Kentucky auditor finds $800 million in waste during special examination of state Medicaid Services

State Auditor Allison Ball released a special examination of the Kentucky Department of Medicaid Services (DMS) on Wednesday, which says a specific failure on the part of DMS led to more than $800 million of wasted taxpayer money.

It found that DMS did not take basic steps to ensure it was not duplicating payments made by other states once a recipient moved out of Kentucky and enrolled in another state's Medicaid program. All states must check for and investigate alerts from the federal government warning that double (or more) payments are occurring, but DMS failed to do so. This failure led to about $800 million worth of unnecessary capitation payments to MCOs across four years (from January 1, 2019, to December 31, 2022).

"This exam uncovered about $800 million of taxpayer dollars erroneously paid without benefiting Medicaid recipients," Ball said. "Medicaid is one of Kentucky's costliest programs, and it's essential that we make sure every Medicaid dollar spent is going directly to benefit Kentuckians in need of services, not being wasted due to bureaucratic negligence."

The special examination reviewed a specific issue within Kentucky's Medicaid program involving payments made to managed care organizations (MCOs) that act on behalf of DMS to pay for Medicaid recipients' covered services. DMS pays MCOs "capitation payments," which are somewhat similar to the premiums paid by privately insured individuals to their health insurance providers.

The full report is available at www.auditor.ky.gov.

This is the latest in a series of Kentucky Medicaid issues uncovered by the Auditor. These include: 1) the failure to ensure ineligible noncitizens did not receive Medicaid benefits, 2) the failure to prevent the same Social Security Number from being used by multiple Medicaid claimants, and 3) the failure to complete inspections of over 100 long-term care facilities in Kentucky, some of which were last visited in 2019.

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