Policy References:

GASB Interpretation No. 6 – Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements (GASB Codification Section 1500 – Reporting Liabilities)

Process and Document Preparation:

MEDICAID OVERVIEW

The Medicaid program commenced in 1965 following enactment of Federal regulations which required each state to establish systems for administering and providing Medicaid benefits. The overall objective of the program is to subsidize health care costs for economically deprived individuals. Substantially all Medicaid program costs are shared by the Federal Government, State Government and Local Governments. In addition to funded medical programs, New York State receives funding for administration and training costs incurred under the program.

The Department of Health (DOH) and the Office of Mental Hygiene (OMH) administer Medicaid in New York State. OMH incurs State costs for both medical assistance and administration, and training for State facilities providing services to individuals. DOH incurs similar costs, sets Medicaid rates for providers and processes:

1. All significant Medicaid expenditures for medical assistance and administration and training for all State agencies incurring Medicaid expenditures, and
2. The pass-through program of Medicaid funds due to local governments (counties). In the fall of 1977, the State implemented the Medicaid Management Information System (MMIS), a method of centralizing claims processing for counties. Previously, claims were paid at the decentralized county level, requiring a monthly reconciliation of advances received and payments made.

Medicaid liabilities arise in three major areas:

1. Provider claims,
2. Rate setting and appeals, and
3. Federal disallowances.

Proper financial statement reporting under generally accepted accounting principles requires the recognition of material liabilities (and assets) that exist at the end of the reporting period, but are paid or received after period end. A Medicaid liability will be reported in the financial statements in the form of an accrual as well as by disclosure in footnotes.

The specific areas to be considered are outlined in the following table:

RATE APPEALS

Rate appeals in process, which are administered by DOH, are at various stages ranging from appeal receipt to the reviewed appeal package being submitted to budget for approval. The accrual in this area will be composed of both the specific identification of closed appeals and an estimate of in-process appeals based on historical data.

For in-process appeals, the State will manually determine historical trends relating to the approval/denial rate of appeals. With this information, an estimate of the retroactive Medicaid impact of those appeals that have not yet reached the "at budget" stage can be made by applying an average dollar per approved appeal, factored down by the State and local share of the liability.

The rate appeal accrual determination process will include these elements:

1. Value of appeals (State and Federal shares) approved by DOH for hospitals and nursing homes.
2. Medicaid rate appeal statistics providing the number and dollar value of closed appeals and hearing appeal statistics for both hospitals and nursing homes.
3. The number of outstanding appeals for both nursing homes and hospitals.
4. Total Medicaid impact for a period to be determined immediately preceding the fiscal year report date.

Guide to Financial Operations

REV. 02/10/2021