Objective

To determine whether Medicaid cost savings can be achieved by modifying the reimbursement methodology for Medicare Part C cost-sharing claims in accordance with federal requirements. The audit covered the period from July 1, 2016 through December 31, 2020.

About the Program

The Department of Health administers the New York State Medicaid program. Many of the State’s Medicaid recipients are enrolled in both Medicaid and Medicare. Medicare is the primary payer for medical services provided to these dual-eligible recipients. Medicaid typically pays for cost-sharing liabilities, which include Medicare deductibles, coinsurance, and copayments.

Under Medicare Part C, private companies administer Medicare benefits by offering different health care plans (known as Medicare Advantage Plans) and processing and paying claims for services. The Centers for Medicare & Medicaid Services (CMS) allows state Medicaid programs several options for paying the Medicare Part C cost-sharing. States can pay: the full Medicare cost-sharing liability, their standard Medicaid fee for a service, or a rate between those amounts established by the state and approved by CMS.

In 2016, the New York State Legislature approved a plan for Medicaid to pay 85 percent of dual-eligibles’ copayment or coinsurance on Medicare Part C outpatient claims, except for ambulance and psychology services, for which Medicaid pays 100 percent of the cost-sharing liability (inpatient services also still paid 100 percent). The plan was approved by CMS and enacted as New York State Social Services Law § 367-a, effective July 1, 2016.

The number of Medicaid recipients joining Medicare Advantage Plans has grown from 546,589 in July 2016 to 720,034 in December 2020. Medicaid payments for Medicare Part C claims during this period totaled about $972 million for the claim types reviewed by this audit: outpatient claims for clinic, practitioner, transportation, referred ambulatory, durable medical equipment, laboratory, eye care, and dental services; and inpatient claims.

Key Findings

• New York’s current Medicaid payment rules for Medicare Part C cost-sharing liabilities compared to the allowable alternatives have significantly different costs to the Medicaid program.
• If New York Medicaid had limited its cost-sharing so that the total payment (Medicare’s payment plus what Medicaid was billed for the copayment or coinsurance) was no more than the typical Medicaid fee, it could have saved over $419 million from July 1, 2016 to December 31, 2020. Other states already use this approach, and it is similar to how New York Medicaid currently pays Medicare Part B cost-sharing.
• We project that, using this reimbursement methodology, the State could save over $122 million annually based on the average savings for the last two years.

Key Recommendation

• Formally re-evaluate the existing Medicaid methodology for processing and paying Medicare Part C cost-sharing liabilities (including the necessity of exemptions to payment limitations for ambulance, psychology, and inpatient services), and engage other stakeholders, as appropriate.