COMMITMENT • INTEGRITY • LEADERSHIP	View full PDF report View Selected Abbreviations
Department of Health Care Services It Paid Billions in Questionable Medi-Cal Premiums and Claims Because It Failed to Follow Up on Eligibility Discrepancies Report Number: 2018-603

Audit Results

Health Care Services Made Questionable Payments Amounting to Billions of Dollars and May Have Prevented Some Individuals From Accessing Services

Health Care Services paid at least $4 billion in questionable Medi‑Cal payments from 2014 through 2017 because it failed to ensure that it was providing benefits only to eligible beneficiaries. We performed a statewide comparison of Medi‑Cal beneficiary eligibility data and found pervasive discrepancies between the state and county systems. Many of these discrepancies resulted from Health Care Services failing to ensure that counties had evaluated the Medi‑Cal eligibility of beneficiaries transitioning from other programs. Some counties may have failed to complete those evaluations promptly because the implementation of the Affordable Care Act created a backlog of Medi‑Cal applications and eligibility redeterminations. In addition to questionable payments, we identified more than 54,000 individuals who were not recorded as eligible for Medi‑Cal in Health Care Services’ system, even though the counties’ records indicated that they were eligible. Because health care providers use Health Care Services’ records to authorize care for beneficiaries, eligible individuals may encounter hardship when their eligibility status is not accurately reflected in Health Care Services’ records. Further, there may be additional data discrepancies related to beneficiaries who qualify for Medi‑Cal benefits through other entitlement programs.

Health Care Services Recorded More Than 453,000 Beneficiaries as Eligible for Medi‑Cal Although the Counties Had Not Confirmed Their Eligibility

Health Care Services paid at least $4 billion in Medi‑Cal payments for beneficiaries who may have been ineligible for Medi‑Cal. Specifically, in reviewing the Medi‑Cal beneficiaries in December 2017 and tracing their eligibility status over the previous four years, we found more than 453,000 beneficiaries in Health Care Services’ MEDS who were not listed as eligible in SAWS. This problem spanned all three of the county eligibility systems that are part of SAWS and existed in each of the 58 counties, as detailed in Appendix A.

Table 2 shows that the $4 billion in questionable payments associated with these beneficiaries consisted of premiums paid to managed care plans and fee‑for‑service claims paid to medical providers. Health Care Services paid managed care plans roughly $3 billion in questionable premiums, of which about $700 million came from state funds. Health Care Services also paid medical providers about $1 billion in questionable fee‑for‑service claims, a portion of which also came from state funds.² As described in the Introduction, the federal share of Medi‑Cal costs is scheduled to decrease over the next few years for some beneficiaries. Consequently, the State’s share of Medi‑Cal costs for these types of errors will likely increase in the future.

Table 2
Health Care Services Paid More Than $4 Billion in Questionable Premiums and Paid Claims
January 2014 Through December 2017

SAWS INFORMATION		BENEFICIARY INFORMATION (AS OF DECEMBER 2017)			QUESTIONABLE PAYMENTS (FROM JANUARY 2014 THROUGH DECEMBER 2017
COUNTY ELIGIBILITY SYSTEM	NUMBER OF COUNTIES USING THE SYSTEM	ELIGIBLE BENEFICIARIES IN MEDS THAT WE REVIEWED*	BENEFICIARIES WITH QUESTIONABLE ELIGIBILITY	PERCENT	MANAGED CARE PREMIUMS	FEE-FOR-SERVICE CLAIMS	TOTAL
LEADER Replacement System	1	3,134,520	229,248	7%	$1,532,680,994	$585,660,939	$2,118,341,933
CalWORKs Information Network	18	4,475,248	172,968	4%	$1,226,421,776	$294,095,476	$1,520,517,252
Consortium IV system	39	3,109,997	51,175	2%	$304,256,184	$102,610,399	$406,866,583
Totals	58	10,719,765	453,391	4%	$3,063,358,954	$982,366,814	$4,045,725,768

