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The Honolulu Advertiser
Posted on: Saturday, May 26, 2001

State audit targets medical programs

By Lynda Arakawa
Advertiser Capitol Bureau

Problems with the Medicaid and QUEST medical programs may be costing the state millions of dollars, state Auditor Marion Higa said in a report released yesterday.

The audit cited lax procedures to ensure that only eligible people enroll in Medicaid or QUEST, the state's managed-care program for the poor. That means the state could be spending taxpayer dollars to provide such medical benefits for people who don't quality, the audit said.

The audit also concluded that the state Medicaid fee-for-service program had an overpayment error rate that, when applied to fiscal 2000, could mean a loss of more than $7 million.

Medicaid's fee-for-service program covers people who meet certain income requirements and are at least 65 years old, blind or disabled.

On the issue of eligibility, the audit's review of 25 randomly selected case files found that only eight had all of the required documents to show verification. The remaining 17 files did not have any documentation that income had been — as required — verified against other government databases.

The Med-QUEST division staff also does not always re-verify clients' eligibility as required under Hawai'i Administrative Rules, according to the audit.

The division has not conducted periodic risk analyses or system security reviews of the Medicaid Management Information System as required by federal regulations, the audit said.

The audit also found errors in how the state administers the Medicaid fee-for-service program.

The state has contracted with Hawaii Medical Service Association to review medical claims and pay physicians and hospitals for services. The audit calculated a 30 percent error rate based on a random sample of 50 claims processed and paid by HMSA during fiscal 2000.

"The high error rate ... the randomness of the errors, and the limited monitoring and oversight procedures of the division, raise serious concerns regarding the propriety of the reported Medicaid program expenditures and the reliability of the work of HMSA," the audit said.

The audit concluded that the Medicaid fee-for-service program had a 2 percent overpayment error rate, which would amount to the more than $7 million loss during the 2000 fiscal year.

Other critical points in the audit:

• The Med-QUEST division implemented monitoring procedures for only unusual and specific types of claims and has no clear guidelines for reviewing the majority of Medicaid claims processed by HMSA. There are no directions determining how often or how many claims will be tested. Higa said similar issues were pointed out to the Human Services Department in 1996 and 1998 audits.

• The state Med-QUEST division was not in compliance with federal regulations requiring those with QUEST applications delayed beyond 45 days be declared eligible until determined otherwise. The division had estimated that only 1 percent of all such applicants were given eligibility.

During the 2000 fiscal year about 1,100 QUEST applications were delayed beyond 45 days and the average waiting period was 15 to 16 weeks.

• The division has no procedures to make sure monthly payments to health plans for each QUEST recipient are accurate, and that the division continued to pay premiums to health plans for people who were supposed to have been disenrolled.

• The division continues to pay Medicaid providers without the required provider agreements.

In a written response, Human Services Department Director Susan Chandler said the department has addressed some of the audit's findings and recommendations and is continuing efforts to resolve others. She also said the Med-QUEST division has streamlined its application process to become more timely.

HMSA senior vice president Gwen Miyasato said that in an HMSA response to Chandler's department regarding the audit, the company disagreed with about two-thirds of the audit's findings of errors and contended the sample used in the audit was too small to accurately represent the millions of claims it processes.

Gov. Ben Cayetano yesterday said he did not read the audit yet but that it's important to "have the right context when we talk about some of these errors."

Cayetano recalled an audit that criticized the state for overpayments of $40 million over eight years or so in a program that handled $4 billion. That meant an error rate of about 1 percent, "which is something that even the private sector couldn't match."

Advertiser Capitol Bureau Chief Kevin Dayton contributed to this report.