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Switch To KanCare Complicates Medicaid Fraud Detection

The state’s privatization of Medicaid is complicating efforts to detect fraud and abuse, according to a recently released report from Kansas Attorney General Derek Schmidt’s office.

The 2014 annual report from the attorney general’s Medicaid Fraud and Abuse Division says the three private companies managing the state’s $3 billion Medicaid program — called KanCare — are not providing all the information needed for the state to conduct investigations.

The report says that since Kansas privatized its Medicaid program in 2013, the fraud unit has received incomplete and obscured claims data. In addition, transitioning the management of Medicaid from the state to three private companies has led to breakdowns in communication and forced fraud investigators to deal with three different sets of rules and procedures, the report says.

For the fiscal year running from July 1, 2012, to June 30, 2013, the fraud unit recouped a record $33.7 million in improper payments. But agents were already sending warning signs about the KanCare program that began rolling out in the second half of the year — concerns about inaccessible data, multiple manuals and the lack of referrals of potentially fraudulent claims by the managed care companies.

"While these are serious areas of concern at this point, it is anticipated they will be resolved over time," the 2013 annual report said.

The 2014 report released last month shows collections dropping to $28.7 million and the areas of concern about managed care unresolved.

According to that report, each of the three KanCare companies — Amerigroup, Sunflower State Health Plan and United HealthCare — maintains its own database of claims information and then submits “a portion” of that data to a centralized database. But the data currently being made available to the unit “does not supply all of the information needed to complete a thorough review of the cases being investigated,” according to the report.

In addition, the report says, sometimes critical information “is not being communicated” to the fraud unit by the KanCare companies.

It cites as an example an investigation that the unit was conducting without knowing that all three managed care organizations either had already investigated the same provider or were in the process of investigating it.

“This is information that would have been helpful to the unit, and potentially to the investigation,” the report says.

Sunflower State declined to comment. Representatives of the other two managed care organizations did not respond by Friday to an email query.

Legislative intervention ‘last resort’

Sen. Jeff King, an Independence Republican, said the problems identified in the fraud unit's report are troubling but he’s not eager to see the Legislature force a solution.

“Certainly the Medicaid fraud unit has been one of the shining stars of our attorney general's office and all of state government,” King, the Senate vice president, said. “We need to make sure they have all the information they need, while protecting patient privacy, to find Medicaid fraud.”

King said the attorney general’s office is working with the managed care companies on a solution. He said he would prefer to let that process play out and viewed legislative intervention as a “last resort.”

“It’s something we will want to keep our eyes on in the months ahead,” he said.

The Kansas Department of Health and Environment administers KanCare. KDHE spokeswoman Sara Belfry said the agency also is working to address the problem.

“KDHE continues to work to identify improvements that can be made to the reporting and referral processes, and we continue to work to correct the encounter data and make it more user friendly for investigative purposes,” Belfry said in an email.

Kansas Department for Aging and Disability Services Secretary Kari Bruffett, who until June headed the health care finance division at KDHE, said the private companies are contractually obligated to help.

“Certainly part of the contract is for the MCOs to cooperate with the MFCU (Medicaid Fraud Control Units),” Bruffett said.

A.J. Kotich, a Democrat who is running against Schmidt, a Republican, for attorney general, said the latest Medicaid fraud unit’s report “raises serious concerns.” He said that if he’s elected, he would use the full authority of the office to address them.

“The attorney general should be a leader and not a victim of self-imposed bureaucracy,” Kotich said.

A spokeswoman for Schmidt's office said the fraud unit’s annual report “speaks for itself,” and the attorney general would not comment.

Not just a Kansas problem

Federal government watchdog agencies and a spokeswoman from a national Medicaid fraud investigators organization say Kansas regulators are not alone.

As more states turn to private-sector managed care organizations to try to stem Medicaid costs, one of the byproducts is that investigators increasingly face extra barriers to the information they use to find fraud.

“It’s definitely not unique (to Kansas),” said Barbara Zelner, executive director of the National Association of Medicaid Fraud Control Units. “It’s a situation with having managed care organizations involved with Medicaid reimbursements.”

Zelner said the challenges vary from state to state, and more information would be available upon review of how states have written their contracts with the managed care organizations.

“It’s something we’re trying to deal with, but it’s a very new phenomenon at this point,” Zelner said.

Medicaid served 71.7 million Americans in fiscal year 2013, at a cost of $431.1 billion. The federal Centers for Medicare and Medicaid Services estimates that about 5.8 percent of that, or $14.4 billion, consisted of improper payments.

The use of managed care, or capped per-beneficiary payments to health insurance contractors, has been increasing within Medicaid programs since the 1990s. Nearly every state has at least a portion of its Medicaid enrollees under managed care now. In 2013 and 2014, Kansas moved all of the state's more than 400,000 Medicaid recipients under three private managed care organizations in KanCare.

According to the federal government, two-thirds of Medicaid beneficiaries receive at least some of their services from managed care organizations. As of 2011, about 27 percent of the federal dollars put toward Medicaid went to managed care organizations.

A U.S. Government Accountability Office report published in May identified gaps in the tracking of Medicaid money that is filtered through the private organizations.

“Neither state nor federal entities are well positioned to identify improper payments made to managed care organizations (MCOs),” the report summary states, “nor are they able to ensure that MCOs are taking appropriate actions to identify, prevent, or discourage improper payments.”

A 2013 report from the U.S. Department of Health and Human Services’ Office of Inspector General raised similar concerns about managed care. That report said that Medicaid Fraud Control Units nationwide were receiving fewer referrals of potentially fraudulent claims from managed care organizations than they would expect.

The inspector general’s report said that, depending on how contracts are written, managed care organizations might have more incentive to drop a provider with suspicious claims from their networks than go through an expensive and time-consuming process of vetting those claims for fraud or abuse — especially if the managed care organizations were not contractually allowed to share in any proceeds recovered.

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