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The state Department of Health (DOH) overpaid nursing homes by an estimated $42 million in Medicaid funding over a 44-month period because many care providers are not collecting money from their clients’ income sources as required, and local governments are failing to enforce that provision, according to an audit released today by New York State Comptroller Thomas P. DiNapoli.

“Medicaid is a costly program, but DOH continues to throw money out the window,” DiNapoli said. “We first reported on this problem ten years ago. It is crucial for DOH to fix the areas of concern identified in our report now. We risk losing millions of dollars in future Medicaid overpayments if these longstanding problems go unchecked.”

The state’s Medicaid program has grown from 4.6 million recipients in 2007 to 5.2 million in 2010. For the fiscal year ended March 31, 2011, Medicaid costs totaled $53 billion – $10 billion more than three years earlier.

Medicaid pays $6.8 billion for the nursing home care of about 121,000 people each year. The federal government pays for 50 percent of the nursing home costs; the state funds about 40 percent; and localities fund the remaining 10 percent.  Many Medicaid nursing home residents have income from various sources, including Social Security and pensions, known as Net Available Monthly Income (NAMI). This income is used to offset the cost of care.

Localities are responsible to determine the NAMI of Medicaid recipients on an ongoing basis and must provide the information to the DOH’s eMedNY computer system, which processes nursing home provider claims for Medicaid reimbursement. The eMedNY system is supposed to deduct NAMI from the amount that Medicaid pays to the nursing home provider.

However, the contributions of the localities are capped. Once the cap has been reached, the state assumes the cost of a recipient’s nursing home care not covered by the federal government. This gives localities little incentive to closely monitor some Medicaid-funded nursing home costs.

DiNapoli’s auditors found that Medicaid overpaid providers by as much as $34.5 million during the audit period ended August 31, 2010. When a provider’s claim shows no billing for the first day of the month for a nursing home resident, eMedNY fails to deduct any NAMI from the provider’s claim.

This processing anomaly presents a high risk for exploitation because there is a financial incentive for providers to forego one day of billing to avoid a NAMI offset to their Medicaid payment. The average monthly NAMI is about $1,000 per recipient, but the average value of a single day of Medicaid billing alone is about $200.

DiNapoli’s auditors also found eMedNY overpaid about $7.5 million because localities did not determine or update recipients’ NAMI in a timely manner. In one case reviewed by auditors, a nursing home resident’s NAMI increased by $2,165 in December 2007. However, the locality did not update eMedNY with this information until 10 months had passed, costing the system $21,650. Because regulations do not permit recovery beyond six months, there is no opportunity to recover $8,600 of this amount. This issue was previously identified in an audit by the Comptroller’s Office in February 2001.

It is likely that Medicaid has overpaid millions of dollars more than the audit shows because a legacy computer system that predated the 2005 introduction of eMedNY also reportedly did not properly process required NAMI offsets.

DiNapoli’s auditors recommended DOH:

• Develop controls to properly apply residents’ NAMIs towards the cost of their nursing home care;
• Enhance Department oversight of localities through such techniques as data analysis to identify and assist those that may not be posting NAMI timely to eMedNY;
• Advise localities to review resident’s NAMI at time intervals sufficient enough to avoid overpayments that cannot be recovered; and
• Recover any overpayments.

DOH officials generally agreed with the audit’s recommendations and indicated they are taking steps to address them.

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