YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

January 13, 2004

Report No. 2004-01

Inadequate monitoring of the state's managed care program has caused potentially unnecessary program costs and results in limited assurance program costs truly reflect the healthcare services provided

This audit reviewed the Division of Medical Services' management and oversight of the state's managed care program with initial emphasis on dental services.  In January 2003, the program had nearly 413,000 recipients enrolled and comprised mostly low-income families, pregnant women, children and uninsured parents.  Overall managed program costs have nearly doubled since June 1999, to approximately $700 million (state and federal money) and enrollment has increased 50 percent.  The following highlights the findings:

Managed care program dentists were underpaid for procedures

Dentists statewide received less than the Medicaid rate on more than 20,000 dental procedures, totaling $84,000 in underpayments, during fiscal year 2002's first quarter.  Auditors also found several dentists received more than the Medicaid rate for certain procedures.  For example, while some dentists received Medicaid's rate of $34 for pulling a tooth, others dentists received from $6 to $126 for the same procedure.  The inconsistent compensation occurred due to special pay arrangements and the type of reimbursement methods used.  Division officials improved payment non-compliance by January 2003, which occurred during our review and following public complaints, but some underpayments continued due to reimbursement methods.  (See page 5)

Incomplete claims data leaves state unable to measure overall healthcare costs

Division officials did not place a high priority on complete and accurate encounter claim data, leaving state officials unable to measure the true cost of providing healthcare services. Federal Medicare and Medicaid officials state accurate claims data is critical to evaluating program use, provider performance, program access and quality of care.  Limited audit tests identified numerous duplicate encounter claim records and showed about 10 percent of the sampled pharmacy claims had no associated medical claim recorded on the state computer systems.  Other states have implemented procedures that assure all claims data is at least 90 percent accurate and consider it a critical tool to monitor the program.  (See page 8)

Recipient eligibility inadequately evaluated

Ineligible and potentially ineligible recipients remain in the program.  Audit tests showed more than $1.5 million in capitation payments during fiscal year 2002 went for 990 managed care recipients without social security numbers in the state's computer system.  Federal rules require Medicaid recipients to provide their social security numbers to the state to be eligible for benefits or maintain eligibility.  In addition, capitation payments were made for recipients with out-of-state addresses and invalid social security numbers.  Officials took necessary action on the out-of-state address and invalid social security number recipients we reported to them.  (See page 10)

Limited fraud detection work leaves program vulnerable to higher costs

The division does not perform fraud detection activities in the managed care program despite a federal Medicaid rule requirement to do so.  Division officials said lack of resources and unreliable encounter claim data limit their fraud detection work.  Federal officials said without fraud monitoring, division officials cannot be sure payments reflect true service costs, and could result in higher costs to the state.  (See page 11)

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