Audit of Wis. Medicaid program raises concerns

MADISON, Wis. — The state’s budgeting and financial management practices have not kept pace with the growth in the size and complexity of Wisconsin’s $7.5 billion Medicaid program, an audit released Tuesday said.

The report by the nonpartisan Legislative Audit Bureau said oversight of the vendors increasingly used to administer the various Medicaid programs instead of state employees, as well as monitoring of contracts, could be improved.

The audit said the Department of Health Services has not always considered its available spending authority when making contract decisions, and that not all of its expenditures are included as part of its budget or properly accounted for.

The audit was ordered in January by Republican state lawmakers shortly after they took over majority control of the legislature. They have long argued there is widespread waste in the Medicaid programs and had attempted for years to get an audit, but Democrats then in control of the legislature blocked it.

“Taxpayers, health care providers and Medicaid recipients should expect zero tolerance for inefficiency, waste and fraud,” said DHS deputy secretary Kitty Rhoades in a statement reacting to the audit.

Rhoades said the department has recognized many areas needing improvement and began looking at where changes could be made.

Department of Health Services Secretary Dennis Smith, in a response letter dated Dec. 13 and included in the audit, said DHS has implemented a new process to review all contract changes to make sure enough money is available and proper rules are being followed. Smith said all existing Medicaid contracts are being reviewed to assess their value and relevance.

The department is also working with counties to put in place a new program for determining eligibility for Medicaid and FoodShare programs, Smith said.

The audit comes as Gov. Scott Walker’s administration is planning to cut more than half a billion dollars from Medicaid that is expected to result in 65,000 poor children and adults losing coverage. The federal government gave tentative approval to some of the changes earlier this month but said it needed more time to consider the total request.

Walker’s administration said the cuts were necessary given the rapid growth in Medicaid programs, including BadgerCare Plus, Family Care and Senior Care. Wisconsin’s 16 Medicaid programs currently cover about 20 percent of the state’s population. The number covered has grown by nearly 10 times the rate of the state’s population during the past two decades, driven both by need and expanded program offerings.

Of the nearly 1.2 million people in the program as of January, 42 percent were children, 22 percent were parents or caretakers, 14 percent were people with disabilities and 12 percent were elderly. About 4 percent were childless adults, 2 percent were pregnant women and nearly 5 percent were people receiving limited benefits such as cancer screenings and family planning.

The total spent on Medicaid programs, which include a mixture of state and federal spending, increased more than 40 percent from $5 billion in 2006 to $7.5 billion in 2010.

The audit faulted DHS for not including all of the various program costs in its budget or recording them all as expenses. The audit also found that the reported number of investigations of potential Medicaid fraud dropped from 2,166 in 2006 to 1,424 in 2010, largely because of a reduction in state funding for those queries.

Smith, in his response letter, noted that DHS has recently created a new Office of Inspector General to coordinate and reinvigorate efforts to crack down on fraud and abuse in the program.

The audit also said DHS did not ensure that adequate funding was available before authorizing additional contract work or make sure that services were obtained at a competitive price.

Payments to vendors who provide administrative support to the Medicaid program grew from about $66 million in 2006 to nearly $115 million in 2010.

The audit says that the department’s increasing reliance on vendors may hamper its ability to provide guidance to those contracted staff and to maintain adequate oversight.

Smith said the department is also exploring opportunities to use state employees instead of outside contractors where appropriate.