Because the premiums that Health Care Services pays for managed care continue whether the beneficiary uses the services or not, it is critical that Health Care Services works with counties to promptly resolve discrepancies between SAWS and MEDS. Although Health Care Services has a process for notifying counties of discrepancies between the two systems, in our review period it did not ensure that counties resolved these discrepancies. For example, Figure 5 illustrates a case in which an individual from a beneficiary’s household notified Los Angeles County in April 2014 that the beneficiary had died. Although the county discontinued the beneficiary’s case in its system in June 2014, the case remained active in MEDS. Further, the county did not address—and Health Care Services did not ensure that it resolved—numerous notifications from Health Care Services indicating the need to review this case. Exacerbating this error further, Health Care Services transitioned the deceased beneficiary from fee for service to managed care for long‑term care in November 2014 as part of an effort to increase the use of managed care plans. Health Care Services continued to pay a monthly premium for the deceased beneficiary for nearly four years, until shortly after we notified Health Care Services and Los Angeles County of this error. In total, Health Care Services paid the managed care plan more than $383,000 for a beneficiary whom it should have known was no longer in need of services. Health Care Services’ standard contract with managed care plans contains language that would permit the recovery of premiums that the State paid for beneficiaries who are determined to be ineligible for specified reasons. Accordingly, Health Care Services has started the process to recover the funds it paid to the managed care plan after this person had died.

Figure 5
Health Care Services Paid More Than $383,000 in Erroneous Premiums for a Deceased Beneficiary
From November 2014 Through August 2018

Source: Analysis of Health Care Services’ and Los Angeles County’s eligibility data, Health Care Services’ payment data, and interviews with Health Care Services’ and Los Angeles County’s staff.

Many of the discrepancies we identified between the counties’ records and those of Health Care Services persisted for years. In fact, about 257,000, or 57 percent, of the more than 453,000 beneficiaries we identified had discrepancies that continued for more than two years, as Figure 6 shows. Because county Medi‑Cal offices (county offices) are generally responsible for eligibility determinations, SAWS likely contains the most up‑to‑date eligibility information. Nevertheless, payments to managed care plans and fee‑for‑service providers are based on information contained in MEDS. As described in the Introduction, in recent years Health Care Services has been expanding the use of managed care, for which it pays a premium whether beneficiaries receive services or not. Consequently, it is critical for Health Care Services to ensure that MEDS has the most up‑to‑date information on eligibility.

Figure 6
Approximately 257,000 Beneficiaries Had Records With Discrepancies Lasting More Than Two Years
January 2014 Through December 2017

Source: Analysis of the counties’ and Health Care Services’ eligibility data.

Although the average fee‑for‑service payments associated with the identified discrepancies cost less than the average amount paid for managed care premiums, discrepancies related to fee‑for‑service claims can represent significant costs. In one case, Health Care Services paid roughly $1 million in fee‑for‑service claims for a beneficiary in Los Angeles County between June 2016 and December 2017 even though the county system showed that she was no longer eligible for services. The beneficiary’s case notes from July 2016 indicate that the county was aware of a discrepancy between the county’s system and MEDS, which showed her as eligible. Los Angeles County subsequently reviewed the case and confirmed that she was not eligible for Medi‑Cal. Although Health Care Services had identified this discrepancy, it did not ensure that the county promptly addressed its notifications to review the case and continued to pay these fee‑for‑service claims. Without prompt resolution of identified discrepancies, Health Care Services cannot ensure that MEDS has the most up‑to‑date information on eligibility and consequently it may pay for costly services for which a beneficiary is ineligible.

