Objective

To assess the extent of implementation of the recommendation included in our initial audit report, Cost Saving Opportunities on Payments of Medicare Part C Claims (Report 2020-S-65).

About the Program

Many of the State’s Medicaid recipients are also enrolled in Medicare and are referred to as “dual-eligibles.” Medicare Part A provides hospital insurance and Part B provides medical insurance for doctors’ services and outpatient care. Under Medicare Part C, companies administer Medicare benefits through different health care plans, known as Medicare Advantage plans, that provide the services covered under Medicare Parts A and B. When a dual-eligible recipient receives services, Medicaid will typically pay for any cost-sharing liabilities including Medicare deductibles, coinsurance, and copayments. The Centers for Medicare & Medicaid Services (CMS) allows state Medicaid programs to determine the payment methodology used for Part C cost-sharing liabilities. State Medicaid programs can opt to pay: the full Medicare cost-sharing liability, the state’s standard Medicaid fee, or a rate between those two amounts approved by CMS. In New York, Medicaid pays 85% of dual-eligibles’ copayment or coinsurance on Medicare Part C outpatient claims, except for ambulance and psychology services.

We issued our initial report on September 21, 2021. Our objective was to determine whether Medicaid cost savings could be achieved by modifying the reimbursement methodology for Medicare Part C cost-sharing claims in accordance with federal requirements. The audit covered the period July 1, 2016 to December 31, 2020. The initial audit found that New York’s current Medicaid payment rules for Medicare Part C cost-sharing liabilities compared to the allowable alternatives have significantly higher costs. Additionally, there is a clear inconsistency in Medicaid payment rules for Medicare Part B and Part C outpatient services that allows Medicaid’s payment of Part C cost-sharing to be greater than Part B cost-sharing for the same services. If New York’s Medicaid program had limited cost-sharing so that the total payment to a provider (Medicare’s payment plus Medicaid’s payment of what was billed for the copayment or coinsurance) was no more than the typical Medicaid fee, it could have saved over $419 million during the audit period. The audit found that, with changes to the Part C cost-sharing payment methodology, the Medicaid program could save over $122 million annually.

Key Finding

The initial report’s audit recommendation was not implemented because Department of Health officials declined to take any actions to address the significant potential cost savings identified.

Key Recommendation

Officials are given 30 days after the issuance of the follow-up report to provide information on any actions that are planned to address the unresolved issues discussed in the follow-up report.