Review of Medicaid Outpatient Drug Expenditures in Iowa for the Period October 1, 2002, Through September 30, 2004

EXECUTIVE SUMMARY:

Our objective was to determine whether the Iowa Department of Human Services's (the State agency) claims for reimbursement of Medicaid outpatient drug expenditures complied with Federal requirements. Not all of the State agency's claims for reimbursement of Medicaid outpatient drug expenditures complied with Federal requirements. Of the $709 million ($466 million Federal share) in Medicaid outpatient drug expenditures that the State agency claimed for fiscal years 2003 and 2004, $154,245 ( Federal share) represented expenditures for drug products that were not eligible for Medicaid coverage because they were terminated drugs.  An additional $1,079,386 (Federal share) represented expenditures for drug products that were not listed on the quarterly drug tapes.

We recommended that the State agency (1) refund $154,245 to the Federal Government for drug expenditures that were not eligible for Medicaid coverage; (2) work with CMS to resolve $1,079,386 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, specifically by claiming expenditures only for drugs that are dispensed before the termination dates listed on the quarterly drug tapes and verifying whether drugs not listed on the quarterly drug tapes are covered under the Medicaid program and notify CMS when drugs are missing from the tapes.  The State agency partly agreed and partly disagreed with our recommendations.