Kansas Medicaid inspector general tells Committee on Government Efficiency audits found millions in improper payments and gaps that limit recoupment

The Kansas Medicaid Inspector General told the Committee on Government Efficiency on Oct. 12 that the office’s audits and investigations have identified hundreds of millions of dollars in waste, improper payments and program vulnerabilities and urged changes to contracts, state practices and federal rules to improve recovery and prevention.

The inspector general, who leads the Kansas Medicaid Inspector General’s Office within the Kansas attorney general’s office, told senators the Medicaid program’s $5.5 billion annual budget makes even modest rates of fraud and waste costly: “I just use 10%. If you think about Medicaid being a $5,500,000,000 program, if 10% of that is lost to fraud, that’s over $500,000,000 per year in the state of Kansas,” the inspector general said.

The office presented multiple audit findings and sample recoveries to illustrate how money can be lost and, in some cases, regained. Those examples included:

- Medican (a state-only, 12‑month lifetime program): auditors identified $1.6 million in claims for 912 beneficiaries who exceeded the 12‑month limit. Kansas Department of Health and Environment (KDHE) staff removed 556 people from eligibility, producing about $1.2 million in savings, the inspector general said.

- Capitation payments to managed care organizations (MCOs): the office identified $1.3 million in capitation payments made for 25 beneficiaries whose recorded dates of death showed the MCOs had been paid after beneficiaries had died; the inspector general said those funds were recouped.

- Home‑and‑community‑based services (HCBS) waivers: in a 40‑month review auditors found more than 2,000 people enrolled in waivers who had no claims for more than 12 months, despite program rules requiring at least one service per month. The office attributed $193 million in capitation payments to MCOs for such cases and reported KDHE declined to pursue a broad recovery, citing a three‑month contractual look‑back period.

- Life Alert (personal emergency response) services: auditors found 560 waiver recipients whose only service was a Life Alert device. The report estimated the state paid more than $8 million in capitation dollars through MCOs for those services versus about $55,000 in fee‑for‑service costs, an example the inspector general used to show how payment routes affect total cost.

- TransMed (a time‑limited benefit to help enrollees transition to employment): auditors found more than $16 million in capitation payments for more than 2,000 people who had exceeded program time limits, with 580 still enrolled after the office flagged the issue, producing another $1.5 million in capitation costs, the inspector general said.

- Continuing care retirement communities (CCRCs) and the “bed tax” (quality care assessment): the office found that 68% of CCRC registrations reviewed were not in compliance with state rules. That noncompliance contributed to an estimated $87 million in lost QCA revenue; auditors estimated the state had to supplement roughly $33 million from the general fund to make up the federal match. The office estimated roughly $12 million in potential savings in the next fiscal year after regulatory changes and the transfer of oversight from the Kansas Department of Insurance to the Kansas Department for Aging and Disability Services (KDADS), which the inspector general said took effect after legislation Governor Laura Kelly approved May 10, 2024.

The inspector general also summarized complaint and investigation activity for calendar 2024: 1,454 complaints processed (1,318 alleging eligibility fraud), 105 investigations opened, and recoveries or savings of approximately $236,000 from investigations. The office described one individual recovery of $140,000 from misused inheritance intended to pay for nursing‑home care.

On recoupment and recovery, the inspector general repeatedly described two constraints: KDHE’s three‑month contractual look‑back for recoupments from MCOs and federal Centers for Medicare & Medicaid Services (CMS) rules that limit state administrative recovery in certain contexts. “CMS also has rules on that to prevent the states from recovering on through administrative processes,” the inspector general said, noting restitution is possible when a case is criminally prosecuted but that prosecutions do not always yield recoverable funds.

Senators pressed the inspector general on multiple operational points: how quickly beneficiaries are removed after a residency match is discovered (the office said beneficiaries are notified and subject to KDHE appeal processes, with a typical notice period of about 10 days); whether KDHE recoups funds from MCOs (the inspector general said KDHE generally does not recoup except in instances such as beneficiary death); and whether frequent eligibility redeterminations would be feasible (officials said federal rules and passive‑review practices limit more frequent checks).

The inspector general urged legislative and administrative remedies: tighter contractual requirements for MCOs (for example, requiring explanation‑of‑benefits notices), expanded authority or interagency access to review other public benefits programs (SNAP, TANF) to pursue joint cases, and more resources for the office to increase audit and investigative capacity. “We could do more,” the inspector general said, noting the office’s staffing at the time — three auditors, two analysts and two special agents — and a docket of audits in progress (preauthorization processes for MCOs, school Medicaid billing, and others).

Committee members and the inspector general also discussed a planned government‑efficiency portal that the committee chair said would allow citizens and staff to report efficiency ideas or suspected waste for referral to the appropriate agency.

The hearing produced no formal votes. The committee chair told members to be prepared for a hearing on Senate Bill 13 the next day.

The inspector general left senators contact information and a QR code linking to the office’s published audit and annual reports for follow‑up.