Stephen Group: Medicaid Out-Of-Staters Show Automation Need More Than Fraud

A health care policy consultant says its finding that 42,891 Medicaid and private option recipients may have out-of-state addresses underscores the need for an automated system but does not necessarily indicate widespread fraud.

On Oct. 7, The Stephen Group released its report that it produced under contract with the Health Reform Legislative Task Force that recommended changes to the state’s health care system.

Through information provider LexisNexis, it found 42,891 combined Medicaid and private option beneficiaries had best addresses that were out of state – 7.8% of the 549,906 total unique adult individuals identified by LexisNexis.

In an interview, lead consultant John Stephen said those numbers indicate a need for more investigation and that the department must create an automated system that can track beneficiaries’ eligibility in real time, not once a year as it does. Moreover, some of those individuals may have recently moved to Arkansas, or they may live in state but have opened accounts elsewhere or in a relative’s name.

“There could be instances of clear fraud, and there could be instances that there’s just delays as well,” he said. “Again, this has to be looked at further or investigated to some extent by the department.”

Among those addresses, 20,110 private option recipients were found to have best addresses that were out of state. That number is 8.9% of the 224,782 adult private option recipients LexisNexis was able to identify. Another 22,781 traditional Medicaid recipients were found to have best addresses that were out of state – 7% of the 325,124 identified adult traditional Medicaid beneficiaries. Among traditional Medicaid recipients, 4,137 have best addresses in Texas, and 1,896 have best addresses in California. Among private option recipients, 3,750 have Texas addresses while 1,324 have California addresses.

“It’s not unusual that there are large numbers of changes in addresses. This is a population that moves, too,” Stephen said.

Meanwhile, 3,543 traditional Medicaid recipients and 3,210 private option recipients have no record of living in Arkansas.

The private option uses federal Medicaid dollars to purchase private insurance for individuals with incomes up to 138% of the federal poverty level. Created in 2013 and reauthorized in 2014, it has been controversial from the start. The Health Reform Legislative Task Force was created this year as a compromise between Gov. Asa Hutchinson and legislative opponents. That compromise funded the private option through the end of 2016 while the task force studies overall Medicaid reforms. The task force next meets Tuesday, Oct. 20.

Each policy costs almost $500 per month. The private option is being funded almost entirely with federal dollars. Starting in 2017, the state will begin paying for 5%, a number that increases to 10% by 2020. Amy Webb, DHS director of communications, said some of the beneficiaries in the database provided to The Stephen Group may have already been purged from the system. Still, at some point they were receiving coverage either through Medicaid or the private option.

“But that, again, doesn’t mean they were never here in Arkansas and were getting fraudulent coverage all along,” she wrote in an email. “It could mean that a person was here when they were approved, but moved out of state at some point and never told us. We just won’t have a full picture of what happened in these cases until we dig deeper.”

Medicaid recipients are required by law to notify DHS when they move. Because they often don’t, an automated system is needed, or the state’s Medicaid system will continue to pay those premiums until it undertakes its yearly eligibility check, Stephen said. DHS is spending $200 million to create an eligibility system that is costing more than twice the original expected cost.

“Somebody moves from Arkansas to Texas today that’s on the private option, the way the current system is at the department, the way it’s run on eligibility, they won’t know that unless the individual self-reported and told the department they moved until they do the redetermination a year later,” he said.

An automated system would allow DHS to quickly identify beneficiaries whose addresses have changed. A letter would be sent to the beneficiary requesting updated information within 30 days, potentially followed by disenrollment. He said the high number of out-of-state addresses “underscores the need on the front end to fix the problem now and not to look back.”

In its report, The Stephen Group recommended the state create a system, probably administered by the Department of Finance and Administration, that would track Arkansans’ eligibility for all government services. He said the problem isn’t limited to Arkansas.

“This happens in every state. There are people that move out of state all the time that were on the Medicaid program. They’re moving in and out all the time, and states around this country do not have the automated check on addresses. They wait until the year of the renewal period is up. And so they’re wasting a lot of taxpayer dollars by continuously paying a (per member, per month payment) when someone has moved out of state and just has not told the department or notified them of the new address. And in some situations, they’re using the health care system of the state that they previously lived in.”

The Stephen Group found 367 traditional Medicaid recipients who were deceased prior to being authorized – 261 of them for more than two years. Moreover, 128 private option recipients were deceased prior to being authorized, including 82 who had been dead for more than two years.

That’s not unusual, Stephen said, because of the difficulty involved in tracking deceased individuals. The Social Security Administration does not aways have updated access to death files, which means that DHS sometimes must rely on county records that are often updated manually. Funeral directors do not often provide timely information to authorities. Moreover, the state has successfully recouped some of the money it has paid for deceased individuals.

“There are additional databases available the department’s not using today, and it could more quickly identify deceased individuals, and they know that and they’re going to be working on that,” he said.

Webb said DHS needs time to research those numbers. In some cases, she said, an individual could have fraudulently obtained coverage.

“If that’s the case, we’ll make sure they no longer get that coverage and take any other appropriate steps,” she wrote in an email. “But it also could be an Arkansas resident who is staying with a sick relative out of state or a student on a temporary internship. So our first step is getting a sample of the LexisNexis data, and then find those beneficiaries. Once we do that, we’ll determine whether they legitimately have coverage. We’ll also want to find out how they came to get coverage from us. Did they go through the federally facilitated marketplace or (DHS’s) Access Arkansas? That is a critical piece of information to have because we know we’ve gotten bad data from the feds before. All of this will take quite a bit of leg work, but we think it is important to dig into this so the state can decide the best direction to go from here.”