Review of New Jersey's Compliance With the "Reimbursement of State Costs for Provision of Part D Drugs" Medicare Demonstration Project Requirements

The New Jersey Department of Human Services (DHS) complied with certain provisions of the Medicare demonstration application when claiming drug costs for full-benefit dually eligible beneficiaries (eligible for both Medicare and Medicaid). However, DHS claimed some drug and administrative costs to both the Medicaid program and the Medicare demonstration project. Of the approximately $79 million that DHS was reimbursed through the Medicare demonstration project and that it included on its Medicaid Forms CMS-64, DHS accurately adjusted its Forms CMS-64 to reflect $67.8 million ($33.9 million Federal share) for some drug costs. However, DHS did not adjust its Forms CMS-64 to reflect $11.3 million ($5.8 million Federal share) for additional demonstration project costs. According to DHS officials, DHS did not adjust its Forms CMS-64 to account for some of its drug costs and most of its administrative costs paid through the Medicare demonstration project because of a clerical oversight.
We recommended that DHS refund $5.8 million to the Federal Government for improper Medicaid drug claim payments ($5.2 million) and administrative cost payments ($600,000). We did not make any procedural recommendations because the demonstration project has ended. In its comments on our draft report, DHS said that it would adjust its expenditure reports in accordance with our recommendation.