DOCUMENT RESUBE 00504 - [A0751182] [Survey of HEW and States' Manageaent of Spend-Down Payments for Medically needy Persons]. HRD-77-43; B-164031 (3). February 3, 1977. 5 pp. Report to Secretary, Department of Health, Edication, and Welfare; by Gregory J. Ahart, Director, Human Resources Div. Issue Area: Health Programs: Compliance With Financing Laws and Regulations (1207); Health Programs: Reimbursement Policies and Utilization Controls (1208);Health Programs: Impact of National Health Insurance (1209). Contact: Human Resources Div. Budget Function: Health: Health Care Services (551). Organization Concerned: New York, NY; Maryland; California; District of Columbia; Illinois. Congressional Relevance: House Committee on Interstate aud Foreign Commerce; Senate Committee on Finance. Authority: Social Security Act. Reviews were coDducted during 1975 and 1976 of systems for managing spend-down payments for the medically needy in New York, Maryland, California, the District of Columbia, and as a followup, in Illineis. Spend-down payments, provided by some States under Medicaid for those with incomes above a State-prescribed level but with greater medical expenses, are not eligible for Federal financial participation. Findings/Conclu£ions: New York and Illinois have been paying for and improperly claiming Federal assistance for spend-down amounts although procedures existed for collecting these amounts from the medically needy. Improper Federal financial assistance to New York State for expenses at municipal hospitals was estimated at S3 million for a 12-sonth period. Illinois concurred with a 1975 HBE Audit Agency report on its Medicaid program, but did not neet the report's recommendations and did not plan corrective action until a new Medicaid management Information System would be operational. Limited reviews at the other locations did not disclose billnags for ineligible costs. Recommendations: The Administrator of the Social and Rehabilitation Service should: assure that the Federal Government does not reimburse New York and Illinois for ineligible amountsr evaluate billing procedures of other States, and adjust incorrect claims. (HTW) CD UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 2058 IN IfIdLY - TO HUMAN REaOURCES DIVISIN B-164031(3) FEB 3 877 The Honorable The Secretary of Health, Education, and Welfare Dear Mr. Secretary: During 1975 and 1976, we reviewed the systems for managing spend- down payments for the medically needy in New York, Maryland, California, and the District of Columbia. We also followed up on a December 1975 HEW Audit Agency report on this subject involving Illinois. ~enerally, persons receiving public assistance under title IV,Aid to ir ilies with Dependent Children (AFDC), or title XVI, Supplemental Security Income (Aged, Blind, alnd Cisabled),of the Social Security Act are eligible for assistance under Medicaid. Tnese persons are gener- ally referred te is "categorically" needy. Persons whose incomes or other financial resources exceed standards, set by the States, to qualify for public assistance programs but are not sufficient to meet the costs of necessary medical care may also be entitled to Medicaid benefits if the State wishes. These people, eligible for Medicaid, but not cash assistance, are generally referred to as "medically" needy persons. The medically needy may have all or part of their medical expenses paid for under Medicaid. Those medically needy whose income and re- sources are above a State prescribed level must first incur a certain amount of medical expense--the "spend-down" amount--before they can receive assistance under Medicaid. Federal regulations provide that the payment of this spend-down amount is a matter between the medically needy and the provider of medical assistance. These amounts are not eligible for Federal financial participation. New York and Illinois have been paying providers for, and claiming Federal financial assistance for, spend-down amounts which are the re- sponsibility of medically needy recipients. Procedures existed in both States for establishing accounts receivable and attempting to collect spend-down amounts from the medically needy; however, the collections-- which were credited to total Medicaid costs--represented only portions HRD-77-4: B-164031(3) of the Federal Government's share of amounts improperly claimed. In addition, both States have made direct refunds for portions cf the amounts incorrectly claimed; however, New York has made no refund for periods after September 1972, and Illinois continues to improperly claim Federal financial assistance for spend-down amounts which are the responsibility of medically needy recipients. New York On May 24, 1976, we reported to the Acting Regional Commissioner of the Social and Rehabilitation Service (SRS) regional office in New York on this subject. New York State has been improperly claiming Federa' ,inancial assistance for spend-down amounts relating to medical expenses incurred by the medically needy at municipal and voluntary hospitals in New York City. Such Federal financial assistance amounted to about $1 million for voluntary hospitals during fiscal year 1975. Based on actual spend- down amounts billed by municipal hospitals for the 6-month period, Octo- ber 1975 through March 1976, we estimate that improper Federal financial assistance to municipal hospitals for a 12-month period was about $3 million. The passing on of costs incurred by these medically needy for Federal financial participation was previously identified in --an August 20, 1969, audit report by the HEW Audit Agency, --a November 26, 1973, audit report by the New York State Office of the State Comptroller, and --a June 4, 1974, joint audit report by the New York State Depart- ments of Social Services and Health and HEW's Social and Rehabili- tation Service. The State Comptroller's report estimated that, since the inception oa the Medicaid program in 1966 through September 1972, the Federal Govern- ment had paid about $3.7 million for these ineligible costs. New York State subsequently adjusted its December 1973 quarterly expenditures claim by $3,701,500. This report also recommended that "* * * future Medicaid claims