Audit faults more than $84 million in MassHealth payments tied to out-of-state residents

BOSTON — MassHealth errantly paid more than $84 million related to care for residents who were living in other states, Auditor Diana DiZoglio’s office concluded in a new report that the executive branch criticized as “overly broad” and “misleading.”

State law requires members of MassHealth, which combines Medicaid and the Children’s Health Insurance Program under a single umbrella, to live in Massachusetts to remain eligible.

The auditor’s office reviewed “capitation payments,” which MassHealth makes to managed care organizations to coordinate health care for its members, between Jan. 1, 2018 and Sept. 30, 2021 and said it found millions of dollars were spent on services for out-of-state residents.

Altogether, DiZoglio’s office estimated MassHealth made about $84.8 million in capitation payments during the audit period on behalf of members who lived elsewhere, out of a total of $2.4 billion in capitation payments in that span.

“Our audits serve as a tool for state agencies to help ensure greater transparency, accountability, and equity,” DiZoglio said in a statement alongside the 22-page report. “It is unacceptable that due to a lack of appropriate oversight by MassHealth, nearly $85 million in overpayments went to MCOs for out-of-state residents who were concurrently enrolled in another state’s healthcare program. Taxpayers deserve better, and I strongly urge MassHealth to adopt this audit’s recommendations.”

DiZoglio’s office called on MassHealth to revise its “data match” procedures to better detect when members who are receiving benefits in fact live in other states. The program should pause coverage or move members to a “fee-for-service model” if they have not submitted documentation proving they live here, the auditor’s office said.

In a multi-page response published in the final report, the Executive Office of Health and Human Services disagreed with many of the audit’s findings and methodology.

The audit used a sample of 100 MassHealth members, 63 of whom were residing in nine other states or Puerto Rico and had enrolled in that territory’s Medicaid program while remaining on the MassHealth rolls. Auditors then built out the $84.8 million overall estimate based on out-of-state residents they found in the sample group, which EOHHS said produced “a misleading conclusion about the fiscal impact of any error.”

“While the draft report acknowledges the existence of varying capitation payment amounts, the report indicates that the audit focused on a 100-member sample that is not drawn from all MassHealth MCO members but rather the highest dollar amounts of capitation payments,” MassHealth wrote in its response. “By focusing only on the highest dollar amounts (as opposed to apportioning the sample in a manner that reflects the distribution of MassHealth members in each MCO rating category) the outcome of the 100-member sample does not appear representative of the overall MCO population and will greatly inflate the dollar amount of the extrapolated finding.”

MassHealth also argued that much of the sample time period overlapped with the COVID-19 pandemic, when “member residency fluctuated more than normal” and federal law temporarily limited state Medicaid programs from reassessing which members were still eligible.

The Healey administration is a few months into a massive, year-long effort to redetermine eligibility for the first time since the public health emergency began, a process that policymakers expect will reduce the rolls by up to 400,000 people and free up $1.9 billion in spending that can be directed toward other state budget uses in fiscal year 2024.

Over the first two months of the process, about 35,000 Bay Staters left MassHealth, but the program’s overall enrollment still increased slightly in that span due to typical monthly growth.

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