Counties Did Not Always Determine Whether Beneficiaries With Temporary Medi‑Cal Eligibility Were Actually Eligible for Medi‑Cal

We identified 170,000 beneficiaries who, as of December 2017, had temporary Medi‑Cal eligibility statuses that were past the permissible period for resolution. Under certain circumstances, state law provides people with temporary Medi‑Cal eligibility while their county assesses whether they continue to be eligible for Medi‑Cal services. For example, when a person is discontinued from SSI/SSP programs for exceeding income and property requirements, Health Care Services may not discontinue his or her coverage until the county makes a determination that he or she is no longer eligible for Medi‑Cal benefits. Other circumstances in which state law directs Health Care Services to provide temporary Medi‑Cal coverage include when children are enrolled into Medi‑Cal by qualified hospitals, physicians, and certain community clinics or other entities. To provide this coverage, a person is assigned temporary Medi‑Cal benefits, and then automated notifications and reports are sent to the county indicating that they must assess the person’s eligibility. Once a county office completes the eligibility determination process, the county office either authorizes or discontinues the Medi‑Cal eligibility.

Health Care Services expects counties to complete a typical eligibility determination process within two months to a year, depending upon why the beneficiary is receiving temporary benefits. However, for the cases we reviewed, all of the counties in the State failed to complete this determination for at least some temporary Medi‑Cal beneficiaries—and Health Care Services did not ensure that the counties determined their eligibility. While some of the individuals we identified will ultimately qualify for Medi‑Cal, Health Care Services’ failure to ensure that the counties promptly determined whether these individuals were qualified for Medi‑Cal benefits creates an unnecessary risk that premium and claim payments will be made on behalf of people who do not qualify.

Although Health Care Services asserted that it is able to recover some improper payments, it may be unable to recover past payments for beneficiaries with temporary eligibility who are later determined to be ineligible because state and federal law generally guarantees this coverage for them. For example, state and federal law typically requires counties to first notify beneficiaries of any changes to their eligibility status before the counties can stop the beneficiaries’ Medi‑Cal benefits. However, if counties do not perform timely determinations of eligibility and then send these notices to temporary beneficiaries who do not qualify for Medi‑Cal, Health Care Services may be unable to recover payments for them.

Most of the 170,000 beneficiaries we identified had temporary eligibility for Medi‑Cal for more than one year beyond the allowable time frame. In fact, more than 20,000 of these beneficiaries were at least three years past that time frame. The most prevalent temporary eligibility statuses were related to cases in which an individual was terminated from SSI/SSP but received temporary Medi‑Cal benefits until the counties redetermined the individual’s eligibility. Health Care Services expects counties to determine the Medi‑Cal eligibility of a beneficiary transitioning out of SSI/SSP within three months. However, we found almost 50,000 beneficiaries who still had temporary Medi‑Cal eligibility status four months or more after transitioning out of SSI/SSP, and on average counties had not reassessed the eligibility of these nearly 50,000 beneficiaries for more than two years. Further, Figure 7 shows that Health Care Services made payments totaling $631 million for nearly 16,000 beneficiaries whose temporary eligibility status extended for more than three years past the allowable time frame. Because Health Care Services made these payments for beneficiaries who might not have qualified for Medi‑Cal, we consider these payments to be questionable. In total, Health Care Services made $1.2 billion in questionable payments for these beneficiaries.

Figure 7
Health Care Services Paid More Than $600 Million for Beneficiaries Who Were Transitioning From SSI/SSP for More Than Three Years
January 2014 Through December 2017

Source: Analysis of the counties’ and Health Care Services’ eligibility data and of Health Care Services’ payment data.

* Pursuant to the holding of Craig v. Bontá, beneficiaries losing SSI/SSP-based Medi-Cal for any reason other than death or incarceration must be reevaluated for eligibility before their benefits are discontinued. Health Care Services expects this process to take up to three months. Therefore, we consider beneficiaries as having eligibility discrepancies starting in the fourth month of temporary eligibility.

