Medicaid plagued with wasteful spending

The Medicaid welfare program has long been plagued with wasteful spending. The U.S. Government Accountability Office designates Medicaid as a high-risk program, largely because it is “particularly vulnerable to fraud, waste, abuse and improper payments” and has inadequate oversight to prevent wasteful spending. Indeed, the U.S. Department of Health and Human Services, or HHS, reports an improper...

The Medicaid welfare program has long been plagued with wasteful spending. The U.S. Government Accountability Office designates Medicaid as a high-risk program, largely because it is “particularly vulnerable to fraud, waste, abuse and improper payments” and has inadequate oversight to prevent wasteful spending. Indeed, the U.S. Department of Health and Human Services, or HHS, reports an improper payment rate of nearly 10 percent. This means that, across the country, up to $40 billion in Medicaid spending is wasteful and/or fraudulent. HHS officials estimate that eligibility determination errors account for most of the improper payments.

A 2010 HFS Inspector General report found that 34 percent of randomly selected Medicaid files in Illinois contained eligibility errors. The vast majority of these errors were discovered in the areas of income and other basic eligibility requirements, such as residency and household composition.

So in 2012, lawmakers enacted 305 ILCS 5/11-5.2, which requires the Illinois Department of Healthcare and Family Services, or HFS, to verify income, residency and identity eligibility for all Medicaid applicants. HFS must connect with the Illinois Department of Employment Security, U.S. Department of Homeland Security, U.S. Social Security Administration, U.S. Department of Health and Human Services, U.S. Department of Veterans’ Affairs, Illinois Secretary of State and neighboring state agencies in order to verify wages and other income, citizenship and immigration status, employment status and residency.

HFS launched the enhanced eligibility verification program in January 2013. The state signed a two-year contract with Maximus, Inc., which specializes in this type of work. So far, Maximus has reviewed eligibility for nearly 145,000 individuals enrolled in Medicaid. Of those, Maximus identified nearly 75,000 who were ineligible for benefits. Maximus also found an additional 18,000 individuals who were eligible for benefits but enrolled in the wrong program. For example, some individuals enrolled in Medicaid may only qualify for programs with greater cost-sharing.

Source: Illinois Department of Healthcare and Family Services

Of course, the American Federation of State, County and Municipal Employees sued HFS, arguing that the state should have used government employees to review eligibility, rather than contracting with an independent vendor. They want state union workers to verify eligibility, despite the fact that the state doesn’t have the workforce or technology to adequately do the job. An arbitrator agreed with the union, putting the success of the verification project in jeopardy.

A similar project recently launched in Pennsylvania, which has a Medicaid program that is very similar in size and scope as Illinois’ program. In its first 10 months of operation, the Pennsylvania Department of Public Welfare identified more than 160,000 ineligible individuals who were receiving Medicaid benefits, including individuals who were in prison and even millionaire lottery winners. This led to nearly $300 million in savings in the first ten months alone. Illinois officials estimate that the eligibility verification project could save upwards of $350 million.

Of course, taxpayers are not the only ones hurt by Medicaid fraud. Every dollar spent on individuals who are ineligible for Medicaid is a dollar that is unavailable to the most needy and vulnerable. Hopefully, Gov. Quinn will appeal the arbitrator’s ruling or the General Assembly will amend the authorizing statute to ensure the state’s contract can move forward.