Many flagged by Medicaid consultant as "out of state" are likely eligible in-state residents | Arkansas Blog

Monday, November 2, 2015

Many flagged by Medicaid consultant as "out of state" are likely eligible in-state residents

Posted By on Mon, Nov 2, 2015 at 7:35 AM

The Health Reform Legislative Task Force's consultant released its nearly 500-page report last month on the present and future of health care — focusing on Medicaid and the private option — in Arkansas. One portion of the report that predictably got a little bit of attention were the group's findings on  beneficiary eligibility and the potential for fraud.

The state's consultant, the Stephen Group, subcontracted with LexisNexis to search public records data in order to look for potential problems on the rolls. The big headline number: according to this search, 42,891 beneficiaries have a record of out-of-state addresses; of those, 6,753 did not have an in-state address at all in the public records searched by LexisNexis (the Stephen Group also flagged some other "risk indicators," including a couple hundred that may be deceased, which I'll cover in a subsequent post). 

Unfortunately, while the Stephen Group's findings seemed designed to attract headlines, they provided little in the way of background on what the numbers actually mean — or just how the state might prudently proceed. And it's important to keep in mind that the Stephen Group made no claim whatsoever that it actually identified ineligible beneficiaries

First, some context: there are more than 900,000 beneficiaries in the Medicaid program. In a program of that size, with a transient population and a lot of turnover, there will always be a small number of people in the program who should be moved off of the rolls (the big bucks in terms of waste, fraud, and abuse are on the provider side, not the beneficiary side, but we'll save that for another day). The state, of course, must be vigilant in ensuring program integrity. But it also must do so in a cost-effective way. The error rate is not going to be zero. There is a subset of lawmakers who live in a constant state of anxiety about a poor person getting over on them, but in chasing down problems for a tiny fraction of the program, policymakers need to be careful about diminishing returns (not to mention ensuring a balance that also protects beneficiaries and avoids excessive administrative burden, an area in which Arkansas has an iffy track record this year).

While the scattering of lawmakers and others who have tried to over-dramatize the fraud narrative typically flatly state that the Stephen Group found people who live out of state and are thus ineligible for the program, that's not at all the case — as the Stephen Group themselves noted in presenting their report. 

"This does not mean that we found fraud," John Stephen, managing partner of the Stephen Group, told the task force. "We need to be clear on that. These are risk indicators."

However, Stephen added: "But the risk indicators that were found absolutely convince us that you have a problem that needs to be addressed."

The trouble is that the Stephen Group made no case for why this was so. The numbers were presented without context. How meaningful and predictive is the flag they used in terms of actually identifying ineligible beneficiaries? (The Stephen Group did no follow-up, even on a subset of those flagged, leaving that more complicated task to state agencies). What would be the baseline expectation for this flag in a program of this size? How does this compare to other states? 

By way of background, the national Medicaid error rate, according to the most recent federal Payment Error Rate Measurement (PERM) testing, was 6.7 percent; the error rate specifically for beneficiary eligibility was 3.1 percent. But a couple of important caveats make clear that comparing PERM's measurement to the Stephen Group's snapshot of alleged risk is apples to horseflies. PERM is a rigorous, methodical audit of actual eligibility, as opposed to the quickie Lexis search for possible flags done by the Stephen Group. PERM also looks at so-called “negative cases" — situations where eligibility was denied when it should not have been. The Stephen Group did not look at eligibility denials to determine whether people in Arkansas have been denied coverage or wrongfully terminated when they were in fact eligible. 

Unfortunately, the Stephen Group's "out of state" flag really doesn't tell us anything at all about how the state is doing with respect to something like PERM benchmarks, eligibility error rate, or program integrity. That's because there are a large number of circumstances in which someone might have an out-of-state address somewhere in the public records that LexisNexis is searching but actually be a legal Arkansas resident eligible for the state's Medicaid program. 