Beneficiaries who remain on a temporary eligibility status may accumulate significant costs to the State. Although Health Care Services paid an average of about $12,000 for each of the 170,000 temporary Medi‑Cal beneficiaries with discrepancies that we identified, in one example, Health Care Services paid more than $6 million in claims for a beneficiary transitioning from SSI/SSP whose county had not determined eligibility for two and a half years. According to Los Angeles County, it did not complete its evaluation of this beneficiary’s eligibility within the mandated time frame for beneficiaries transitioning from SSI/SSP because of worker oversight and issues with Health Care Services’ exception reports, which Health Care Services transmits to a county printer each month. Los Angeles County explained that this method of communication proves difficult because of recurring equipment malfunction and the cumbersome distribution of the paper referrals to the appropriate personnel. The county completed its determination in September 2018 and concluded that the beneficiary was eligible for Medi‑Cal services at that time. However, the county’s determination did not assess whether the beneficiary would have been eligible during the two and a half years when Health Care Services paid $6 million for those services.

Although Health Care Services has a process for notifying counties of these temporary Medi‑Cal beneficiaries, counties may not input the beneficiaries into their county systems. Specifically, Health Care Services provides counties with exception reports that counties can use to track beneficiaries with temporary Medi‑Cal eligibility and the number of months the beneficiary has received temporary eligibility. However, there are limitations to these reports and Health Care Services did not follow up to ensure that counties resolved these cases, as we discuss later. Further, if counties do not use these reports properly, they may not create records for these temporary Medi‑Cal beneficiaries in SAWS. Because payments to managed care plans and fee‑for‑service providers are based on information contained in MEDS rather than SAWS, Health Care Services may continue to make payments for these beneficiaries even though counties have not evaluated their eligibility.

Changes in Federal Law and System Issues Contributed to the Unresolved Discrepancies

The three counties we visited—Los Angeles, Sacramento, and Stanislaus—reported that some of the discrepancies resulted from the increase in their workload due to the implementation of the Affordable Care Act in 2014. All three counties stated that the number of Medi‑Cal applications increased well above their historical averages after the Affordable Care Act became effective. Although Health Care Services noted that the counties’ workloads started to stabilize by the end of 2016, it said that as of August 2018, counties were still working to resolve issues and exceptions created during the initial implementation of the act in 2014. According to Los Angeles County, because its eligibility processes are back to normal, it plans to start reviewing past cases.

Further contributing to the increased workload, the three counties noted that they experienced system difficulties related to the implementation of Covered California’s and Health Care Services’ California Healthcare Eligibility, Enrollment, and Retention System (CalHEERS) in 2014 and 2015. As part of its implementation of the Affordable Care Act, the State required counties to rely upon CalHEERS to determine the appropriate levels of Medi‑Cal eligibility for some applicants. The counties asserted that system issues with CalHEERS hindered their ability to maintain accurate eligibility records during the system’s implementation. Although the State developed an interim process in late 2014 to address some system issues, these issues prevented counties from performing basic tasks in CalHEERS, such as denying or discontinuing certain cases, because the system did not initially include this functionality. Health Care Services noted that in 2014 and 2015, CalHEERS required significant system modifications to accommodate policy changes and to interface with the counties’ systems. Although some of these system modifications introduced new functionality, others altered existing functionalities that required counties to create manual processes. When we discussed the topic of CalHEERS’ system issues with Health Care Services, it explained that CalHEERS has become more reliable and stable since 2014. Nevertheless, the discrepancies we found persisted until at least December 2017. As we discuss later, Health Care Services has started implementing a new process that it believes will reduce these kinds of discrepancies. However, if counties are unable to resolve discrepancies between the county systems and the State’s system, Health Care Services may continue to incur questionable costs.

Finally, we found that one of the county systems had a system error that prevented it from reporting when certain beneficiaries were not eligible for Medi‑Cal. Specifically, CalWORKs Information Network (CalWIN) sometimes continued to identify beneficiaries as eligible for Medi‑Cal even though the counties had discontinued or denied the beneficiaries’ eligibility. When we brought this to CalWIN’s attention, its representatives explained that issues with the way CalWIN interacts with CalHEERS created this system error. In total, Health Care Services paid more than $14 million in Medi‑Cal premiums and claims from January 2014 through December 2017 for beneficiaries affected by this system error in December 2017. CalWIN plans to resolve the issue as part of a system update in February 2019; however, until then, this issue may continue to affect all 18 counties that use that system.

