Federal Government Overpays New York Medicaid System by $700 Million

The Medicaid program is a joint federal and state effort–the public bodies split the cost. The state cost itself is further subdivided into payments made by county governments and those coming straight from Albany. This interconnected relationship is helpful in that it doesn’t place the burden too heavily on any single public entity. Yet, it also means that the New York Medicaid system is at risk for cuts and changes whenever either the county, state, or federal government faces budget problems.

That means that local residents are constantly bombarded with stories about how one government or another is seeking to alter the way the system works to trim costs. The program is an essential lifeline for many local residents. Each New York Medicaid attorney at our firm appreciates the stress that comes with wondering whether a loved one will be able to stay in a long-term care facility or be admitted to a new facility when faced with health problems.

The latest scare came this week as federal officials admitted that they overpaid New York State by a shocking $700 million in 2009 for Medicaid services. The causes for the overpayment are still being rooted out. Essentially, officials believe that the main problem was a faulty reimbursement formula for nine centers for the developmentally disabled. The Poughkeepsie Journal explains that the rate paid per resident at those facilities was four times higher than the actual cost of care and ten times higher than reimbursement rates paid at similar facilities.

The errors went unnoticed in large part because the New York Medicaid reimbursement system is notoriously complex. For example, in an effort to encourage a shift from institution-like care to community-home settings, the institutions are actually allowed to charge for a portion of the care of those who already moved out of the large facility. This creates a confusing web of charges and payments that apparently resulted in hundreds of millions of dollars being paid without notice.

State officials are unclear how the extra payments were actually spent by the state in recent years. The funds were likely dispersed to buffer budgets for a range of state programs.

Concerns were initially raised that discovery of the overpayment would lead to a penalty–challenging efforts secure the financial future of the New York Medicaid system. Fortunately, according to the New York Times, a federal audit report released this week does not recommend any state penalty. The errors were made both by state and federal officials, and so instead of trying to collect a portion of the overpayment–and hurting New Yorkers already in the program–both public entities will apparently work together to correct the reimbursement calculations for the future.

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