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Inspector General audit finds errors in school‑based Medicaid claims; recommends moving payments to MCOs
Summary
The Kansas Inspector General reported errors in school‑based Medicaid fee‑for‑service payments, including $46 million paid in the audit period that CMS expects to be handled by MCOs, invalid provider identifiers, missing parental consents and background checks; IG recommends shifting payments to managed‑care organizations and improving oversight.
Steve Anderson, Inspector General, told the House Committee on K‑12 Education Budget that his office found numerous problems in school‑based Medicaid fee‑for‑service reimbursements for services delivered January 2021 through January 2023. "We paid out over $46,000,000," Anderson said, describing fee‑for‑service payments the IG believes should have been the MCOs' responsibility under managed care.
The audit focused on three questions: whether KDHE had effective systems to process and track claims, whether policies aligned with federal guidance, and whether IEPs and parental consents supported medical necessity for claims. Anderson said auditors found widespread documentation and processing errors, including an invalid national provider identifier (NPI) that a school used on claims after the issuer — a former local school business director — left the district; that invalid NPI appeared on 242 of 316 beneficiaries' claims in a sample. The IG also identified $573,000 in payments tied to invalid NPIs in the sample and a broader $390,000 amount in claims involving an invalid NPI in another sample.
On parental consent and IEPs, Anderson said many IEPs lacked required parental consent for Medicaid reimbursement: "a 70% invalid payment rate for missing consent would result in $32,000,000 in invalid payments," he told the committee, and he reported 31% of providers reviewed lacked proof of background checks. The audit noted that some claims were paid despite missing physician orders or physician signatures, and that the state's contractor and KDHE had not caught these problems.
Anderson recommended changing the KanCare contract so MCOs carry responsibility for school‑based Medicaid payments rather than the state paying fee‑for‑service directly. He estimated that moving payments to MCOs could save the state more than $22 million a year by stopping the current fee‑for‑service outflow and reducing administrative costs.
KDHE acknowledged errors in its response included in the report; Anderson said KDHE staff told auditors they had not been closely monitoring the program and admitted improvements were needed. Committee members asked about contract language that currently carves school‑based services out of MCO responsibility and whether capitation rates would be adjusted if MCOs were required to pay for school services; Anderson and others said contract changes and monitoring adjustments would be needed.
Members also asked about summer service delivery, the potential for federal recovery of improper payments and whether MCOs were aware of extra payments; Anderson said the federal government had previously recovered funds from Kansas in a prior OIG audit and that his office had identified improper payments for KDHE to pursue.
KDHE and KSDE staff were invited to follow up and the committee requested additional materials; the IG stood for questions and offered follow‑up briefings. No immediate statutory changes were adopted at the hearing.
