Review of New Mexico's Medicaid Administrative Costs for the Quarter Ended September 30, 2004

The State claimed $1.5 million ($1.1 million Federal share) of unallowable Medicaid administrative costs, consisting of $1.1 million ($883,000 Federal share) for costs claimed because of errors in compiling the Form CMS-64 and $374,000 ($187,000 Federal share) resulting from errors in the random moment timestudy base that was used to allocate eligibility fieldworker costs. The State also claimed $509,000 at unallowable enhanced Federal funding rates (75 and 90 percent). Although these costs were eligible for Federal reimbursement at the standard 50 percent rate, they did not meet enhanced-rate guidelines; therefore, the State improperly received $128,000 in enhanced funding.

We could not determine what portion of $772,000 ($386,000 Federal share) was allowable. The State claimed 100 percent of the costs for medical assistance workers and Temporary Assistance for Needy Families (TANF) program employees to Medicaid even though their work also benefited other programs. In addition, we could not determine the allowability of $8.5 million ($6.4 million Federal share) for an adjustment that the State made to claim TANF transition costs at an enhanced Federal funding rate.

We recommended that the State (1) refund $1.2 million to the Centers for Medicare & Medicaid Services (CMS), (2) work with CMS to identify the allowable portion of the $772,000 ($386,000 Federal share) in costs for medical assistance workers and TANF program employees, (3) work with CMS to identify the allowable portion of the $8.5 million ($6.4 million Federal share) adjustment made to claim TANF transition costs at an enhanced Federal funding rate, and (4) make additional administrative changes related to our findings.

In written comments on our draft report, the State agreed with most of our findings and recommendations. The State said that it would refund to CMS $1.17 million of the $1.2 million in unallowable Medicaid administrative costs and enhanced Federal funding rate costs. The State disagreed with findings totaling $22,000 in the "Miscellaneous Overcharges" section of the report. After reviewing the State's comments and the documentation that it provided, we maintain that our findings and recommendations are valid and that the State should refund the entire $1.2 million to CMS.