Audit of the Department of Human Services’ Med-QUEST Division and Its Medicaid Program

Med-QUEST reporting and inattention to fraud impede legislative efforts to contain costs

Data provided by division does not fullfill legislative needs

In FY2015,  Med-QUEST Division health care payment appropriations alone accounted for nearly 15 percent of State spending.

Report No. 14-02, January 2014

While Hawai‘i’s Medicaid program is financed with a combination of state and federal funds, we found that the Med-QUEST Division concentrates its reporting around meeting federal measures and requirements, which focus on quality of health care services delivered, and not State concerns, which are largely related to costs. With State contributions to the Medicaid program nearly doubling over the past five years, legislators are understandably concerned about the relevance and usefulness of the information it currently receives from the division. Absent adequate and appropriate information; however, the Legislature is unable to make informed decisions about and enact legislation to implement any cost containment measures relating to the Medicaid program.

State’s Medicaid program costs compare favorably to peer states and national averages

After analyzing data from the Med-QUEST Division and other government and private sources, we found that Hawai‘i’s Medicaid costs compare favorably to other states and the national average.  Although Hawai‘i has a higher Medicaid enrollment as a percentage of its population compared to other states, its Medicaid costs are below the national average and the division has been relatively successful in controlling spending per enrollee and stabilizing program costs. In addition, while Hawai‘i has some flexibility in containing these costs, we found that these options are becoming more limited. Requirements associated with the Compacts of Free Association agreements and Affordable Care Act to be implemented in 2014, prevent the division from making certain adjustments to benefits and eligibility.

State is exposed to tens of millions of dollars in losses due to fraud, waste, and abuse

We also found that division management has neglected to commit sufficient resources to its efforts to curb fraud, waste, and abuse. As a result, Hawai‘i’s detection and enforcement activities lag far behind national averages, exposing the State to tens of millions of dollars in losses annually. For instance, in 2011, the Centers for Medicare and Medicaid Services projected that improper payments from the Hawai‘i Medicaid and Children’s Health Insurance programs totaled $66.9 million. Since additional federal regulation will limit cost containment options for the State, the division needs to be more proactive in containing the costs that it can control by establishing and implementing an effective and efficient fraud, waste, and abuse detection program.

Agency response

The department generally agreed with our conclusions and recommendations and said it has already undertaken actions to address several of our recommendations. It agreed Hawai‘i’s Medicaid program fares well compared to peer states and the rest of the nation, and that it has managed to control costs on a per-enrollee basis even while enrollment has increased. The department also said it is committed to eliminating all fraud, waste, and abuse, and that it has made substantial improvements in program integrity. And it stated that implementation of its new eligibility system, KOLEA, will reduce eligibility errors. The department identified four efforts it plans to pursue this legislative session to improve support for additional program integrity efforts. Although the department contends that our fraud, waste, and abuse finding was primarily based on outdated documentation, we note the department provided that documentation as the most current available.

READ >>> Entire Report

OMB: $101B Spent on Incorrect Federal Payments Each Year

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'Passive Renewal' Enables Hawaii Medicaid Fraud

SA: Medicaid beneficiaries are renewed annually for medical coverage through a process called passive renewal in which residents are only required to return forms if their eligibility status has changed, a policy put in place to ensure continuous coverage for families with children. Recipients are automatically renewed for another year if they don't respond to the annual query.

In 2013 there were roughly 89,000 passive renewal recipients with an estimated cost per beneficiary of more than $2,000 per year. The auditor, applying an error rate of 10.5 percent, estimates $19.6 million in erroneous payments for this group alone.

DHS has tried in the past to change the passive renewal policy that began in 2004, but the Centers for Medicare and Medicaid Services denied its requests, citing federal regulations that prohibit changes that would make eligibility standards more restrictive, the report noted.

2011: DHS: Thousands of ghost names on Hawaii Medicare, Medicaid Rolls

read ... About How Community Clinics Make Money

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DHS statement regarding auditor’s report

News Release from Hawaii DHS

“The Department of Human Services (DHS) is committed to eliminating all fraud, waste and abuse. The Department appreciates the assistance of the Legislature and the State Auditor’s Office to help identify areas to reduce medical assistance program costs and to improve program integrity,” said DHS Director Patricia McManaman.

“The Auditor’s Report, however, relied on outdated information and did not recognize the Department’s substantial progress under the Abercrombie Administration to enhance program integrity and eliminate abuses,” McManaman said.

Since the 2011 federal report was issued, the DHS has implemented new systems, processes, screening and enrollment requirements, contractual requirements for health plans, and launched a new eligibility system, KOLEA — all with the goal of reducing fraud and waste.

The DHS is seeking funds from the 2014 Legislature for an additional investigator, fraud auditor and program integrity manager. Funding also is being sought for an asset verification IT system, which will interface with KOLEA.

The verification system will improve program integrity for all individuals still subject to asset verification.

The Auditor’s Report expressly recognizes that Hawaii’s Medicaid program fares well when compared to peer states in the rest of the nation.

It also notes that DHS has managed to control its costs on a per-enrollee basis even in the face of growing Medicaid enrollment.

In 2010, Hawaii’s per-enrollee costs were 19 percent lower than the average among peer states.

Hawaii’s efforts to control costs did not come at the expense of quality. In 2013, the Commonwealth Fund ranked Hawaii as the state with the best health care system for low income individuals.

“The Med-QUEST staff is dedicated to providing timely access to quality care for beneficiaries, while assuring proper oversight of taxpayer dollars. Ultimately, it is my responsibility to assure program integrity throughout the Department,” McManaman said.

An estimated 301,000 individuals are enrolled in the Hawaii Medicaid program, which is administered through the Department of Human Services.

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