A federal watchdog says the state’s Agency of Human Services should refund millions of dollars because it received more federal money than it should have when it built Vermont Health Connect.
The money came in the form of “establishment grants,” which the federal government gave to states so they could plan and build their own health insurance exchanges.
But the Office of the Inspector General for the U.S. Department of Health and Human Services said the Agency of Human Services was fully reimbursed for some expenses, when in reality the federal government should have paid only 10 percent or 50 percent of those expenses.
Specifically, in a report from September, the inspector general said the state spent $10.5 million in establishment grant money using a bad formula that assumed 100 percent of the Vermont population would use Vermont Health Connect to get insurance.
The report recommends the state either refund the $10.5 million or work with the U.S. Centers for Medicare and Medicaid Services, known as CMS, to determine how much the state should have received. The inspector general said only CMS can resolve the issue.
Steven Costantino, the commissioner of the Department of Vermont Health Access, which administers the state’s Medicaid program, said it was important to know that CMS approved Vermont’s original and revised methodologies for collecting the money.
Under the methodologies the inspector general questions, the state assumed — even after regulators raised questions — that every Vermonter would use the exchange to either sign up for a commercial policy or enroll in Medicaid.
As of July 2012, the report said, “The state agency projected that 74.05 percent of state population would use the Vermont marketplace to enroll in (commercial insurance plans) and 25.95 percent of the population would use the marketplace to enroll in Medicaid.”
In July 2013, CMS asked the state to revise that methodology, so Vermont projected that 47.01 percent of the population would buy commercial insurance plans and 52.99 percent would use Medicaid. CMS approved that new methodology.
“Using the revised methodology, the state agency should have identified that it allocated $10.5 million using a cost allocation methodology that included a material defect and retroactively adjusted the costs,” the report says.
At the time the state was setting up Vermont Health Connect, officials were planning to use it as the basis for an information technology platform to manage single-payer health care, which was envisioned as covering nearly every Vermont resident under a government-funded plan.
“The decision to base this cost allocation plan on Vermont’s population was rooted in the Vermont Legislature’s goal back in 2012 of covering the entire state population, with waivers carving out those specific segments of the population that could be included in single-payer,” Costantino said.
“At that time, Vermont clearly communicated with CMS regarding the rationale for this definition,” he said. “When Vermont put its plans for single-payer on hold, CMS recommended a change to our methodology, and we comported with their request prospectively.”
In addition to the $10.5 million that might need to be refunded, the inspector general’s report said the state “may not have” properly spent $13.9 million in federal Medicaid money from April 2014 to September 2014 and that it drew down about $700,000 more than it should have between January 2014 and September 2014.
The report says the $13.9 million may have been improperly allocated because many of the people enrolled through Vermont Health Connect were counted as enrollees more than once. The state “had a backlog of more than 10,000 (commercial insurance) applications that officials had to review manually to identify accurate enrollment,” and “some individuals erroneously had multiple (commercial insurance) applications attributed to them,” the report says.
The report says the state “overstated expenditures” and collected roughly $700,000 more than it needed because “the state agency did not have policies and procedures” to determine how much the state actually spent, and there was high turnover among the staff who would have figured that out.
To rectify the situation with the $13.9 million pot of money, the inspector general recommends the state work with CMS to refund whatever was not properly allocated. For the $700,000 pot of money, the inspector general recommends the state reduce how much federal money it uses in the future by $700,000, in essence refunding the money.
Costantino, who called CMS a partner, said the state has been in discussions with the federal regulators about the report. “If they feel that additional actions are needed, then we’ll work with them on a resolution,” he said.