State paid $21.8M to 'deceased enrollees'

Virginia is working to recover almost $22 million that the state mistakenly paid insurers for people enrolled in the state Medicaid program who already had died. That includes $15.7 million the state must repay to the federal government for its share of the cost.

In an audit released on Monday, the Office of the Inspector General for the U.S. Department of Health and Human Services said Virginia paid at least $21.8 million to managed care companies for about 12,000 "deceased enrollees" in the Medicaid program in 2019 through 2021. The state makes "capitated" or monthly per-person payments to six private managed care companies to cover the cost of most of the 2.1 million Virginians who receive health care under Medicaid, with expenses shared by the federal and state governments.

"The state agency made unallowable capitation on behalf of deceased enrollees because it did not have adequate controls in place to identify all deceased enrollees and properly cancel their enrollment," the audit states.

The inspector general recommended the state immediately refund the federal share of the improper payments and work to recover other payments, including those that may have been made in 2018 and 2022 — immediately before and after the three years covered by the audit. It also recommended that Virginia "continue to pursue development and implementation of an automated matching and eligibility update process" to quickly update the status of enrollees who have died.

Finally, the auditor recommended a "supervisory review to ensure the state agency personnel completely and accurately update the state agency's eligibility system based on information provided by the Virginia Department of Health's Office of Vital Records," which maintains state death records.

The Department of Medical Assistance Services, which runs the state Medicaid program, said the health department provides death information monthly, which the Medicaid agency manually cross-checked to identify and close enrollment for those who fully match death records. "This process was found to be inefficient as the level of manual work would often take up to a month to complete," DMAS Director Cheryl Roberts said in response to inspector general's audit.

The state has implemented a new system to automatically close out enrollment for people who fully match death records. "This new process has increased the timeliness of this process, while reducing human error," Roberts said.

DMAS, as the state Medicaid agency is known, said it previously had closed 8,787 of the 12,054 people identified by the audit as deceased, or about 73%, and had recovered payments made to manage care insurance companies.

Subsequently, it found that 1,460 of the Medicaid enrollees listed by the federal auditor as deceased remained on the program rolls improperly. "Using the agency's new automated closure process, action was taken to immediately close these enrollments back to member's date of death and recover improper payments," Roberts told the inspector general in a letter on June 13.

That left 1,836 people on the Medicaid rolls who did not match health department death files, including 246 people who had not died and 850 who were deceased.

Of the rest, 681 did not have a date of death listed by the Social Security Administration, which maintains death record information nationally.

Roberts said the state agency would work with federal regulators to "repay any outstanding debit that has not been repaid through the recoupment process" with managed care companies. Through June 9, it estimated it had recovered all but $95,677 of the improper payments made in 2019, 2020 and 2021.

She estimated it had recovered all improper payments made in 2022 and all but $226,023 of those made in 2018.

Since implementing the new automated system in January, Roberts said the state agency has matched 98% to 100% of the deaths reported each month.

Any missed by the new system are checked manually, with "an additional supervisory review to ensure any closures which were not acted on through the automated process are reviewed and accurately updated within DMAS' eligibility system," she said.