One big issue is that residency, for the purposes of Medicaid eligibility, includes people who may not currently be in the state but intend to return. If someone is taking care of a relative in another state but plans to return to Arkansas, she is still an Arkansas resident. Same with someone out of state for college or an internship or a temporary job. And note that this can work the other way, too: someone who is a student in Arkansas may be planning to stay here, and is thus a legal resident, despite still having a family address or previous address listed out of state.

I asked Medicaid Deputy Director Mark White whether a significant number of those flagged by the Stephen Group were likely in fact in-state residents and Medicaid eligible.  

"Oh absolutely," he said. "And part of that goes back to the definition of residence. You do not have to be physically present all the time to be a resident."

White pointed out that there were also common scenarios in which an out-of-state family member handled the affairs of some of the state's disabled beneficiaries or the elderly in long-term care, with the result that they have an out-of-state address associated with their name, despite residing in Arkansas. 

And then there's the obvious point that this transient population may have multiple addresses associated with their names because they have frequently moved prior to ending up in Arkansas (particularly in communities along the border). The report states that the "best address" found for these beneficiaries was outside of Arkansas but the overwhelming majority of those addresses (75 percent for traditional Medicaid, 87 percent from the private option) were from prior to Medicaid authorization; it remains unclear how "best" is defined if it's older than what DHS has on file. An older out-of-state address, of course, is irrelevant (note that these beneficiaries received communications in the mail when they were first found eligible, and those communications were not returned).

Of course, some of those 42,891 no doubt are in fact ineligible because they are not Arkansas residents. How many? There's just no way to know. The Stephen Group did not do any followup, The list has not been run through the U.S. Post Office for validation. They did not search claims to see if these beneficiaries are getting services from Arkansas providers or out of state. That's the kid of legwork that would give us more answers than an older address out in cyber space.

It's worth noting here what the Stephen Group offered in their proposal for the contract: "An audit of the current Medicaid system in Arkansas to include without limitation an examination of: verification of eligibility of individuals currently on the Medicaid rolls and recommendations for removal of any individuals found not to meet eligibility criteria." That's basically what won them the contract, but that's really not what they provided. 

Instead, the heavy lifting will now be left to DHS to try to determine whether the Stephen Group's flags have value. (The Stephen Group's report was clear that no adverse action should be taken against any beneficiary on its list — "the results would need to be carefully reviewed, and investigated by DHS.") The Stephen Group has sent the list of flagged names to DHS. The names are tagged with what flag they got, such as "out of state address," but no further information, such as what state their address is supposedly in. 

DHS has begun investigations on some of the out-of-state flags (the agency has thus far released no information on just how many they have tackled, but it is likely a small subset, as they are having to analyze them one by one). Among those they have investigated, a "significant number," according to White, have already been removed from the rolls as part of the state's troubled eligibility verification process. This is another key bit of context: most of the names that the Stephen Group pulled came from the rolls prior to the state initiating its annual eligibility verification and re-enrollment process. Given that the state was late in getting to that process, by more than a year for some beneficiaries, it's inevitable that there were names still on the rolls that no longer belonged. Many of those are now gone. In other words, the Stephen Group's flagged lists are a bit out of date, as a significant number of them have already been removed from the rolls. (White suggested that this showed that the eligibility verification process was working; that's a stretch, but we'll save that for another post.)

For those with the "out of state" flag who are still on the rolls, DHS is first checking to see if they have SNAP (food stamps) or Medicaid transactions in Arkansas. If someone is using food stamps in Arkansas, the risk that the beneficiary is actually an out-of-state resident is low (many, though not all, Medicaid beneficiaries are also on food stamps). But if they're not using food stamps in state, that's a red flag that they have left Arkansas. 

"If we find someone who is on SNAP and has not had a transaction in Arkansas in the last three months, we're going to investigate that case and determine whether the individual is still in the state," White said. 

Thus far, the overwhelming majority of those who have been checked on SNAP claims did in fact have in-state claims, suggesting that they are likely Arkansas residents (take that with a grain of salt; DHS has only looked at a small subset of the total flagged, and not all of those are on SNAP). 

