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Missouri may owe federal government $34.8 million after Medicaid audit

Flickr | e-MagineArt.com

Missouri’s Medicaid program — MO HealthNet — failed to follow federal requirements for drug payments that could have saved the U.S. government millions, according to an audit released today. Now, a federal investigator is asking the state to refund about $35 million, the federal share of the total cost of those drugs.

Federal law requires drug manufacturers to pay rebates to states for pharmaceuticals that are covered under Medicaid. To receive those savings, states must bill the manufacturers. The discounted price is then reflected in the amount that the federal government pays the state for their share of the program.

According to the audit by the Office of the Inspector General, MO HealthNet did not collect rebates for physician-administered drugs worth $49,954,190 between 2009 and 2011. The report said Missouri should have had a system to collect the data necessary to bill drug  manufacturers for rebates. Not having that data made those claims ineligible for federal reimbursement.

The federal share of those charges was $34,837,957, according to the audit.  

Read the full audit report from the Office of the Inspector General here.

Missouri Department of Social Services Director Brian Kinkade responded to the audit with a letter, saying that Missouri’s hospitals had encountered significant administrative and financial barriers in complying with the law, which went into effect Feb. 1, 2008. Kinkade added that MO HealthNet had attempted to address the issue by using a system facilitated by the Centers for Medicare and Medicaid Services.

The state also applied for a hardship waiver, which expired before the audit period.

“Accounting for [the rebates] over time was very complicated. Both our system and the state system were probably not, at least in 2008, ready to provide that kind of data,” said Missouri Hospital Association spokesperson Dave Dillon. He said he believes the state did its due diligence to comply with the law as well as it could.

Those rebates likely would have added up to fewer than $7 million over the three-year period, a spokesperson for the Missouri Department of Social Services said in an e-mail.

“The real winners in this are the folks at the drug companies that didn’t have to pay these rebates,” Dillon said.

The report will be submitted to Centers for Medicare and Medicaid Services for review, which will determine how the state must proceed. If they affirm the Office of the Inspector General’s recommendation, Missouri may still appeal their ruling.

Kinkade wrote that refunding the federal government “would impose an enormous hardship on the state,” and asked that the agency “be permitted to discuss a resolution of this matter that addresses OIG’s and CMS (Centers for Medicare and Medicaid Services)’s concerns, while not unduly penalizing the State or its Medicaid providers or participants.”

Since September of 2013, the Office of the Inspector General has discovered unallowable federal reimbursements during audits of five other state Medicaid programs: Maryland, Oregon, Idaho, Nebraska and the District of Columbia. All were asked to refund less than than $4 million for unbilled rebates, making the findings in Missouri particularly striking.

It's been a particularly tough six months for MO HealthNet when it comes to audits. In November, the Office of the Inspector General found that Missouri owed the federal government $11.5 million, after miscalculating payment rates for some services to people with developmental disabilities. Two months later, a report issued by the office of Tom Schweich, then-Missouri state auditor, raised concerns that the program’s oversight of its contractors is inadequate. 

Read the Department of Social Service response to the federal audit below.

Follow Durrie Bouscaren on Twitter for more healthcare news: @durrieB