New York state made $21.6M in improper Medicaid payments

ALBANY - A lack of guidance and ineffective oversight of the state's Medicaid program led to more than $21 million in improper payments for laboratory tests, according to a recent audit released by the state comptroller's office.

The audit by Comptroller Thomas DiNapoli examined 275 laboratory procedures with lifetime limits set by the state's Department of Health, including many pertaining to genetic tests that "typically shouldn't be needed more than once."

Auditors uncovered 91,718 claims totaling $19.6 million in Medicaid payments filed between June 2019 and December 2025 for laboratory tests exceeding the lifetime limits, including many for genetic testing that the Department of Health says are only needed once.

A bulk of the overpayments, $18.7 million, were made by managed care organizations (MCOs), which are paid a monthly premium by the state for each Medicaid member and reimburse providers for services of each enrollee.

The audit also uncovered 11,049 claims filed between June 2019 and January 2025 for laboratory and ambulatory services totaling $1.8 million that were paid out on behalf of hospitalized Medicaid members, despite patients having an all-inclusive inpatient rate for services that already covers those costs.

Most of the claims were paid by managed care organizations that "did not understand the Medicaid policy or had claim processing system weaknesses that enabled these payments," the audit found.

It's the latest audit in recent years to uncover overpayments within the state's more than $90 billion-a-year Medicaid program administered by the state's Department of Health due to a lack of oversight.

The program, which provides health insurance for more than 8 million individuals with low income and special health needs, has come under increased criticism in recent months by the Trump administration, which is currently probing the program for wasteful and fraudulent spending.

Marissa Crary, a spokesperson for the state's Department of Health, said Medicaid is a "lifeline for millions of people" and that the agency has taken steps to improve its procedures to root out wasteful spending.

"The Department has improved system controls to enforce lifetime limits on certain laboratory codes and will continue to incorporate any other appropriate process improvements that are feasible to control costs and root out abuses while preserving and improving quality of care," the statement reads.

Lifetime limits exceeded

The state's Department of Health is tasked with setting limits on how often Medicaid patients can access certain laboratory tests and other services. Some laboratory tests covered by Medicaid have lifetime limits because they are not considered medically necessary, including many genetic tests, though providers can submit appropriate records for review to allow additional payments for tests.

New York has lifetime limits for 275 laboratory procedures, with service limits on fee-for-service claims enforced through eMedNY, the state's Medicaid claim processing and payment system.

But the Department of Health only lists seven laboratory procedures in its laboratory procedure code manual and does not "specifically communicate the lifetime limits of the remaining 268 codes to MCOs or providers, nor does it issue guidance instructing or encouraging MCOs to enforce the same lifetime limits used in fee-for-service," according to the audit.

Instead, managed care organizations are expected to develop internal policies that meet the minimum level of care laid out in the managed care model contract.

"We found that DOH did not provide adequate guidance on these lifetime limits to MCOs and allowed inconsistent claim payment rules between fee-for-service and managed care," the audit reads. "Consequently, MCOs generally did not place the same limits on procedures as DOH did on fee-for-service claims."

The audit recommends the Department of Health develop a review process for procedures paid more than once in a lifetime to determine an appropriate course of action, including whether any funds should be recovered. It also recommends developing a determination on whether to "provide the complete list of laboratory procedures with lifetime limits to MCOs, and public guidance to help prevent improper payments."

Other oversight issues

It's not the first time that the comptroller's office has uncovered improper Medicaid payments by the state's Department of Health.

An audit released in 2020 found that New York paid more than $706 million in Medicaid payments over three years after a lack of oversight of the Medicaid program led to improper charges for pharmacy services.

Last year, the comptroller's office found that $1.7 million in Medicaid payments were disbursed due to a lack of oversight of cost-sharing involving third-party providers.

New York's Medicaid program has been under federal scrutiny since March, when Dr. Mehmet Oz, the administrator of the Center for Medicare & Medicaid Services sent a letter to Gov. Kathy Hochul and state Health Commissioner Dr. James McDonald seeking more information on the state's "elevated per capita Medicaid spending and utilization patterns."

The Trump administration in June temporarily suspended funding for New York's Medicaid Fraud Control Unit, which investigates and prosecutes fraud for the health care program, citing low performance.

State Attorney General Letitia James has disputed those claims, pointing to more than $627 million in received Medicaid funds since she has taken office.

A report from the U.S. Department of Health and Human Services Office of Inspector General issued in March found that New York was one of four states that recovered nearly half of the $706 million in civil recoveries relating to Medicaid fraud last year.