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Audit: $12.3M Illinois Medicaid benefits to dead

CHICAGO – An auditor's report released Thursday provided new details about the Illinois Medicaid program's overpayment of $12.3 million for medical care for 2,850 people who were dead.

One person who died in 1989 had payments of nearly $30,000 to providers for 816 dental, lab and hospital services from 2005 through 2013, state Auditor General William Holland's report said. That case and several others have been turned over by the state Medicaid agency to fraud investigators.

The Associated Press first reported on the overpayments last month, but the report provides a broader perspective on the scope of the problem. For instance, the report states 561 individuals were signed up for Medicaid managed care after their deaths – an average of 663 days, or nearly two years, afterward. The state paid monthly premiums totaling nearly $7 million for those 561 people.

Holland termed that "a glaring deficiency" in an interview with the AP.

"That's a lot ... " Holland told the AP. "I die. Two years from now, somebody enrolls me in a managed-care program."

The vast majority of the overpayments – $11.4 million – went to managed care organizations, that is, the private insurance companies with contracts to pay for health care for the poor and disabled. The state pays monthly fees to those companies on a per-patient basis, rather than paying doctors and hospitals a fee for each separate service.

State auditors and the state's Medicaid agency pin the blame on a failure to check Medicaid files against state death records in a system that assigns patients into managed care plans. Auditors recommended Illinois enter death dates into its eligibility system for Medicaid enrollees. The Department of Healthcare and Family Services, the primary state Medicaid agency, accepted the recommendation.

Department spokeswoman Joanne Von Alroth said more than $11 million will be recovered by the end of the summer.

"We took immediate action as soon as this issue came to light," Von Alroth said.

Samantha Olds of the Illinois Association of Medicaid Health Plans, which represents nine health insurers that have Medicaid contracts, said the state is improving at the removal of the names of dead people from the passive enrollment system that assigns Medicaid clients to managed care health plans.

"This is an unfortunate administrative issue," Olds said. "They're really doing a lot to improve this."

Illinois has lagged behind other states in adopting managed care, but a state Medicaid overhaul law enacted in 2011 is gradually expanding managed care to half the state's Medicaid patients by 2015.

The auditors also found:

• $192,000 in overpayments for individuals with more than one Medicaid recipient ID number. The department is correcting the problem and recovering the improper payments, according to the report.

• Lack of oversight for a contract to build a secure framework for sharing electronic health information among hospitals and other providers. Illinois received nearly $19 million from the federal stimulus law to develop the information exchange, which wasn't in production by the end of 2012 as required by the contract. A project manager has been hired to enforce contract milestones, according to a response from Gov. Pat Quinn's office contained in the audit report.

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