Earlier this month, the Office of Inspector General released a 29-page audit report of an investigation conducted on the California Department of Health Care Services. The audit, which covered the review of more than 112,000 Medicaid capitation payments amounting to nearly $74 million dollars was initiated to determine whether California had made capitation payments on behalf of deceased beneficiaries. The OIG had previously identified a trend in other states in which State Medicaid programs were making capitation payments on deceased beneficiaries – and given California’s size, wanted to ensure their program wasn’t following the problematic trend.

California pays managed care organizations (MCOs) to provider covered health care services in exchange for a fixed monthly payment for each enrollee (capitation payments). California Medicaid Program (Medi-Cal) is the largest Medicaid program in the United States, covering more than 39 million residents each year. Of these 39 million people, 80% are enrolled in managed care. Long story short – the OIG’s concerns were well-founded.

In their report, OIG states that they reviewed Medi-Cal capitation payments spanning from July 1, 2014 through December 31, 2017. Through selecting a stratified random sample of 184 capitation payments of $528,769 ($387,751 of which were Federal share), they were able to estimate the total value and Federal share of unallowable capitation payments. The results of this audit confirmed that California had in fact made capitation payments after the death of multiple beneficiaries. Of the 184 samples payments, only 6 were correctly paid out. The remaining incorrect payments totaled $433,948, of which $302,755 were Federal share.

California had previously established certain processes to prevent these kinds of unallowable payments, but their efforts fell short. Many of these errors came as a result of California failing to dis-enroll beneficiaries after their date of death, failure to collaborate with the Department of Public Health to reconcile death data, and by neglecting to routinely employ additional resources to identify dates of death. These detrimental mistakes have been estimated to total more than $70 million of unallowable payments to MCOs during the 2.5-year audit period.

The OIG went on to recommend that California not only refund $53.4 million to the Federal Government, but that they also work to identify and recover additional unallowable payments made to MCOs during the audit period.