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Audit (A-03-10-00202)

06-28-2011
Review of Administrative Costs Claimed by Pennsylvania's Home and Community-Based Waiver for Individuals Aged 60 and Over

Executive Summary

Our review found that Pennsylvania's Department of Public Welfare (State agency) did not comply with Federal requirements when it claimed Medicaid administrative costs under the Home and Community-Based Services Waiver for Individuals Aged 60 and Over (Aging Waiver). The State agency claimed $4.2 million ($2.1 million Federal share) in administrative costs for non-Aging Waiver activities and $495,000 ($371,000 Federal share) because of an adjustment error. The Aging Waiver authorizes services for Medicaid beneficiaries aged 60 or older who are economically distressed and are clinically eligible for care in a skilled nursing facility.

Because the State agency (1) did not amend its cost allocation plan to identify the administrative costs associated with the Aging Waiver program and non-Aging Waiver activities or submit a methodology for allocating them and (2) did not ensure that all costs claimed under the Aging Waiver were accurate, the State agency claimed unallowable costs.

We also set aside for CMS's adjudication $51.3 million ($25.8 million Federal share) in local agencies' administrative costs for Aging Waiver activities. The State agency identified the administrative activities in the Aging Waiver but did not amend the cost allocation plan or submit a methodology for allocating the associated costs.

We recommended that the State agency (1) refund $2.1 million in Federal funds for administrative costs not identified in the Aging Waiver or the cost allocation plan, (2) refund $371,000 in Federal funds to correct an adjustment error, (3) amend its cost allocation plan to identify all Aging Waiver administrative costs and include detailed allocation methodologies to enable CMS to determine if the costs are being allocated in proportion to benefits received, and (4) work with CMS to determine the allocability of $51.3 million ($25.8 million Federal share) in local agencies' administrative costs for Aging Waiver activities and adjust the Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program accordingly. The State agency generally did not agree with our recommendations. After reviewing the State agency's comments, we made changes to our report and revised our recommendations.

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