IG Says Two States Need To Return $130 Million Of Federal Medicaid Money

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Ethan Barton Managing Editor
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Alabama and Maryland haven’t repaid $130 million in Medicaid funds that a government watchdog claims they shouldn’t have kept, while a third state, Illinois, spent such funds on something other than healthcare.

Federal regulations allow states to withdraw funds “as needed,” but the Centers for Medicare and Medicaid Service (CMS) hasn’t clarified what “as needed” means, the Department of Health and Human Services Inspector General (IG) reported Monday.

“That regulation is the only Medicaid regulation regarding withdrawals, and it has not been updated since 1970, although the banking industry has changed significantly,” the IG said. “CMS has not issued guidance instructing states on the appropriate extent and timing of Medicaid withdrawals.” That’s why Alabama, Maryland and Illinois were able to withdraw excessive federal funds.

All three states that we audited withdrew more funds than necessary to meet immediate cash needs,” the IG said. “At the time of our reviews, Alabama and Maryland had overdrawn more than $130 million in Medicaid funds that they had not refunded to the federal government. Although Illinois refunded overdrawn Medicaid funds, its withdrawals exceeded its expenditures by an average of $60 million a quarter.”

The states also withdrew funds from the wrong federal accounts. “On multiple occasions, the states withdrew federal funds from one year’s account to pay for a different year’s expenditures, causing … account balances to be wrong and sometimes concealing when the states had overdrawn federal funds,” according to the IG.

Additionally, Illinois withdrew funds for “non-Medicaid expenditures” and to pay estimated, rather than actual, costs. “Illinois deposited the Medicaid funds into its general revenue account and used these funds to pay for non-Medicaid expenditures, which could have included expenditures for transportation, education, and pensions.”

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