California improperly claimed $52.7 million in Federal Medicaid reimbursements for capitation payments made on behalf of illegal aliens with unsatisfactory immigration status (UIS), according to a recent audit by the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG). This audit reveals a significant misuse of federal funds, raising concerns over the state's Medicaid practices and their compliance with federal requirements.
Federal law generally prohibits states from claiming Medicaid reimbursements for non-emergency services provided to illegal aliens with UIS. However, California's Medicaid program, known as Medi-Cal, has extended coverage to these individuals, which should have been funded solely by state funds. The Centers for Medicare & Medicaid Services (CMS) requested this audit to ensure that federal reimbursements were not improperly claimed.
The OIG audit examined $888.8 million in capitation payments made from October 1, 2018, through June 30, 2019. Of this, $372.9 million was the federal share. The audit scrutinized the proxy percentage California used to exclude non-emergency services from federal claims. This proxy, set at 39.87 percent, was meant to identify costs for non-emergency services, ensuring they were not federally reimbursed.
The audit discovered that California's proxy percentage was outdated and inaccurate. Instead of the 39.87 percent applied, the correct percentage should have been 48.36 percent. This discrepancy led to California improperly claiming $52.7 million in federal funds. The state had relied on a proxy developed in the early 2000s without reassessing its accuracy in reflecting current costs of non-emergency services for illegal aliens with UIS.
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The OIG recommended that California: 1) Refund the $52.7 million improperly claimed. 2) Collaborate with CMS to determine and rectify any further improper claims from periods not covered by the audit.
California partially concurred with the first recommendation, acknowledging the need for a refund but disputing the recalculated proxy percentage and the refund amount. The state proposed to return the funds manually. California fully agreed with the second recommendation.
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