Audit Finds State Health Agency Needlessly Spent More than $500 Million

An audit of MassHealth released Tuesday found that the agency erroneously paid more than $500 million from October 2009 to September 2014.

The report, released by state auditor Suzanne Bump, found two major problems with MassHealth, the state’s Medicaid agency. First, the organization paid $233 million to medical providers directly, when in fact those fees should have been paid by its partner health insurers, called managed care organizations (MCOs).

Second, Bump found that the agency could have saved another $288 million during the five-year time period if its affiliates’ contracts had contained more concrete language about which services would be covered. The audit found that MCOs frequently paid for services that they were not technically required to cover, adding to the money spent needlessly.

Taken together, duplicate or incorrect payments accounted for more than $500 million wasted, the most expensive audit findings in almost 30 years. In a statement, Bump says it’s imperative that MassHealth—Massachusetts’ largest state program, with annual payments to healthcare providers reaching $10.8 billion—rule out inefficiencies like those uncovered in the audit:

“MassHealth has failed to fully realize the cost savings potential of managed-care organizations,” said Auditor Bump. “To avoid paying for health services twice, MassHealth must know exactly what it should and should not pay for and have a claims processing system that can follow those rules. It is troubling to see this amount of inefficiency.”

The details of the audit show the extent of that inefficiency. Bump’s report says $20 million of the faulty spending was a result of poorly updated databases alone, while millions more could have been saved if the agency simply kept an accurate master list of medical procedures that MCOs are required to cover.

While MassHealth has pledged to improve its systems, the agency claims that Bump’s figures are off by as much as $127 million, as it maintains that some procedures identified in the report should not have been covered by MCOs.