Audit of the Kentucky Medicaid Agency's Buy-In of Medicare Parts A and B

EXECUTIVE SUMMARY:

The objective of our audit was to determine whether the Cabinet for Health and Family Services, Department for Medicaid Services (State Medicaid agency) paid Medicare premiums only for individuals eligible for the State buy-in program.  During the conversion to a new buy-in system in 2004, the State Medicaid agency erroneously paid approximately $4 million ($2.8 million Federal share) in Medicare Part B premiums for 4,816 individuals who were not eligible for the State buy-in program.  These erroneous payments occurred because the State Medicaid agency did not adequately test changes made to its buy-in system.  During the periods before and after its conversion to a new buy-in system, the State Medicaid agency generally paid Medicare premiums for individuals who were eligible for the State buy-in program.  However, the State Medicaid agency inappropriately claimed $41,307 ($29,290 Federal share) in Medicare premiums for periods when nine beneficiaries were ineligible because it did not reconcile CMS's monthly Medicare premium billing files to the State Medicaid agency's eligibility records.

We recommended that the State Medicaid agency refund to the Federal Government:  (1) $2,770,494 (Federal share) in Medicare premiums claimed for the 4,816 ineligible beneficiaries added during the buy-in system conversion period and (2) $29,290 (Federal share) in Medicare premiums claimed for the periods when the nine beneficiaries were ineligible.  We also recommended that the State Medicaid agency adequately test all future changes to its buy-in system prior to implementation and develop internal controls to ensure that Medicare premiums are paid only for eligible individuals.  In written comments to the draft report, State agency officials agreed with our findings and recommendations.