Indiana Paid $1.1 Million on Behalf of Dead Medicaid Beneficiaries, Audit Shows

February 16, 2020 Updated: February 16, 2020

The state of Indiana paid some $1.1 million in Medicaid-related payments in 2016 and 2017 to managed-care organizations (MCO) on behalf of beneficiaries who were dead, according to federal auditors.

The audit (pdf), carried out by the Department of Health and Human Services Office of Inspector General (OIG) and released on Feb. 13, revealed that in a random sample of 100 so-called capitation disbursements made to MCOs, the state of Indiana “made 95 unallowable payments.”

“We confirmed that 70 of the 71 beneficiaries associated with the 100 capitation payments in our stratified random sample were deceased,” the OIG concluded. “On the basis of our sample results, we estimated that Indiana made payments totaling at least $1.1 million ($862,097 federal share) to MCOs on behalf of deceased beneficiaries.”

The organizations that received the unlawful payments are part of the Medicaid Managed Care health care delivery system.

“Medicaid managed care provides for the delivery of Medicaid health benefits and additional services through contracted arrangements between state Medicaid agencies and managed care organizations (MCOs) that accept a set per member per month (capitation) payment for these services,” the Medicaid program site states.

MCOs use capitation payments to manage health care costs, utilization, and quality.

“Capitation is a fixed amount of money per patient per unit of time paid in advance to the physician for the delivery of health care services,” said Patrick Alguire, M.D., director of education and career development at the American College of Physicians.

“By contracting with various types of MCOs to deliver Medicaid program health care services to their beneficiaries, states can reduce Medicaid program costs and better manage utilization of health services,” Alguire said.

Yet aspects of the system have been plagued by problems, with the Indiana report coming on the heels of others that similarly found that some states had improperly paid capitation payments on behalf of the deceased.

An audit released in September 2019 found that Illinois paid an estimated $4.6 million to MCOs to cover deceased Medicaid beneficiaries.

Illinois Medicaid administrator Doug Elwell acknowledged the findings in a written response to the audit (pdf) and said state authorities would try to recover the improper payments and refund them to the federal government.

Similarly, Indiana Medicaid Director Allison Taylor said in a written response included in the audit that the state agrees with the conclusions of the report and will seek to recoup the payments.

There are more than 71 million people currently covered under Medicaid, the social safety net program created five decades ago and expanded by President Barack Obama through the Affordable Care Act, commonly known as Obamacare.

The Trump administration has sought to reform the system, recently announcing that it would test letting state Medicaid programs limit health benefits and prescription drug coverage for some patients in return for changing how federal government contributions to the states are made.

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