Fed Audit Discovers Texas Was Paying MCOs Multiple Capitation Payments for the Same Individuals

The U.S. Department of Health and Human Services Office of the Inspector General just published an audit report this week that Texas paid out incorrectly $922,557 in CHIP payments to Medicaid managed care organizations.

Now a million dollars in the grand scheme of the 2020-2021 Texas Medicaid budget at some $66 billion is pretty small potatoes.

Multiple capitation payments for same individuals

But the interesting thing is that the feds discovered what Texas or the MCOs had not -- these were improper capitation payments made in the same month for 572 individuals who had more than one identification number plus 27 more who were different individuals.

Audit period over three years

The audit covered from January 1, 2016 to October 31, 2019.  Barring this audit, the problem would have continued totally undetected by Texas HHS or the MCOs.

Monthly capitation paid regardless of whether or not a healthcare service is performed

According to the audit report, under Texas CHIP, the State agency pays MCOs a monthly fee, known as a capitation payment, to ensure that each enrolled beneficiary has access to a comprehensive range of medical services. A capitation payment is “a payment the State [agency] makes periodically to a contractor on behalf of each beneficiary enrolled under a contract for the provision of medical services under the State plan. The State [agency] makes the payment regardless of whether the particular beneficiary receives services during the period covered by the payment.”

The state had actually paid the MCOs $1,921,396, twice what should have been paid.  As the federal share of this amount was $1.783,669, the state owes $856,456. The state is disputing this amount.

Human error

Texas HHS attributes the unallowable payments to "eligibility worker and system errors."

The full report is available below:


One Response

  • There is so much to say about this. First of all, the MCO’s never actually risk losing money managing Medicaid. If they ever actually ran at a loss, the next state budget will adjust the loss and raise the cap payment to cover the increase. Because the feds cover approximately 60% of the Medicaid cap, Texas makes money from the Fed for every dollar it places in the Medicaid budget – for every 40 dollars spent it gets about 60 from DC. There is NO incentive to limit spending – quite the opposite. Texas continues to find creative ways to increase Medicaid spending without ever actually improving outcomes or raising rates to providers. First there was the ortho run away spending train. When that got curtailed, apparently a new scheme was developed – oops we assigned multiple numbers to the same recipient! Now I am not going to waste time reading the published audit so maybe my conclusion is wrong, but I will wager that the MCO’s actually did pay out the money to providers in order to not risk a budget cut in the annual session. Either way, the big winners are always the ones with big gov contracts on the line.

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