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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



Our audit of Health Care Services’ Medi-Cal eligibility system highlighted the following:

Results in Brief

The Department of Health Care Services (Health Care Services) paid at least $4 billion in questionable California Medical Assistance Program (Medi‑Cal) payments from 2014 through 2017 because it failed to ensure that it provided benefits only to eligible beneficiaries. Medi‑Cal offers two delivery models for health care services: managed care and fee for service. Health Care Services pays a managed care plan a monthly capitation payment (premium) to provide eligible services for a Medi‑Cal beneficiary. More than 80 percent of Medi‑Cal beneficiaries were in managed care plans as of January 2018. Under the fee‑for‑service model, which less than 20 percent of Medi‑Cal beneficiaries use, medical providers bill Health Care Services directly for the services they provide to Medi‑Cal beneficiaries. Of the $4 billion in questionable payments, roughly $3 billion were premiums paid to managed care plans. Of this, about $700 million of those payments came from state funds. Health Care Services also paid medical providers nearly $1 billion in questionable fee‑for‑service claims, a portion of which also came from state funds.1

The key reason for these questionable payments is that Health Care Services failed to ensure that the counties resolved discrepancies between the state and county Medi‑Cal eligibility systems. Counties are generally responsible for determining Medi‑Cal eligibility and for recording this information in one of the three data systems—collectively known as the Statewide Automated Welfare System (SAWS)—which then transmit the beneficiaries’ information and Medi‑Cal eligibility to Health Care Services’ Medi‑Cal Eligibility Data System (MEDS). Health Care Services uses the information in MEDS to determine the amount that it pays for Medi‑Cal beneficiaries. However, instead of actively monitoring identified eligibility discrepancies between the county systems and MEDS and then working with the associated county Medi‑Cal office (county office) to ensure that the discrepancies are resolved, Health Care Services relies on county offices to address the discrepancies identified in automated reports from MEDS. However, we found that this process does not always resolve mismatches between state and county systems in a timely manner or at all in many instances.

We performed a statewide comparison of beneficiaries’ eligibility in MEDS and SAWS data and found pervasive discrepancies between the systems. As Figure 1 shows, our analysis of 10.7 million Medi‑Cal beneficiary records from December 2017 revealed more than 453,000 beneficiaries marked as eligible in MEDS although they were not listed as eligible in SAWS for at least three months. Upon examining the data for these beneficiaries from 2014 through 2017, we found that 57 percent of these discrepancies had persisted for more than two years. Because counties are generally responsible for eligibility determinations, SAWS likely contains the most up‑to‑date eligibility information. Nevertheless, Health Care Services bases payments to managed care plans and fee‑for‑service providers on information contained in MEDS. It is critical that Health Care Services ensures that MEDS has the most up‑to‑date information on eligibility because it pays managed care plans a monthly premium for an increasing number of Medi‑Cal beneficiaries regardless of whether beneficiaries receive services.

Figure 1
Large Discrepancies Exist Between Health Care Services’ and Counties’ Medi‑Cal Eligibility Records

Figure 1 is a graphical representation of the system comparison we performed and the results of that comparison.

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

For example, we identified one instance in which a member of a beneficiary’s household notified Los Angeles County in April 2014 that the beneficiary had died. Although the county discontinued the beneficiary’s Medi‑Cal eligibility in its system, it did not address—and Health Care Services did not ensure that it resolved—numerous notifications from MEDS indicating the need for further follow‑up on this case. As a result, the beneficiary remained active in MEDS. Exacerbating this error further, Health Care Services transitioned this deceased individual from fee for service to a managed care plan for long‑term care in November 2014 as part of an effort to increase the use of managed care plans. From then on, the State continued to pay monthly premiums for the deceased beneficiary until August 2018, shortly after our office notified Health Care Services and Los Angeles County of this error. In total, the State paid the managed care plan more than $383,000 for an individual who Health Care Services should have known was no longer in need of services.

Of the roughly 453,000 discrepancies we identified, 170,000 were related to beneficiaries who had been given temporary Medi‑Cal eligibility status but whose cases had exceeded the permissible period for resolving their eligibility. State law provides certain individuals with temporary Medi‑Cal eligibility while their counties assess whether they continue to be eligible for Medi‑Cal services. For example, when individuals are no longer eligible for certain entitlement programs, such as Supplemental Security Income/State Supplementary Payment, state law requires Health Care Services to ensure uninterrupted medical coverage for those individuals until the counties finish evaluating their Medi‑Cal eligibility. To provide this coverage, beneficiaries are assigned temporary Medi‑Cal benefits and then Health Care Services notifies the counties that they must assess the beneficiaries’ eligibility. Health Care Services typically expects this process of assessing eligibility to take from two months to a year, depending upon why the beneficiary is receiving temporary benefits. However, most of the 170,000 beneficiaries we identified had temporary eligibility status for Medi‑Cal for more than one year beyond that time frame, and nearly 20,000 of these beneficiaries had temporary eligibility status for at least three years past the allowable time frame. Because Health Care Services does not actively follow up on counties’ efforts to complete these eligibility determinations, it continues to make Medi‑Cal payments related to these individuals without knowing whether they are eligible for program benefits.

In our review, we looked at discrepancies existing at a specific point in time—December 2017—and we did not examine beneficiaries who qualified for Medi‑Cal through other entitlement programs that depend on MEDS for Medi‑Cal eligibility determinations, such as California Work Opportunity and Responsibility to Kids. Given these limitations, the monetary impact of the problem could be much greater than the $4 billion we identified.

As Figure 1 indicates, we also found roughly 54,000 individuals whom counties designated as eligible for Medi‑Cal but who were not listed as eligible in MEDS. Because health care providers use MEDS to authorize care for beneficiaries, these individuals may have experienced hardships in accessing health care services, as they would have been denied benefits until the system discrepancies were resolved. Health Care Services places highest priority on resolving system errors in which individuals are denied benefits. This may be one reason why we found fewer of these errors than we did errors in which Health Care Services paid for benefits for beneficiaries with uncertain eligibility. Nevertheless, unless Health Care Services takes a more proactive role in resolving data discrepancies between MEDS and SAWS, the State will continue to both deny benefits to potentially eligible individuals and make questionable Medi‑Cal payments—a large portion of which will be paid to managed care plans for beneficiaries who may not be receiving services.

Selected Recommendations

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 implement procedures by December 31, 2018, 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.

Agency Comments

Health Care Services agreed with our recommendations and indicated that it plans to implement them. However, Health Care Services stated that it could not commit to implementing all of them within our recommended time frames.


1 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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