed care to include Medicare-Medicaid dual enrollees and Medicaid-only individuals with long-term care needs. North Carolina contracted with Prepaid Ambulatory Health Plan (PAHP) providers for high tech imaging and ultrasound services to eligible Medicaid beneficiaries, and it offered a Program for All-Inclusive Care for the Elderly (PACE) to provide all Medicare and Medicaid services to individuals over age 55 who required a nursing home level of care.

State Medicaid agencies use the Medicaid Management Information System (MMIS), which interfaces with the State agency's eligibility system, to process payments and maintain beneficiary eligibility and enrollment information./9

HOW WE CONDUCTED THIS AUDIT

Our audit covered 37,434 PIHP, PAHP, and PACE capitation payments from July 1, 2009, through June 30, 2014,/10 totaling $3,478,847 (Federal share $2,321,552), made on behalf of beneficiaries who the State agency identified as possibly deceased prior to the month of the capitation payment./11

For these 37,434 capitation payments, we matched the claim data on the State agency file to the SSA DMF and used the beneficiary's SSN, name, and date of birth to identify the beneficiary's date of death/12 and capitation payments with beginning dates of service after the beneficiary's date of death. For each of these payments, we used a variety of sources, including the MMIS, the SSA DMF, the CWF, vital records data, and online obituaries, to determine the beneficiary's month and year of death from at least two corroborating sources. We then analyzed these payments to identify individual unallowable capitation payments for monthly coverage after each beneficiary's determined month and year of death and to determine total unallowable payments.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Appendix A contains the details of our scope and methodology, and Appendix C contains the Federal and State requirements.

FINDINGS

The State agency made unallowable capitation payments to certain managed care entities on behalf of deceased beneficiaries. Of the 37,434 capitation payments reviewed, the State agency paid 3,912 before the beneficiaries' deaths or recovered the payments./13

However, the remaining 33,522 were for monthly coverage after the beneficiaries' deaths, were unrecovered, and were therefore unallowable. Although the State agency identified and recovered some unallowable payments, it did not always identify and process death information in its eligibility system and MMIS. As a result, the State agency made $2,911,595 (Federal share $1,948,657) in unallowable payments to certain managed care entities for the audit period.

THE STATE AGENCY MADE UNALLOWABLE PAYMENTS TO CERTAIN MEDICAID MANAGED CARE ENTITIES

The State agency's PIHP, PAHP, and PACE contracts established Medicaid eligibility as a requirement for enrollment and generally provided for recoupment of payments made in error.

However, despite recovery efforts, the State agency did not recover all capitation payments made on behalf of deceased beneficiaries. Of the 37,434 capitation payments that we reviewed, totaling $3,478,847 (Federal share $2,321,552), the State agency paid 3,912, totaling $567,252 (Federal share $372,895), to certain managed care entities before the beneficiaries' deaths or recovered the payments. However, the remaining 33,522 payments, totaling $2,911,595 (Federal share $1,948,657), were on behalf of deceased beneficiaries and were unrecovered./14

Unallowable Prepaid Inpatient Health Plan Payments

The State agency made 19,285 PIHP capitation payments totaling $2,515,173 (Federal share $1,679,137) on behalf of deceased beneficiaries. The PIHP contracts provided for automatic disenrollment upon enrollee death and recoupment of overpayments (PIHP Contract, sections 4 and 10). However, these unallowable payments (representing 86.38 percent of total unallowable payments) were unrecovered.

Unallowable Prepaid Ambulatory Health Plan Payments

The State agency made 14,196 PAHP capitation payments totaling $267,188 (Federal share $183,821) on behalf of deceased beneficiaries. The PAHP contracts provided for audit, reconciliation of payments, reporting of errors to the State agency, and recoupment of payments made in error, including after an individual is retroactively terminated (PAHP Contract, Attachment B, sections C and E). However, these unallowable payments (representing 9.18 percent of total unallowable payments) were unrecovered.

Unallowable Program for All-Inclusive Care for the Elderly Payments The State agency made 41 PACE capitation payments totaling $129,234 (Federal share $85,699) on behalf of deceased beneficiaries. The PACE contracts provided for termination upon a beneficiary's death (PACE Contract, Appendix G). However, these unallowable payments (representing 4.44 percent of total unallowable payments) were unrecovered.

THE STATE AGENCY DID NOT ALWAYS IDENTIFY AND PROCESS DEATH INFORMATION The State agency did not always identify and process death information in its eligibility system and MMIS.

On October 1, 2013, the State agency implemented a new eligibility system, NC FAST, which determined whether an individual was eligible for Medicaid. Because the date of death indicator field in NC FAST did not automatically populate, it was added manually using data obtained from the SSA DMF or the county Department of Social Services (DSS). This manual input was subject to human error and inaccuracies in the SSA DMF and DSS data. Although case workers at the county level researched and retroactively corrected some discrepancies, NC FAST date of death information was not always accurate.

