Review of Non-Risk Managed Care Contract Administrative Costs in Utah

EXECUTIVE SUMMARY:

The objective of our review was to determine whether, for the period July 1, 2002, through September 30, 2005, Utah claimed administrative costs for its non‑risk managed care contracts pursuant to Federal regulations. Utah claimed some administrative costs for its non‑risk managed care contracts that were not in accordance with Federal regulations. Specifically, Utah incorrectly claimed administrative costs at the medical rates (between 70 and 74.19 percent) instead of at the 50-percent administrative rate. For July 2002 through September 2005, Utah reported $31.0 million of administrative costs, for which it claimed $22.7 million in Federal reimbursement, at medical rates rather than at administrative rates. Prior to our audit, Utah recognized that its initial claim was incorrect. Accordingly, it attempted to adjust and lower its claim of the Federal share to the 50-percent administrative rate, which reduced its reimbursement from $22.7 million to $15.5 million. However, our review indicated that Utah did not identify all of the overpayments before making that adjustment.

We recommended that Utah: (1) refund $625,489 to the Federal Government and (2) develop adequate policies and procedures to ensure that future claims for administrative costs for non-risk managed care contracts comply fully with Federal regulations. Utah concurred with our findings and recommendations.