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Review of Massachusetts� Compliance With the �Reimbursement of State Costs for Provision of Part D Drugs� Medicare Demonstration Project Requirements

Massachusetts complied with certain provisions of the Medicare demonstration application when claiming drug costs for full-benefit dually eligible beneficiaries. The Medicare demonstration project reimbursed States for drug costs and related administrative costs incurred during the transition to Medicare Part D. Dually eligible beneficiaries are eligible for both Medicare and Medicaid. However, we found that the State claimed some drug costs to both the Medicaid program and the Medicare demonstration project. Specifically, when we initiated our audit in November 2008, the State had not adjusted its Forms CMS-64 to reflect $15.2 million ($7.6 million Federal share) in drug costs that the State was reimbursed through the Medicare demonstration project in August and December 2006 and June 2007 for the quarter ended March 31, 2006.

During our audit, the State adjusted its Forms CMS-64 for the quarters ended December 31, 2008, and March 31, 2009, to account for $7.609 million in drug costs reimbursed through the Medicare demonstration project. State officials informed us that they planned to adjust the Form CMS-64 for the quarter ended June 30, 2009, for the remaining $17,000.

We recommended that the State refund $17,000 to the Federal Government and make future refunds to the Medicaid program in a timely fashion. The State agreed with our recommendations.