Individuals May Have Been Inappropriately Denied Services

Because of unresolved discrepancies between Health Care Services and county records, some individuals may have been inappropriately denied Medi‑Cal benefits. For example, Los Angeles County recorded one individual as being eligible for benefits beginning in May 2016, but Health Care Services’ records did not show that individual as eligible. The county’s case notes indicated that its system and MEDS had a conflict with the individual’s identification numbers, an error that causes a barrier to receiving care. According to Health Care Services, MEDS shows that this individual was later recorded as eligible for Medi‑Cal in January 2018. However, this discrepancy lasted for more than a year and the individual could have encountered barriers to care during that time. In total, we identified more than 54,000 individuals in December 2017 who had been eligible for Medi‑Cal at least three months, according to the counties’ records, but Health Care Services’ records did not show them as eligible. Some of these discrepancies may be attributable to timing issues where counties retroactively corrected the individuals’ eligibility records.³ However, these individuals could have experienced a barrier to medical care during the period when their records showed them as ineligible.

Although eligible individuals can ultimately obtain the Medi‑Cal services to which they are entitled, these types of discrepancies in Health Care Services’ records conflict with the department’s mission. Specifically, Health Care Services states that its mission is to provide Californians with access to health care. With certain exceptions, state law gives the county of residence the responsibility for determining eligibility and providing ongoing case management; however, health care providers use Health Care Services’ records to authorize care. Therefore, providers may deny individuals medical services until the discrepancy is resolved or may bill individuals directly for those services even though the county has approved them for Medi‑Cal. Los Angeles County explained that for an individual to resolve this type of error, he or she would have to contact the county, which would then make arrangements for updating MEDS. When Health Care Services and the counties leave these Medi‑Cal eligibility discrepancies unresolved, individuals may encounter hurdles to obtain the services to which they are entitled.

There Could Be Additional Data Discrepancies in MEDS That Were Not Included in Our Review

The State uses MEDS to store eligibility information for all Medi‑Cal beneficiaries, including those who receive Medi‑Cal through other entitlement programs. For example, MEDS houses the Medi‑Cal eligibility information for CalWORKs because CalWORKs recipients may also qualify for Medi‑Cal benefits. MEDS also includes eligibility information for beneficiaries who qualify for Medi‑Cal benefits based on their CalFresh eligibility. Until July 2017, California had a federal waiver to grant certain CalFresh participants Medi‑Cal benefits without the need for an application or a determination for 12 months. Because payments to managed care plans and fee‑for‑service providers are based on information contained in MEDS, inaccurate eligibility information in MEDS could generate inappropriate Medi‑Cal payments for these beneficiaries. However, we did not determine whether discrepancies existed for these beneficiaries because the scope of our audit excluded beneficiaries who are eligible for Medi‑Cal through other entitlement programs. Many of the 2.6 million beneficiaries we excluded from our analysis received Medi‑Cal through entitlement programs that are not under the oversight authority of Health Care Services. The text box lists some of the programs that we excluded from our review. Additionally, because of the amount of data needing review, we limited our analysis to beneficiaries with eligibility discrepancies in Medi‑Cal as of December 2017. As further described in Appendix B, our analysis and calculation of payments included only discrepancies that persisted for at least three months. Consequently, our estimates of questionable payments are conservative and the actual amount of questionable Medi‑Cal premiums and claims paid by Health Care Services is likely greater than the $4 billion we identified.

