APNewsBreak: Feds: NY was overpaid for health exchange setup

New York improperly used as much as $150 million in grants to set up its insurance exchange under President Barack Obama's health care law and help people enroll for coverage, according to a federal audit released Tuesday.

The Office of Inspector General for the Department of Health and Human Services said in the report provided to The Associated Press that the state used inflated population figures to claim funding, effectively saying every New Yorker would benefit from coverage through the exchange.

The office has recommended requiring the state to return the money or work out the proper amounts with the Centers for Medicare and Medicaid Services. The state disputes the findings.

At issue is part of the $571 million the federal government gave New York in grants from 2010 through 2014 to get the exchange up and running, enroll uninsured people in "qualified health plans" and encourage participation in Medicaid and the Children's Health Insurance Program.

The auditors looked at about $222 million of that money for the period from August 2011 through March 2014 and determined the state had vastly overstated the number of expected participants in the plan by using a formula that assumed the entire state population of nearly 20 million would be eligible.

That resulted in the state getting $93.4 million more than it was entitled to for "establishment grants" and another $55 million because it failed to use "updated, better data" and the money should have been allocated to Medicaid.

A spokesman for the inspector general's office said the state combined the numbers for Medicaid and CHIP in its "cost allocation plan" and came up with an initial number of 5 million participants and projected another 1 million would be added.

The problem, he said, is that the balance of roughly 14 million should not have been counted as eligible for exchange plans because most of those people already had coverage through an employer or Medicare for seniors.

In fact, the state health department's most recent report on the exchange showed that as of Jan. 1 just under 2 million people were enrolled through Medicaid, 215,000 children through Child Health Plus and 380,000 through what's called the "Essential Plan" for low-income people not qualified for Medicaid. Another 272,000 were covered by the private plans offered through the exchange.

The audit said "weak internal controls," including a lack of written polices, led to the state health department mistakes.

In its response to the audit, the health department disputed each finding and said its formula "reasonably reflected the distribution of the state population that would benefit from the marketplace." It also said its method was approved by the Centers for Medicare and Medicaid Services.

"New York State of Health strongly disagrees with the inspector general's finding that federal grant funds were misallocated to exchange activities rather than to other public health insurance programs, and that any refund is due to CMS," the health department said in a statement Monday. "New York followed all federal rules and guidance and allocation methods were approved by the Centers for Medicare and Medicaid Services."

The CMS didn't immediately respond to questions about how it will work with the state or how New York's allocation was approved with what the auditors said were errant numbers.

Audits have turned up similar problems in Vermont, Nevada, Maryland and Washington, D.C., but nothing on the scale of New York.

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