New Mexico Should Refund Almost $120 Million to the Federal Government for Medicaid Nursing Facility Level-of-Care Managed Care Capitated Payments

Why OIG Did This Audit

In a previous OIG audit, we reviewed recoveries that New Mexico received from its managed care organizations (MCOs) related to payments that New Mexico had made to its MCOs for calendar years 2014 and 2015. For that audit, we reported that New Mexico had not performed reconciliations of capitated payments for Community Benefit (CB) services. This audit followed up on our recommendation that New Mexico perform the required reconciliations and refund the Federal share of any recoveries.

Our objectives were to determine whether New Mexico: (1) performed reconciliations of capitated payments for CB services as required under its contracts with MCOs and refunded the Federal share of any related recoupments to the Federal Government and (2) provided support that enrollees were eligible to receive services at the nursing facility level-of-care (NFLOC) rate.

What OIG Found

New Mexico performed reconciliations of capitated payments for CB services as required under its contracts with MCOs. However, it did not recoup from its MCOs any overpayments identified in the CB services reconciliations and did not refund any related Federal share to the Federal Government. Of the $3.8 billion in CB services capitated payments for our audit period, New Mexico did not recoup $139.2 million in overpayments for enrollees who did not use CB services within 90 calendar days of their approval for CB services. As a result, New Mexico did not return the related Federal share of $98.6 million.

Additionally, New Mexico did not provide support that the enrollees on whose behalf MCOs received $35.2 million in capitated payments at the higher NFLOC rate for our audit period were eligible for services at that rate. As a result, New Mexico claimed $29.4 million in overpayments for those enrollees and inappropriately received $20.5 million in Federal share for those overpayments.

What OIG Recommends and New Mexico Comments

We recommend that New Mexico: (1) recoup $139.2 million in CB services capitated payments from its MCOs and refund the $98.6 million in Federal share to the Federal Government, (2) recoup the $29.4 million in NFLOC capitated payments from its MCOs and refund the $20.5 million Federal share to the Federal Government, and (3) establish policies and procedures to recoup the NFLOC capitated payments made to its MCOs based on settings-of-care that are removed after payment and no longer valid.

In written comments on our draft report, New Mexico concurred with our third recommendation but did not concur with our first and second recommendations. New Mexico said that, although it did not implement the recoupment process as outlined in its MCO contracts, it developed an alternative method that met the spirit of compliance. New Mexico also said that the alternative method resulted in an immaterial financial impact. After reviewing New Mexico’s comments, we maintain that our findings and recommendations are still valid.