Health Care Services Failed to Ensure That Counties Corrected Data Discrepancies

Although Health Care Services has established a process for notifying counties of beneficiary records that require follow‑up, gaps in this process allowed the problems we identified to persist. Specifically, Health Care Services uses MEDS to identify temporary beneficiary records that require further follow‑up and beneficiary records that have been discontinued in MEDS but are still eligible in SAWS. Health Care Services sends the results of this process to the counties in two ways: through MEDS alerts and exception reports. Health Care Services provides the SAWS administrators with MEDS alerts data files that the administrators enter into their respective systems to notify county workers of discrepancies by flagging cases. Exception reports, on the other hand, exist outside of the county systems and list beneficiaries who the counties need to review.

Although MEDS alerts are important, counties may not resolve all discrepancies if they only address the cases flagged by these alerts in their systems. For example, Stanislaus County eligibility workers do not typically continue to work on cases related to beneficiaries who have been discontinued in the county system, so they are unlikely to open these cases and thus encounter MEDS alerts for these beneficiaries. They also do not encounter MEDS alerts for beneficiaries who do not have a case in the county system to flag. Therefore, the exception reports that Health Care Services generates are a critical tool for counties to use in resolving the problems we identified.

In spite of the importance of exception reports in resolving costly eligibility problems, Health Care Services provides the reports to some counties in a format that limits their usefulness and that does not ensure that all counties receive or use the reports. For example, Health Care Services stated that it does not send the exception report containing temporary beneficiaries to four counties. Further, 26 counties receive Health Care Services’ exception reports containing temporary beneficiaries in printed form only, as they are transmitted to a printer at the county office. Los Angeles County, which accounts for 52 percent of the questionable payments we identified, stated that it takes roughly two weeks to manually process the voluminous monthly exception reports that Health Care Services sends to its printer. Beneficiaries listed in paper reports such as the one Figure 8 depicts cannot be sorted, filtered, or easily compared to earlier reports to enable workers to prioritize or monitor the timely resolution of eligibility issues. Health Care Services asserts that it transmits the rest of the exception reports containing temporary beneficiaries to the counties electronically, but the electronic files are simply text versions of the printed reports and are subject to the same limitations unless the counties process them further. Figure 9 shows an example of an exception report that Health Care Services sends to some counties.

Figure 9
Exception Reports Are Not User-Friendly

Source: A redacted Health Care Services exception report.

When we followed up with Sacramento County, it asserted that it does not receive or use either the report containing temporary beneficiaries or the report containing beneficiaries with eligibility discrepancies. The county began using the data file containing MEDS alerts to generate its own tracking spreadsheet in 2018. Similarly, Stanislaus County does not use either of these reports. Until Health Care Services provides more useful reports to the counties to help them identify and prioritize the cases that require further review, the problems that we identified could continue to go unresolved.

In addition to identifying beneficiaries needing follow‑up, Health Care Services has provided the counties guidance on how to prioritize alerts. However, this guidance has deemphasized the need to correct some eligibility errors and instead focused on ensuring beneficiaries’ access to care as its highest priority. For example, Health Care Services categorized errors related to beneficiaries who are in MEDS but not in the counties’ systems as the lowest priority—equivalent to notifications related to beneficiary zip code changes. Health Care Services describes notifications in this category as informational and requiring some review. When we followed up with Health Care Services about this prioritization, it explained that it is reconsidering how counties should prioritize notifications and that it anticipated updating its guidance in October 2018.

Further, Health Care Services paid counties $2.3 billion for the local administration of Medi‑Cal eligibility in fiscal year 2017–18; however, despite this funding, it has not used its authority to ensure that the counties resolve discrepancies in a timely manner. State law establishes county performance standards that, for example, require counties to resolve MEDS alerts affecting eligibility within approximately two months. However, Health Care Services took no action to identify which counties were out of compliance with these standards from 2014 through 2017. According to the standards, if Health Care Services finds that a county does not meet the stated time frame among other requirements, the county must submit a corrective action plan for approval. If Health Care Services finds that a county is not meeting improvement benchmarks specified in its corrective action plan and the county received a cost‑of‑doing‑business increase from the State in that year, Health Care Services has the authority to sanction the county by reducing the funding that the county receives to administer Medi‑Cal. After the county has made sufficient improvement, Health Care Services can restore the funding to the county. However, Health Care Services suspended the program it used to measure compliance with the county performance standards in February 2014 because of the difficulties that counties faced during the initial implementation of the Affordable Care Act. As such, no counties submitted corrective action plans during our audit period. Health Care Services said that it is exploring whether it will sanction counties that do not remedy known discrepancies, and if they do, the process through which it would implement these sanctions. However, Health Care Services stated that it does not anticipate that it would start implementing sanctions until counties have the time to meet performance standards and submit corrective action plans if necessary.

