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Audit (A-02-07-01050)

Review of Medicaid Administrative Costs Claimed by New Jersey for State Fiscal Year 2007

Executive Summary

The State agency's Medicaid Administrative Claim (MAC) did not comply with Federal requirements. Specifically, the State agency's contractor, Maximus, Inc. (Maximus), included unallowable costs in the cost pool used to compute the MAC, resulting in a claim for $10 million ($5 million Federal share) in excess Medicaid administrative costs. In addition, Maximus (1) performed a random moment timestudy (RMTS) that deviated from acceptable statistical sampling practices and (2) applied Medicaid eligibility rates that were not documented by the State agency. We were unable to quantify the effect of these errors; however, they impacted the accuracy of the Medicaid administrative costs claimed by the State agency and the validity of the RMTS used to allocate these costs. Therefore, we were unable to express an opinion on the allowability of the remaining $15.9 million ($8 million Federal share) claimed on the State agency's MAC.

We recommended that the State agency (1) refund $5 million to the Federal Government, (2) work with CMS to determine what portion of the remaining $8 million in Medicaid administration costs claimed for FY 2007 was allowable under Federal requirements, (3) establish policies and procedures to ensure that future RMTS results used to allocate costs to Medicaid follow acceptable statistical sampling practices, and (4) maintain supporting documentation for Medicaid eligibility rates used in computing the MAC. The State agency generally disagreed with our recommendations.

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