Colorado paid more than $7 million to insurance companies for care to dead Medicaid

Colorado is the latest state found to have paid insurance companies to handle care for Medicaid recipients who had died, according to a new report from the U.S. Department of Health and Human Services’ Office of the Inspector General.

The audit estimated that Colorado paid insurers at least $7.3 million, including both state money and about $3.8 million in federal funds, which the state might have to return. The payments were made on behalf of nearly 9,000 deceased Coloradans, according to the report.

The federal Centers for Medicare and Medicaid Services didn’t answer questions about whether it would seek to recoup the payments.

Colorado, like other states that contract with private companies to manage Medicaid enrollees’ care, pays a monthly rate for each member assigned to a company. The audit examined about $13 million in monthly “capitation payments” from 2018 to 2020.

The payments are a relatively small portion of the $15 billion that Colorado spends annually on Medicaid and other health coverage programs. Still, the news the state might have to repay them arrives at a difficult time. Colorado faces a billion-dollar hole in its budget, and lawmakers are considering Medicaid cuts as one of the major tools to make the numbers work.

The Colorado Department of Health Care Policy and Financing, which oversees the state’s Medicaid program, has no plans to return the money, because inspectors used state and federal records rather than reaching out to the enrollees to verify that they had actually died, spokesman Marc Williams said.

If the state did need to return any funds, a settlement with the federal government could take two to three years, he said.

“Based on the OIG’s inadequate approach in reaching the financial estimates in this report, HCPF will need to spend time disputing the estimates directly with the Centers for Medicare and Medicaid Services, rather than attempting to identify and recover unallowable capitation payments,” he said in a statement.

State officials also said they couldn’t recover the money sent to some of the insurance companies, either because they’d gone out of business or because of the terms of the contracts, according to the audit. They agreed with recommendations to identify when enrollees die going forward.

Sixteen states and Puerto Rico also paid for deceased enrollees’ care coordination, according to a list of audits since 2016. The improper payments ranged from $589,000 in Wisconsin to almost $71 million in California.

Colorado and the other states had similar problems with their processes, including using eligibility systems that didn’t work with other systems that include death data, and not taking advantage of other data sources that could verify deaths, according to the Office of the Inspector General.

In most cases, data from the Social Security Administration showed the person had died, but Colorado didn’t know because it lacked an automated system to check for deaths among enrollees. Less commonly, the state did have information about a person’s death in its eligibility system, but processed the payments anyway.