The District has badly mishandled the process of applying for child welfare-related Medicaid claims, putting D.C. taxpayers on the hook for $176 million in payments that should have been reimbursed by the federal government.
The city has decided to quit seeking federal payments on millions of dollars of medical services, officials said, until it can untangle the application process and put a new system in place.
The total loss between 2003 and 2010 linked to the Child and Family Services Agency comes to $176 million. That includes $82 million blown between 2003 and 2008, and an additional $94 million over the next two years, budget documents show.
Maximizing Medicaid funds is especially important now as the federal government has hiked reimbursement rates as part of the stimulus package, said Gary Burtless, a senior fellow of economic studies at the Brookings Institution.
“In a way, it is surprising, for an item that’s just so important for a state or jurisdiction as a source of their total revenue, that they wouldn’t have top-notch people on top of the problem,” Burtless said. “Because relatively speaking, how much does it cost to send an itemized receipt to the federal government?”
Chief Financial Officer Natwar Gandhi told city leaders last week that temporarily discontinuing Medicaid billing within CFSA meant abandoning $44.6 million in the current fiscal year. The loss comprises half of the projected “spending pressures,” unexpected costs such as overtime and severance that the city must cover to balance the 2009 books.
Mayor Adrian Fenty, meanwhile, eliminated anticipated Medicaid reimbursements next year for targeted case management and rehabilitative services, the two areas that have caused CFSA the most trouble. The $49.8 million write-down of the agency’s 2010 budget was offset with local and federal funds.
The losses come at a difficult economic time, as Gandhi recently slashed revenue projections by $340 million over the next two years.
D.C. Councilman Tommy Wells, chairman of the human services committee, was caught off guard. CFSA did not allude to its 2009 shortfall during oversight hearings earlier this year, he said, nor has the agency adjusted spending to compensate.
“For an agency to overspend its budget by $44 million and provide no notice to the council committee with oversight just doesn’t make sense,” said Wells, who fired off a letter Tuesday to the CFSA director demanding answers.
Mismanagement of Medicaid is classified by D.C.’s outside auditor as a “material weakness” in financial controls, one that threatens the District’s standing on Wall Street.
The city’s fiscal 2008 surplus was reduced by $109 million to cover improperly submitted or poorly documented claims filed by city agencies since 2003 — 75 percent of that figure, or $82 million, fell on CFSA.
The Department of Health Care Finance is working to consolidate Medicaid billing and claims processing of all District agencies under a single entity, called an Administrative Services Organization. Once that entity is in place, CFSA billing will restart and there will be attempt to recover lost Medicaid dollars.
“We’re not sure if we’re going to be able to do that, though,” said Dr. Julie Hudman, health care finance director.
AT A GLANCE:
CFSA’s lost Medicaid dollars
» 2003-2008: $82 million
» 2009: $44.6 million
» 2010: $49.8 million