Beneficiary information in NC FAST interfaced with the MMIS as part of the claim payment process, and the State agency implemented MMIS edits to prevent payment of claims on behalf of deceased beneficiaries. For example, the new MMIS that was implemented on July 1, 2013, included edit checks to identify and prevent such payments./15

However, because the State agency did not apply these edit checks to capitation payments, it made 33,522 unallowable capitation payments to PIHP, PAHP, and PACE providers.

In 2015 the State agency's recovery audit contractor and primary post-payment vendor completed reviews of selected Medicaid payments made after the beneficiary's date of death and submitted recovery letters to providers for recovery of all overpayments identified.

Additionally, the State agency began performing quarterly reviews of selected Medicaid payments made after a beneficiary's date of death.

The State agency's eligibility system, MMIS, and recovery efforts led to identification and recovery of some unallowable capitation payments on behalf of deceased beneficiaries.

However, because it did not always identify and process death information in NC FAST and the MMIS, the State agency did not identify and recover 33,522 PIHP, PAHP, and PACE capitation payments after beneficiaries' deaths.

UNALLOWABLE CAPITATION PAYMENTS

As a result, the State agency made $2,911,595 (Federal share $1,948,657) in unallowable payments to certain managed care entities for the audit period.

RECOMMENDATIONS

We recommend that the North Carolina Department of Health and Human Services, Division of Health Benefits:

* refund $1,948,657 (Federal share) to the Federal Government;

* identify capitation payments made to managed care entities on behalf of deceased beneficiaries before and after our audit period and refund the Federal share of amounts recovered; and

* improve the accuracy of NC FAST date of death information and apply MMIS edits as necessary to identify all deceased beneficiaries, prevent all capitation payments for monthly coverage after death, and recover such unallowable payments.

STATE AGENCY COMMENTS

In written comments on our draft report, the State agency agreed with our recommendations and described actions that it has taken or plans to take to address them. The State agency plans to work with the CMS regional office to determine the amount, method, and timing of the refund in our first recommendation. The State agency implemented MMIS edits to prevent and recover capitation payments made on behalf of deceased beneficiaries, and its contractors reviewed such payments that may have occurred outside of the audit period. The State agency also plans to continue contractor reviews, enhance information sources for identifying deceased beneficiaries, and streamline tracking and followup processes to ensure that it takes appropriate action promptly.

The State agency's comments are included in their entirety as Appendix D.

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Footnotes:

1 See Appendix B for related OIG reports.

2 Because of the Patient Protection and Affordable Care Act's Medicaid expansion, payments for "newly eligible" adults were reimbursed at a 100-percent FMAP during calendar years 2014 through 2016.

3 SSA, Programs Operations Manual System, GN 02602.060 (May 13, 2011). The Master Beneficiary Record is an electronic record of all Title II (of the Act) beneficiaries. The Supplemental Security Income Record is an electronic record of all Title XVI (of the Act) beneficiaries.

4 The Numident contains personally identifiable information for each individual issued a Social Security number (SSN).

5 SSA, Programs Operations Manual System, GN 02602.060.B.1 (May 13, 2011).

6 SSA maintains death data--including names, SSNs, dates of birth (DOBs), and States of death--in the DMF for approximately 98 million deceased individuals.

7 Children, non-elderly individuals with disabilities and low-income caretaker adults are enrolled on a mandatory basis, while older adults, American Indian/Alaska Natives, Foster Care Children, dual eligibles, pregnant women, and special needs children have the option to enroll.

8 The 1915(b)/(c) waiver program became statewide in 2013.

9 The State agency implemented a new MMIS on July 1, 2013. It also implemented a new eligibility system called North Carolina Families Accessing Services through Technology (NC FAST) on October 1, 2013.

10 The audit period encompassed the most current data available at the time we initiated our audit.

11 Using claim data extracted from its MMIS, the State agency provided an Excel file (the State agency file) identifying 37,434 capitation payments totaling $3,478,847 (Federal share $2,321,552) on behalf of PIHP, PAHP, and PACE enrollees who were possibly deceased and, therefore, ineligible for Medicaid.

12 Of the 37,434 Medicaid beneficiaries associated with these claims, we identified 37,428 in the SSA DMF. For the six beneficiaries not identified in the SSA DMF, we obtained four beneficiaries' dates of death from the Common Working File (CWF) and one beneficiary's date of death from an online obituary. Because we could not verify the remaining beneficiary's date of death, we treated it as a non-error.

13 The vast majority of these were payments on the first of the month for monthly coverage interrupted by the beneficiary's death. Additionally, the State agency recovered 478 of these payments.

14 Despite the State agency's efforts to identify and recover unallowable payments, 22 percent of these unallowable payments occurred more than 3 months after the beneficiaries' deaths.

15 The MMIS included claim edit checks 253 and 261 designed to deny payment for services after beneficiaries' deaths. If the service end date was after the beneficiary's death date, the MMIS automatically denied the claim.

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Full report: https://oig.hhs.gov/oas/reports/region4/41600112.pdf