Health Care Services finalized a plan in September 2018 to implement a new quality control process to monitor eligibility discrepancies and temporary beneficiaries. Portions of the plan were piloted in August 2018 and Health Care Services anticipates that it will implement the final portion of the plan in December 2018. This program will focus on, among other things, MEDS alerts that directly affect eligibility, beneficiaries with eligibility discrepancies, and beneficiaries with temporary eligibility that has persisted for more than 90 days. In pursuing these changes, we determined that Health Care Services could efficiently reduce the number and cost of eligibility discrepancies by focusing its efforts on the counties that pose the highest risk. For example, Figure 10 shows that 85 percent of the questionable payments we identified were attributed to just five counties: Alameda, Los Angeles, Orange, Riverside, and San Diego. If Health Care Services focused its initial efforts on these counties, it could address most of the questionable payments we identified.

Figure 10
Five Counties Were Associated With 85 Percent of the Questionable Premiums and Claims Paid By Health Care Services
January 2014 Through December 2017

Source: Analysis of the counties’ and Health Care Services’ eligibility data, and Health Care Services’ payment data.

Recommendations

To ensure that Health Care Services adequately monitors the counties’ resolution of system discrepancies, the Legislature should require Health Care Services to report publicly on counties’ compliance with the performance standards set forth in state law, as well as Health Care Services’ actions taken in response to counties not complying with the standards.

To recover inappropriately spent funds, prevent future erroneous payments, and ensure eligible individuals’ access to care, Health Care Services should resolve the discrepancies we identified and recover erroneous payments where allowable by June 30, 2019.

To prevent future erroneous payments, Health Care Services should do the following by December 31, 2018:

• Implement procedures to ensure the timely resolution of system discrepancies. These procedures should include Health Care Services regularly following up on recurring, unresolved system discrepancies with the responsible county.
• Establish procedures that define when it will use its authority as defined in state law to sanction unresponsive counties that do not remedy known discrepancies.

To assist counties in addressing discrepancies, Health Care Services should do the following by December 31, 2018:

• Find a cost‑effective method to provide its exception reports in an electronic format readable by common database and spreadsheet software products that would allow users to sort and filter the data readily.
• Reevaluate and update its guidance to the counties related to prioritizing MEDS alerts.

We conducted this audit under the authority vested in the California State Auditor by Government Code 8543 et seq. and according to generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives specified in the Scope and Methodology section of the report. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Respectfully submitted,

ELAINE M. HOWLE, CPA
California State Auditor

Date:
October 30, 2018

Staff:
Ben Ward, CISA, ACDA, Audit Principal
Lindsay M. Harris, MBA, CISA
Brandon A. Clift, CPA, CFE
Andrew Jun Lee
Shauna M. Pellman, MPPA
Jesse R. Walden

Legal Counsel:
Mary K. Lundeen, Sr. Staff Counsel

For questions regarding the contents of this report, please contact
Margarita Fernández, Chief of Public Affairs, at 916.445.0255.

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Footnotes

² Because the data system Health Care Services uses to calculate the State’s share of fee‑for‑service payments does not track this information by beneficiary, it was cost‑prohibitive for us to determine the amount of state funds used to pay for these claims.
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³ Because we received the counties’ data after the date that we received MEDS data from Health Care Services, some of the counties’ recent changes giving an individual retroactive eligibility may not have existed in the MEDS data we reviewed.
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