Objective

To determine whether Medicaid overpayments for pharmacy services on behalf of managed care recipients who had third-party health insurance were appropriately recovered. The audit covered the period from October 2015 through May 2020.

About the Program

The Department of Health (Department) administers New York’s Medicaid program. Many of the State’s Medicaid recipients receive their services through managed care, where the Department pays managed care organizations (MCOs) a monthly premium for each enrolled recipient, and in turn, the MCOs are required to pay for the Medicaid services their recipients require, which includes pharmacy services. Many recipients have other third-party health insurance (TPHI) in addition to Medicaid (e.g., employer-based coverage or Medicare Part D). Medicaid is considered the payer of last resort, and as such, MCOs are required to coordinate benefits with the recipient’s TPHI prior to paying for Medicaid services. The Office of the Medicaid Inspector General (OMIG) contracts with Health Management Systems, Inc. (HMS) to identify and recover payments made for services that should have been paid for by a recipient’s TPHI. During the audit period, HMS’ third-party liability recoveries on MCO pharmacy payments totaled about $118 million.

Key Findings

We found that the Department and OMIG lacked adequate oversight of the third-party liability recovery process to ensure that all available recoveries are made. During our audit scope:

• HMS did not bill TPHI carriers for the recovery of about $292 million in pharmacy claims that MCOs paid as the primary insurance for recipients who had TPHI drug coverage. We found improvements could be made in HMS’ processes for recovering claims.
• Third-party insurers often denied claims HMS submitted for recovery for reasons that could be rectified, but follow-up actions by HMS to get payment on those claims were limited, and many payments, potentially tens of millions of dollars, were never recouped.
• Neither the Department nor OMIG performed reviews, reconciliations, or other monitoring of HMS’ recoveries by comparing claims MCOs paid on behalf of recipients with TPHI drug coverage to claims reviewed and recovered by HMS. Furthermore, OMIG and HMS were unable to determine why payments for specific pharmacy services we provided for review were not recovered.

Key Recommendations

• Review the $292 million in MCO payments for pharmacy services we identified and ensure appropriate recoveries are made.
• Implement ongoing monitoring of the TPHI recovery process for pharmacy services on behalf of managed care members to ensure all appropriate recoveries are made.