State owes $21 million for faulty Medicaid claims, report says

A federal investigator has found that Maryland's Medicaid program had a 95 percent error rate in seeking reimbursement for room and board for the developmentally disabled and thus owes the U.S. government nearly $21 million.

Advocates expressed concern that the findings could lead to budget cuts to the program and longer stays on waiting lists for vulnerable individuals and struggling families.


In a report released Friday, the inspector general for the U.S. Department of Health and Human Services said that over a three-year period, state health officials routinely billed the federal government for room-and-board costs that were ineligible under Medicaid rules. Medicaid is a joint federal-state program to pay for health care for the poor and disabled.

In more than half of the cases tested between July 2009 and June 2012, the investigation determined that Maryland reduced the claims made by private providers of services to disabled people but failed to pass on those reductions to the federal government.


"The state agency claimed these unallowable costs because it lacked internal controls to ensure that unallowable costs were not included in claims for provider per diem payments," the inspector general wrote.

In its reply, the state health department said it agreed with the federal findings and has taken steps to correct the errors. In a letter to Inspector General Stephen Virbitsky, Health Secretary Joshua M. Sharfstein promised that his department would "actively monitor and review" the steps it has taken to prevent future errors in claims for federal reimbursement.

The inspector general calculated the state's debt to the federal government at $20.6 million.

Lauren Howell, executive director of the Maryland Association of Community Services, said that represents "a substantial amount of money." She said the report raises concerns about the operations of the Developmental Disabilities Administration, the agency that runs the program.

"It's safe to say this would be viewed as a big deal by all of our stakeholders," Howell said.

Brian Cox, executive director of the Maryland Developmental Disabilities Council, also expressed dismay at the findings.

"We're very concerned about the potential impact on people with developmental disabilities and their families," the advocacy group leader said. "They rely on DDA for essential services and support that you or I take for granted."

Cox said he was particularly concerned about the impact on more than 7,000 people on the waiting list for services for the developmentally disabled.


"The question will be: Would that prolong that wait for service?" he said. Cox and other advocates said they want the administration to find the money somewhere other than in the agency budget.

Patrick Dooley, who took over as acting director of the disabilities administration in June, said the O'Malley administration is talking with the federal government about how to make those repayments, which amount to about $7 million a year out of an annual disability administration budget of $850 million.

"We will do our best to minimize any potential impact," he said.

For administration critics, the inspector general's report was a validation of long-standing complaints about the O'Malley administration.

"There have been reports after reports in department after department of a lack of institutional control to ensure that fraud is not taking place," said Larry Hogan, chairman of the Republican-leaning group Change Maryland. "It puts the Maryland taxpayer on the hook for another $20 million refund to the federal government. It's disgraceful."

Dooley said the problem could be traced to two separate computer systems that did not efficiently communicate. Asked whether anyone had been held accountable, he said his replacement of the previous director was just one step taken out of a recognition that "there's very many issues at DDA that need to be resolved."


The inspector general said the probe was launched after investigators received an allegation that Maryland was claiming reimbursement for costs that were not permitted under its agreement with the federal government for handling 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 individual family homes.