Inspector general tells welfare committee audits found millions in Medicaid waste and possible savings

Steve Anderson, inspector general in the attorney general's office, told the Committee on Welfare Reform on Jan. 27 that audits of Medicaid programs and related services have identified large sums the state can save or recover.

Anderson said his office's audit work lists a $16,000,000 entry described as "waste" in a TransMed-related item and that an interim audit identified roughly $36,000,000 in annual savings if people who lack required functional assessments are moved from costly waiver capitation payments to standard Medicaid. "We could save $36,000,000 a year by making that one simple change," Anderson said.

Why it matters: capitation for waiver participants can be far higher than the cost of standard Medicaid services. Anderson told lawmakers the capitation payment for some waiver enrollees can exceed $5,000 per month while standard Medicaid costs are about $800 per month, creating a wide cost gap when people remain on waivers without required assessments.

Anderson attributed the problem in part to tracking failures in KDADS's CAMIS system, which he described as "defunct and needed to be updated," and said a prior $1,000,000 appropriation to upgrade the system was not implemented. "They bought [an upgrade] years ago and they never did do anything with it," he said, adding that the office recommends fixing CAMIS or moving to a different tracking method.

On the CCRC item, Anderson said a legislative change in how continuing care retirement centers qualify produced about $12,000,000 in annual savings, and he described several other findings of overpayments and potential savings in the audit packet provided to the committee.

Lawmakers pressed on capacity and next steps. Representative Brownlee Page asked whether the IG's office had sufficient manpower; Anderson said KDADS is responsible for removing people from waivers but noted KDADS staffing appeared thin in places and that the IG's office lacks authority to claw back funds. He said the office sought nine additional FTEs under last year's authority expansion but that those positions were not funded. "We were given 9 FTEs'. That was going to be a cross section," Anderson said, describing a mix of auditors, analysts and special agents the office would use to pursue fraud and recovery in cash and food programs as well as Medicaid.

Anderson characterized his office's audits as performance audits rather than financial audits, and said dollar estimates are derived from examining capitation and payment patterns; estimates could be validated later with follow-up work. "Those are estimated savings," he told the committee, noting a follow-up audit could verify actual savings.

What's next: Anderson recommended technical fixes (CAMIS or replacement), improved staffing and a corrective-action plan framework to ensure agencies implement audit recommendations. He also said his office will continue investigations and that some audits will be followed by corrective-action tracking or additional review before the committee.

The committee did not take formal action at the hearing. Anderson stood for questions throughout the presentation and the panel adjourned after closing remarks.