Department of Health - Unnecessary Medicaid Payments for Children at Voluntary Agencies [Issued 9/19/12] [NY]

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Department of Health
Unnecessary Medicaid Payments for Children at Voluntary Agencies

Issued: September 19, 2012
Link to full audit report 2010-S-47

To determine if the Department of Health (Department) had adequate policies and procedures in place to ensure proper Medicaid payments for foster care children placed in voluntary agencies. The audit covered the period July 2005 through July 2011.

New York State's Medicaid program provides health insurance to people who are economically disadvantaged and/or have special health needs. Many foster care children placed in private welfare agencies (known as voluntary agencies) are Medicaid eligible. For these children, the State establishes a "Daily Child Care Rate" (Daily Rate) which is the basis for Medicaid funding the Department provides to the voluntary agencies to pay for medical services provided to the Medicaid eligible children in their custody. For services not covered by the Daily Rate, providers bill Medicaid directly and are reimbursed on a fee-for-service basis. For the five years ended June 30, 2010, Medicaid paid about $990 million on behalf of about 70,000 children placed in voluntary agencies - $640 million of which was paid under the Daily Rate, and the remaining $350 million was paid directly to providers on a fee-for-service basis.

Key Findings

  • In many instances, payments to medical providers under the Daily Rate method far exceeded the reimbursements that the providers would be entitled to under the fee-for-service method. For example, a voluntary agency paid a laboratory $77 for a routine cholesterol screening, while the same laboratory received only $6 from Medicaid for the same test.
  • Medicaid could save millions of dollars annually if the Daily Rate method limited voluntary agency provider reimbursements to the amounts that providers would be entitled to on a feefor- service basis.
  • On a fee-for-service basis, Medicaid paid about 1.1 million claims (totaling $83.2 million) directly to health care providers for medical services that otherwise were covered by Medicaid's Daily Rate payments to the voluntary agencies.

Key Recommendations

  • Formally assess the cost-effectiveness of the Daily Rate reimbursement method. Determine if this method should be modified or if a different reimbursement mechanism should be applied for health services for children at voluntary agencies.
  • Ensure that eMedNY contains the necessary edits and file interfaces to prevent claims from being paid directly to providers when such claims are covered under the Daily Rate for voluntary agencies.

Other Related Audits/Reports of Interest

New York State Medicaid Program: Under Reporting of Net Available Monthly Income for Nursing Home Residents Causes Medicaid Overpayments Report 2010-S-17

State Government Accountability Contact Information:
Audit Director: Brian Mason
Phone:(518) 474-3271; Email:
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236