California made $71M worth of unallowable Medicaid payments to dead people

A new report from the Department of Health and Human Services Office of Inspector General found that California made about $71 million worth of Medicaid payments on behalf of deceased beneficiaries.

These dollars were paid to managed-care organizations, in what is known as a capitation payment. Capitation payments are made by the state, usually monthly, to a managed-care company for the medical services of each beneficiary enrolled under the state plan. These payments are made regardless of whether the beneficiary receives services for the period.

The finding was part of a multi-year audit conducted between July 2014 and December 2017, after previous reviews had found improper payments were being made to deceased residents in other states.

Auditors selected a random sample of 184 capitation payments, of which only six were correct. The other 178 were considered unallowable and made on behalf of deceased beneficiaries. Nearly 30 percent of the unallowable payments occurred more than 1 year after the recipient’s death, while about 70 percent occurred during the first year after death. More than 10 percent continued for more than two years after the date of death.

Using those sample results, the Inspector General estimated that the state agency made $70.9 million on behalf of deceased people between July 2014 and December 2017. The share of federal dollars that accounts for is about $53.4 million.

These unallowable payments, however, account for less than 1 percent of the $150 billion worth of capitation payments made to managed care organizations during the audit period.

The California Department of Health Care Services said it fully or partially agrees with all of the findings and is taking steps to implement appropriate changes.

The California Medical Assistance Program (Medi-Cal) is the largest Medicaid program in the nation, covering 39 million people.

According to the audit, the errors occurred because the state did not dis-enroll beneficiaries after their dates of death were identified or collaborate with other agencies to identify or verify dates of death.

It was recommended that the state repay the federal government $53.4 million, in addition to attempting to recover the unallowable payments made to the managed care organizations.


In 2017, the Office of the Inspector General found that Texas made $5.5 million worth of capitation payments after beneficiaries had died. Earlier this year, auditors found Rhode Island paid about $11 million.

As previously reported by FOX Business, health programs account for the largest share of federal spending. In fiscal 2017, they comprised 26 percent of the federal budget.