Review of Medicaid Outpatient Expenditures in Michigan for the Period October 1, 2004, Through September 30, 2005

We found that Michigan claimed Medicaid reimbursement for $106,000 (Federal share) in fiscal year 2005 for outpatient expenditures for drug products that were not eligible for Medicaid coverage. In addition, of the $987 million ($560 million Federal share) in claims submitted by the State for Medicaid reimbursement, $2.9 million (Federal share) represented expenditures for drug products that were not listed on the CMS quarterly drug tape, which lists all covered outpatient drugs. Because the State did not verify whether the drugs missing from the tapes were eligible for Medicaid coverage, these drug expenditures may not be allowable for Medicaid reimbursement. For the remainder of the $987 million ($560 million Federal share) claimed, we identified no other errors.

We recommended that the State (1) refund $106,000 to the Federal Government for drug expenditures that were not eligible for Medicaid coverage; (2) work with CMS to resolve $2.9 million in payments for drugs that were not listed on the quarterly drug tapes and, therefore, may not have been eligible for Medicaid reimbursement; and (3) strengthen internal controls to ensure that claimed Medicaid drug expenditures comply with Federal requirements. The State concurred with our first and second recommendations and described corrective actions that it had taken to strengthen its internal controls.