for the cost of inpatient hospital care provided to patients with excess in- come should be submitted only after deducting that portion of the cost required to be paid by the recipient." -2- B-164031(3) In its reply to a similar recommendation in the joint audit report, the city said that its method of billing the State for the cost " *of un- collected spend-down amounts is appropriate, and that the city * * shall continue to treat these cases in this manner until such time as we are notified, officially, of this major change in State policy." On August 5, 1976, New York State responded to SRS Reqion II on the findings in our May 1976 report. The State noted it believed its prior billings were appropriate under existing regulations, and did not agree to any financial adjustments for prior payments of spend- down amounts. SRS regional office personnel informed us in January 1977 that they were still evaluating the State's response. New York City, however, effective with admissions beginning July 1, 1976, be- gan deducting spend-down amounts from hospital billings for medically needy patients. The Suffolk County Health District has also been receiving Federal financial assistance for spend-down amounts. About $66,000 was involved in Suffolk in fiscal year 1975 of which the Federal share was $33,000. Following our audit work, Suffolk's Medical Assistance Administrator told us on January 7, 1977, that the County had changed this reimburse- ment practice to pay hospitals net of the spend-down amounts. Suffolk County and New York City Departments of Social Services had collected some spend-down amounts from patients. Suffolk County collected about $31,000 on fiscal year 1975 accounts. This represented about 47 percent of the total spend-down liability for that year. Collections of these spend-down amounts from medically needy persons treated by voluntary hospitals during a 1 year period and by municipal hospitals during approximately a 5-year period amounted to about $514,000 or an overall 5 percent collection rate. Medicaid is credited for the spend-down amounts collected by both New York City and Suffolk County. Illinois The HEW Audit Agency issued a report dated December 23, 1975, on the Illinois Medicaid program. The Audit Agency reported that the ma- jority of the spend-down amount for medically needy recipients was not being applied toward their medical costs. Instead, the State wias pay- ing these costs and claiming them for Federal financial participation with only a reduction for amounts actually collected from the recipients. The HEW Audit Agency estimated that Illinois had claimed at least $626,000 in ineligible costs (Fede.al share $313,000) which should have been paid by i, 'ically needy recipients. - 3- B-164031(3) Illinois concurred and adjusted its Quarterly Statement of Expendi- tures (Form SRS-OA-41) for the quarter ended September 30, 1975, in the amount of $313,000. The HEW Audit Agency recommended that Illinois (1)claim Federal financial participation fcr only those costs of Medicaid services which are in excess of the amount required to be paid by the medically needy recipients, and (2)compute the amount of Federal financial participa- tion improperly requested and appropriately adjust its claim for Federal reimbursement. The State's Apiril 8, 1976, response to the report did not address these recommendations. On May 20, 1976, we discussed :ile HEW Audit Agency report recom- mendations with Illinois officials. The officials told us that the State did not plan to take corrective action until its new Medicaid Management Information system was operational which was not scheduled until early 1978. Other locations Our limited reviews in Maryland, California, and the District of Columbia did not disclose any billings for ineligible costs which should have been paid by medically needy recipients. CONCLUSIONS AND RECOMMENDATIONS HEW has identified that New York and Illinois are billing the Federal Government for amounts that should be paid by medically needy recipients. As of June 1, 1976, 32 States and jurisdictions were providing assistance to the medically needy and 5 additional States have spend-down programs solely for the aged, blind, and disabled. Because of the substantial dollar value of the ineligible claims in New York and Illinois, we believe HEW should determine whether other States are billing the Federal Govcrn- ment for amounts that should be paid by medically needy recipients. Accordingly, we recommend that you direct the Administrator of the Social and Rehabilitation Service to (1)assure that the Federal Govern- ment does not reimburse New York and Illinois for amounts that are not eligible for Federal financial participation; (2)evaluate the procedures of the other States and jurisdictions for billing for services proviaed to the medically needy, and where necessary, take actions to assure that the Federal Government does not reimburse States for amounts that are not eligible for Federal financial participation; and (3)cormpute the amount of Federal financial participation claimed which should have been paid - 4- B-164031(3) by medically needy recipients in Illinois, New York and other States and adjust the States' claims for Federal financial participation. As you know, section 236 of the Legislative Reorganization Act of 1970 requires the head of a Federal agency to submit a written state- ment on actions taken on our recommendations to the House and Senate Comnittees on Government Operations not later than 60 days after'the date of the report and to the House and Senate Committees on Appropria- tions with the agency's first request for appropriations made more than 60 days after the date of the report. We are sending copies of tills letter to the appropriate Senate ant House Committees and Subcomnittees and to the Director, Office of Manage- ment and Budget. We will be pleased to discuss this report with you or your representative. Sincerely yours, Gego J. hart Directr 5
Survey of HEW and States' Management of Spend-Down Payments for Medically Needy Persons
Published by the Government Accountability Office on 1977-02-03.
Below is a raw (and likely hideous) rendition of the original report. (PDF)