Audit Finds Maryland Overcharged Federal Government in 95% of Cases in Waiver Program

    A Social Security program administered by the Centers for Medicare & Medicaid Services (CMS) allows states to apply for waivers for longterm care of individuals with developmental disabilities in home and community settings instead of institutions.  For the three years ending June 2012, the State of Maryland claimed $648.6 million from the federal government under its Community Pathways waiver program.
    An audit by the Office of the Inspector General (OIG) of the Department of Health and Human Services (HHS) found that errors in paperwork filed by the state resulted in overcharges to the federal government in excess of $20 million.  But even more startling than the dollar amount is the 95% error rate uncovered by the audit.  The OIG explains in the Findings section of the report [emphasis added]:

The State agency did not comply with Federal and State requirements when it claimed costs for residential habilitation services under the waiver.  Of the 100 claim lines that we sampled, 5 complied with Federal and State requirements; however, 95 did not.  The 95 claim lines had 135 errors:  

• For 81 claim lines, the State agency included unallowable costs for room and board.    
• For 54 claim lines, the State agency reduced provider payments to reflect amounts in excess of room and board that providers had collected from beneficiaries but did not reduce claims for Federal reimbursement accordingly.   

Forty claim lines included both errors.We estimate that, as a result of these errors, the State agency claimed at least $20,627,705 (Federal share) in unallowable costs.
The State agency claimed these unallowable costs because it lacked internal controls to ensure that unallowable costs were not included in claims for provider per diem payments.  

    In response, the State of Maryland agreed with the finding of the audit, including the recommendation to reimburse the federal government for the $20 million overcharge.  The state agency responsible also noted steps being taken to prevent a reoccurrence of the errors.
    As the Affordable Care Act begins to take full effect in 2014, Maryland is one of the states participating in the Medicaid expansion that is part of the law.  State agencies will have an expanding workload as the Medicaid expansion kicks in, increasing the need for safeguards to be sure that the states are in compliance with reimbursement guidelines.