Review of Medicaid Administrative Costs Claimed through Maryland's Statewide Cost Allocation Plan

EXECUTIVE SUMMARY:

Our objective was to determine whether Maryland claimed Medicaid administrative costs through its cost allocation plan in accordance with Federal statutes, regulations, and guidance.  From October 2003 to September 2004, Maryland claimed $50.7 million in Federal funding for Medicaid administrative services provided by Department of Human Resources (DHR).  Maryland erroneously claimed Medicaid administrative costs totaling $666,694 (Federal share).  Maryland did not amend its cost allocation plan to add 24 cost centers used to distribute DHR costs.  Cost centers are pools of similar expenses in terms of the functions they benefit.  We recommended that Maryland:  (1) refund to the Federal Government $666,694 in administrative costs incorrectly claimed between October 2003 and September 2004; (2) identify additional claims made subsequent to our audit period for unapproved cost centers and make the appropriate refunds; and (3) discontinue claiming costs that have not been approved as part of the State's cost allocation plan, or amend the State's cost allocation plan to include all cost centers not currently approved.  Maryland concurred with our recommendations.