Advance Notice: Briefs

Audit shows state Medicaid cost reimbursement processes aren’t working

By: - November 18, 2019 6:25 am

Department of Health and Human Services | Susan J. Demas

A recent Michigan Department of Health and Human Services (DHHS) audit shows the department’s Medicaid cost reimbursement system for long-term care facilities is “inefficient.” 

Medicaid reimbursement is the payment given directly to the provider for medical services from the DHHS covered by Medicaid. 

The audit, done by the Office of the Auditor General (OAG), assessed the effectiveness of DHHS’ efforts to administer Medicaid reimbursement rate setting, audit and cost settlement processes for services provided by long-term facilities. According to the audit report, the processes for each of these categories is “complicated, labor intensive, ineffective and inefficient.”

The report states that due to the amount of time the DHHS took to complete and return cost reports, as well as inconsistencies in identifying  unallowable costs for Medicaid services, it could potentially inflate future reimbursement rates and provider payments. 

In response to the report, a DHHS spokesperson said the department agrees with the conclusion of the audit, but adds that under the current system, these processes are necessary.

“The current cost-based methodology is inherently inflationary and does not reimburse based on the services needed by or delivered to the residents,” the DHHS wrote. “The complicated cost report acceptance, audit and settlement processes are necessary under the current reimbursement system to ensure the accuracy of rates paid to Medicaid participating nursing facilities. These processes help prevent nursing facilities from being reimbursed for unallowable costs and help protect Michigan taxpayer dollars.”

DHHS has done some work to find alternative reimbursement methodologies, according to the department’s spokesperson. 

As of Oct. 1, the department sets rates for 374 nursing facilities, 34 county medical care facilities, 21 inpatient hospitals with long-term care units and 11 nursing facilities with ventilator dependent units. In 2018, the DHHS reimbursed providers nearly $2 billion for long-term care services.

The department estimates it has recovered more than $32 million through the audit and settlement processes 2016 to present. 

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Allison R. Donahue
Allison R. Donahue

Allison R. Donahue covers education, women's issues and LGBTQ issues. Previously, she was a suburbs reporter at the St. Cloud Times in St. Cloud, Minn., covering local education and government. As a graduate of Grand Valley State University, she has previous experience as a freelance researcher for USA Today and an intern with WOOD TV-8. When she is away from her desk, she spends her time going to concerts, comedy shows or getting lost on hikes in different places around the world.