Follow-Up on Recommendations from Report No. 14-02, Audit of the Department of Human Services’ Med-QUEST Division and Its Medicaid Program

From Hawaii State Auditor, Report 19-06, Jan 30, 2019

In 2014, we found that division management had neglected to commit sufficient resources to its efforts to curb fraud, waste, and abuse. As a result, Hawai‘i’s detection and enforcement activities lagged, exposing the State to tens of millions of dollars in losses annually. In our follow-up, we found that DHS has implemented 10 and partially implemented 6 of the 19 recommendations. Three recommendations have not been implemented and remain open. 

Section 23-7.5, Hawai‘i Revised Statutes, requires the Auditor to report to the Legislature annually on each audit recommendation more than one year old that has not been implemented by the audited department or agency. This report presents the results of our review of 19 recommendations made to the Department of Human Services in Report No. 14-02, Audit of the Department of Human Services’ Med-QUEST Division and Its Medicaid Program, which was published in January 2014.

The Medicaid Program

The Med-QUEST Division provides health insurance through several Medicaid programs under Title XIX of the federal Social Security Act. Health insurance coverage includes the Hawai‘i QUEST and QUEST Expanded Access managed care programs, and the Medicaid Fee-forService program. The QUEST program serves eligible individuals from birth to age 65 who are not blind or otherwise disabled. The QUEST Expanded Access program includes seniors 65 years and older, and individuals of all ages with disabilities.

Hawai‘i’s other, smaller health insurance programs include QUESTNet, QUEST-ACE (Adult Coverage Expanded), Transitional Medical Assistance, federal- and state-funded Coverage of Individuals with Breast and Cervical Cancer, and Special Programs for Medicare Beneficiaries. Additionally, the division oversees the State’s Funeral Payments Program. Collectively, these programs enable low-income adults and children to maintain and improve their health by providing payments for medical, dental, and other medically necessary health care services.

The federal government and states share responsibility for financing the Medicaid program. The federal government matches state spending on an open-ended basis for services that Medicaid programs cover. The federal government’s share of medical assistance expenditures is called the federal medical assistance percentage (FMAP), which is determined annually by a formula that compares a state’s average per capita income level with the national income average. States with higher per capita incomes receive a smaller federal reimbursement. By law, the FMAP cannot be lower than 50 percent or higher than 83 percent.

At the time of our 2014 audit, Medicaid enrollment and the State’s related health care payment expenditures were at their highest point in program history. Since FY2008, Medicaid enrollment rose 36.4 percent, from approximately 211,000 to almost 288,000 in FY2012. Total Med-QUEST Division spending in FY2012 reached more than $1.6 billion, up from $1.5 billion in FY2010, and included State general fund amounts and the federal share received through FMAP. Overall, for FY2012, Med-QUEST Division health care payment appropriations alone accounted for about 15 percent of State spending. Appropriations were expected to grow in the future, with health care payment appropriations increasing to 16.6 percent of State spending by FY2015.

Why we did the 2014 audit

The 2013 Legislature directed the Office of the Auditor to conduct a comprehensive financial audit of the Department of Human Services’ (DHS) Med-QUEST Division, with emphasis on the Medicaid program. With State contributions to the Medicaid program nearly doubling from FY2010-FY2015, the Legislature was concerned about the relevance and usefulness of the information it receives from the division.

What we found in 2014

In Report No. 14-02, Audit of the Department of Human Services’ Med-QUEST Division and Its Medicaid Program, we found that the Med-QUEST Division concentrated 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. We also found that division management had neglected to commit sufficient resources to its efforts to curb fraud, waste, and abuse. As a result, Hawai‘i’s detection and enforcement activities lagged far behind national averages, exposing the State to tens of millions of dollars in losses annually.

What we found in 2018

Our follow-up on DHS’ implementation of recommendations made in Report No. 14-02, conducted between October 2016 and September 2018, included interviewing selected personnel, examining relevant documents and records, and evaluating whether the department’s actions appeared to address our recommendations. We found that DHS has implemented 10 and partially implemented 6 of the 19 recommendations. Three recommendations have not been implemented and remain open….  

(Editor's Note: The recommendations not implemented are the ones where DHS actually has to go out and catch fraudsters, instead of just talking about it.)

read … Full Report

2018: $82K Per Bum: Hospitals Rake in $1.2B Treating Homeless Shelter-Refusers