Review of Medicaid Indirect Costs Submitted by the New York State Department of Health on Behalf of the Office of Mental Retardation and Developmental Disabilities

The New York Office of Mental Retardation and Developmental Disabilities (OMRDD) did not maintain documentation to support its indirect administrative cost rate calculations. In addition, the New York State Department of Health (DOH) did not review OMRDD's administrative costs before claiming them on the Centers for Medicare & Medicaid Services Form-64. As a result, $8.1 million ($4 million Federal share) of the $9.7 million ($4.8 million Federal share) in indirect administrative costs that DOH claimed from January 1, 2003, through June 30, 2006, was unallowable. OMRDD provides services to individuals-both Medicaid and non-Medicaid beneficiaries-with mental retardation and developmental disabilities under a cooperative agreement with DOH, which administers the State's Medicaid program. DOH reports the total of OMRDD's direct and indirect Medicaid administration costs for Federal Medicaid reimbursement.

We recommended that DOH (1) refund $4 million to the Federal Government and (2) verify that Medicaid indirect costs billed by OMRDD are adequately supported. In its comments on our draft report, DOH concurred with our finding and recommendations.