Audit finds Maryland owes $34 million for Medicaid claims

Second audit in many years dings state agency for the disabled.

A federal inspector general has found that Maryland incorrectly billed Medicaid for services for the developmentally disabled in hundreds of thousands of cases and that the state owes the U.S. government more than $34 million, according to an audit to be released Tuesday.

The probe, by the inspector general of the U.S. Department of Health and Human Services, found the state did not ensure beneficiaries met requirements for "add-on" services — such as physical therapy or overnight, in-home help — and allowed many who did not qualify to receive the assistance.

The audit, a copy of which was obtained by The Baltimore Sun, is the second to hit the state's Developmental Disabilities Administration in recent years. In 2013, the office found Maryland routinely billed the federal government for room-and-board costs that were ineligible.

"The state … did not always comply with federal requirements," the auditors wrote in the most recent report, which covers a three-year period starting in 2010. In fact, state officials believed that a requirement limiting services to those most in need was in error, and so they ignored it, according to the audit.

Maryland billed the federal government nearly $582 million from mid-2010 to mid-2013 for residential habilitation services for people with developmental disabilities, including $179 million for add-on services.

The money can be used to provide one-on-one care, occupational and physical therapy, and "overnight" services, in which an aide provides drugs or monitors a person for violent behavior.

In a formal response to a draft of the report earlier this year, the Maryland Department of Health and Mental Hygiene blamed confusion surrounding the requirements on a grammatical error in its agreement with the federal government. The agency said it believed the requirement was intended to mirror state guidelines, which they followed.

In a statement on Monday, Health Secretary Van. T. Mitchell said he would "further detail the department's position" in a letter this month.

Under the agreement between Maryland and the federal government, a beneficiary must meet several criteria, including being the most in need of care on a one-to-five sliding-scale assessment, to qualify for add-on services.

The problem, auditors found, is that the state paid 776,771 claims for people rated less than the most needy.

Maryland officials contend that the assessment is just one of several factors that can be used to approve the added services — and that interpretation is consistent with the state's own regulations.

Federal auditors, however, say that all the factors, including the highest-need designation, must be met.

Advocates for the disabled see potential problems with that stricter standard. Maryland froze assessment grades for years. Under the precise language in the agreement, that means a person could not receive the add-on services even if his or her condition worsened so badly they would otherwise qualify.

Laura Howell, executive director of the Maryland Association of Community Services, a nonprofit advocacy group that represents many service providers, said the problem uncovered by the audit is a technical one.

"It doesn't mean that the need wasn't there, or that the services weren't delivered," she said.

It means, she said, that the state needs "to do a cleanup" to ensure that the language it drafted to set the terms for its federal funding is consistent with its own regulations.

The state's response to the latest audit is different than in 2013. Then, the same auditors found Maryland reduced the claims made by private providers of services to disabled people but failed to pass on those reductions to the federal government, and that the state owed $21 million.

At that time, Maryland officials agreed with the findings and opened a negotiation for refunding a portion of the money. A spokeswoman for the state's health department declined to say on Monday whether it paid back any of that money.

The state is taking a different approach to the latest audit by disputing the report.

The inspector general's office said it launched the probe after investigators received an allegation that Maryland was claiming reimbursement for costs that were not permitted under its agreement with the federal government. The costs were related to the living expenses of people enrolled in its Community Pathways program.

That program provides community-based services for people with developmental disabilities in such settings as group homes, alternative care facilities or family homes.

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