California Incorrectly Claimed Additional Medicaid Funding Authorized Under the Recovery Act When Reclaiming Overpayments Made to Bankrupt or Out-of-Business Providers

For Federal fiscal years 2010 through 2013, the California Department of Health Care Services (State agency) claimed $58.3 million in Federal reimbursement for Medicaid overpayments that it made to providers who were determined to be bankrupt or out of business (uncollectible overpayments). The State agency complied with Federal requirements when reclaiming Federal Medicaid reimbursement for uncollectible overpayments. However, the State agency incorrectly used increased Federal medical assistance percentages (FMAPs) authorized under the American Recovery and Reinvestment Act to claim additional Federal reimbursement of $6.6 million for uncollectible overpayments that were not originally made during the recession adjustment period (October 1, 2008, through June 30, 2011) or were not previously refunded to the Federal Government using the increased FMAPs.

We recommended the State agency refund $6.6 million to the Federal Government and ensure that it uses the FMAPs in effect when the original overpayments were made and refunded when claiming Federal reimbursement for uncollectible overpayments. The State agency agreed with our recommendations and provided information on actions that it had taken or planned to take to address our recommendations.