Review of Medicaid Administrative Costs Claimed for the Pennsylvania Department of Aging's Healthy Steps Program

The State did not comply with Federal requirements when it claimed Medicaid administrative costs for the Healthy Steps for Older Adults program (Healthy Steps). The claimed costs were for Department of Aging payments for services to help older adults remain active and not for the administration of the Medicaid program. Accordingly, the State's claims of $2.4 million ($1.2 million Federal share) in Healthy Steps costs for State fiscal years 2007 through 2009 were unallowable.

Federal law permits States to claim Federal reimbursement for Medicaid administrative costs. These costs must be "for the proper and efficient administration of the State plan." In a December 1994 letter to State Medicaid directors, the Centers for Medicare & Medicaid Services (formerly the Health Care Financing Administration) clarified its position on State claims for administrative costs, stating that "allowable claims ' must be directly related to the administration of the Medicaid program."

We recommended that the State (1) refund $1.2 million in Federal funds for unallowable Healthy Steps costs, (2) refund the Federal share of unallowable Healthy Steps costs claimed after our audit period, and (3) discontinue all future claims for Healthy Steps costs. The State did not comment on our recommendations.