Department of Health


Skip to Content

Login   Subscribe   Site Index   Contact Us   Google Translate™

NYS Comptroller


Taxpayers' Guide to State and Local Audits

Department of Health
Medicaid Program: Improper Fee-for-Service Payments for Pharmacy Services Covered by Managed Care

Issued: January 05, 2015
Link to full audit report 2014-S-5
Link to 90-day response

To determine whether Medicaid made improper fee-for-service claim payments for pharmacy services covered by recipients’ managed care plans. The audit covered the period October 1, 2011 through December 31, 2013.

Medicaid provides a wide range of medical services to those who are economically disadvantaged and/or have special health care needs. In general, the Medicaid program pays medical providers through either the fee-for-service method or the managed care plan method. Under the feefor- service method, Medicaid pays providers directly for Medicaid-eligible services rendered to Medicaid recipients. Under the managed care plan method, Medicaid pays managed care organizations (MCOs) a monthly premium for every Medicaid recipient enrolled in the MCO, and the MCO arranges for the provision of services its members require. MCOs typically have networks of participating providers that they reimburse directly for services provided to their enrollees.

Prior to October 2011, pharmacy benefits were reimbursed through the fee-for-service method because they were excluded from managed care coverage. However, beginning October 1, 2011, most pharmacy benefits were covered by managed care plans, and fee-for-service reimbursement was no longer appropriate for recipients enrolled in managed care. As of December 2013, approximately 4 million Medicaid recipients were enrolled in managed care plans. During the 27-month period, October 1, 2011 through December 31, 2013, Medicaid paid approximately $46.5 billion in premiums to 92 MCO plans.

Key Findings

  • Medicaid inappropriately paid 29,289 fee-for-service pharmacy claims totaling $978,251 on behalf of 18,010 recipients whose pharmacy benefits were already covered by managed care plans.
  • For example, from August 2012 through April 2013, Medicaid paid 51 fee-for-service pharmacy claims totaling $1,736 on behalf of a recipient who was enrolled in a managed care plan during the entire period.
  • Overpayments occurred because the Department of Health did not update its Medicaid eligibility files with MCO enrollment information in a timely manner, in some cases taking more than six months to enter new enrollee eligibility data.

Key Recommendations

  • Review the $978,251 in improper fee-for-service claim payments we identified and recover funds as appropriate.
  • Take corrective action to ensure enrollment information is entered and updated in a timely manner.

Other Related Audit/Report of Interest

Department of Health: Medicaid Fee for Service Payments for Managed Care Recipients (2007-S-100)

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