DHS will also be looking at Medicaid claims for those on traditional Medicaid to see whether beneficiaries are getting medical services in state. They do not have that data for those on private plans via the private option, but plan to work with the office of the Medicaid Inspector General to get that information. Again, people making claims in state or out of state will help to signal whether further investigation is needed. It's worth noting that in most cases, beneficiaries could not get Medicaid services out of state without prior authorization from DHS; people on private plans, however, could potentially use their Arkansas card out of state if the doctor was in the insurance carrier's out-of-state network. 

Again, some of the 42,891 flagged by the Stephen Group are likely actually out-of-state residents no longer eligible for the program, we just have no idea at this point how many, or how serious of a problem this represents in terms of costs. Some people have no doubt moved out of state and never informed DHS, although this likely represents a minority of the flags since the overwhelming majority had the out-of-state address pop up in records prior to enrolling in the program.

Beneficiaries moving out of state without promptly telling DHS doesn't amount to "fraud" in the traditional sense, but it's still an administrative headache for the state that needs to be addressed. However, keep in mind that those on traditional Medicaid typically won't incur any additional cost to the state at all in that scenario, since they just wouldn't have any claims. The private option is trickier, since Medicaid is paying monthly premiums (for now, the feds are picking up that entire cost) — but even in that case, a beneficiary who never makes any claims will lead to lower premiums and true costs for private option plans. Clearing the rolls quickly of people who move is more administratively efficient, and a worthy goal, but the actual impact on costs is likely relatively small.

The potential for outright fraud comes in border states that didn't expand Medicaid. Many of the out-of-state addresses flagged by the Stephen Group were in states with more generous social safety nets than Arkansas. Almost 3,000 of the addresses were in California, for example. The chances that a poor person living in Los Angeles really wants to scam Arkansas and get on the private option are...slim. 

However, a little more than half of the out-of-state addresses cluster around the six states bordering Arkansas. All six of those states did not expand Medicaid, setting up a scenario in which, for example, a Memphis resident might try to fake residency in West Memphis to try to get health coverage across the river. Of course, the more innocuous reasons for an out-of-state address popping up in a Lexis search described above (not to mention actual moves) would also tend to cluster around nearby states. Unfortunately, because the list of names provided by Lexis to DHS did not specify which state the out-of-state address was found for, DHS does not have a way to focus investigations on these border-state cases, other than eventually looking at where claims pop up. 

Just how many of those flagged by the Stephen Group will end up getting investigated by DHS depends on what they find as they tackle the first samples.

"The individuals who are doing this work are our investigators within the department," White said. "This is what they do, day-in, day-out: investigations of possible fraud, possible waste. What we're doing, we're taking those investigators and essentially setting aside their other caseloads for a matter of a week or two. We'll come back week by week and re-asses. How much progress have we made? What's left to be done? Do we need to continue to go this this route or consider going another route?" 

If DHS turns up a high proportion of actual out-of-state residents among the sample of Stephen Groups flags that they investigate, they might mail letters to the rest of the list asking for confirmation of address, potentially removing them from the rolls if they don't get a response. But that's not a process the state would pursue if investigators find that most of those flagged are actually in-state residents.

So the big question for the Stephen Group flags: whether they're even effective tools for identifying a significant number of ineligible beneficiaries. As it stands, an hour spent on running down these flags is an hour taken away from other investigations. 

"We want to look at how much staff time did we invest to get that return," White said (he added that he believed that investigations like this also had deterrence value in preventing fraud).

More broadly, the deeper that the legislature wants to dig, the more resources they will have to devote to investigation. This is where the hunt for waste, fraud, and abuse runs in to cost-benefit questions. Whether the Stephen Group's Lexis search provides savings to the state — or simply headlines for lawmakers hungry to cry foul about the Medicaid program — remains to be seen.  

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