Review of Medicaid Outpatient Drug Expenditures in Montana for the Period October 1, 2001, Through September 30, 2004

Our objective was to determine whether the Montana Department of Public Health and Human Services (the State agency) claims for reimbursement of Medicaid outpatient drug expenditures complied with Federal requirements.

The State agency's claims for reimbursement of Medicaid outpatient drug expenditures for fiscal years 2002 through 2004 did not fully comply with Federal requirements. Of the $266 million ($198 million Federal share) claimed, $992,440 ( Federal share) represents expenditures for drug products that were not eligible for Medicaid coverage because they were either (1) terminated drugs for which the termination dates were listed on the CMS quarterly drug tape before the drugs were dispensed or (2) inadequately supported compound drug expenditures .  An additional $363,210 (Federal share) represents expenditures for drug products that were not listed on the quarterly drug tapes.  Because the State agency did not verify whether these drugs were eligible for Medicaid coverage, these drug expenditures may not be allowable for Medicaid reimbursement.

We recommended that the State agency (1) refund $992,440 to the Federal Government for drug expenditures that were not eligible for Medicaid coverage, (2) work with CMS to resolve $363,210 in payments for drugs that were not listed on the quarterly drug tapes and that may not have been eligible for Medicaid coverage, and (3) strengthen internal controls to ensure that claimed Medicaid drug expenditures comply with Federal requirements.  The State agency concurred with all of the recommendations.