Medicaid Program Audit Holding Up Bonds for Infrastructure

The governor's budget office and the state health department are at odds with a Legislative Audit Division

By Associated Press

HELENA — An ongoing audit of Montana’s Medicaid program threatens to delay or increase the costs of infrastructure projects approved by the Legislature, state officials said.

The governor’s budget office and the state health department are at odds with a Legislative Audit Division finding that says it’s “reasonable” the federal government will require repayment of at least $130 million in Medicaid funds.

Budget Director Tom Livers said Wednesday the state sought to sell $80 million in bonds in November, but auditors wouldn’t sign off on the financial disclosure to investors without including the possible liability to Medicaid.

The governor’s office and the state health department argue the audit division used a small sample and the wrong criteria in finding a 50% error rate in determining Medicaid eligibility, compared to the .4% error rate found by the federal government.

The state will not recognize the “fictional liabilities associated with the Medicaid program,” said Raph Graybill, Gov. Steve Bullock’s chief of staff.

Livers, Graybill and Department of Health and Human Services Director Sheila Hogan and Operations Services Branch Manager Erica Johnston met with the news media Wednesday, saying they wanted to raise the issue before lawmakers traveled to Helena for Legislative Week next week.

The disagreement delaying the sale of the bonds means the state could pay additional interest charges and could see higher bids for projects as contractors fill their schedules. In a worst-case scenario could, the state could lose the 2020 construction season, Livers said.

The governor’s office and legislative auditors say it’s very unlikely the federal government would ask for the money back, but auditors insist it needs to be disclosed as a risk to potential investors. If bonds were sold today, changes in the bond market mean the state would have to pay $300,000 more interest than they would have if they had been sold in November, Livers said.

The bonding was approved to pay $16 million toward renovating Romney Hall at Montana State University, $4.3 million to expand the dental hygiene program at Great Falls College, along with road, bridge, water and sewer projects.

While the audit isn’t final and its findings haven’t been made public, Graybill said auditors looked at 63 of the 275,000 people enrolled in Medicaid and found a 50% error rate in determining eligibility.

In a Jan. 6. letter to Livers, Legislative Auditor Angus Maciver told Livers the case files, in general, did not have the necessary data for auditors to conclude the health department was conforming with the state Medicaid plan. Auditors decided to check state tax return data.

“We identified indicators of ineligibility resulting in significant projected costs,” deputy legislative auditor Cindy Jorgenson wrote to Livers.

State officials say they follow eligibility requirements approved by the federal government. The health department looked at two of the cases and found auditors made incorrect eligibility determinations, Johnston said.

Graybill said the typical rate of error in Medicaid enrollment usually results in the state underpaying or overpaying about $6,000 to $160,000.

“That’s the scale we are talking about for adjustments,” Graybill said. “Not $130 million.”

“If the state is unwilling to adequately inform prospective bondholders and other users of the financial statements of this contingency, we must inform them through our audit opinion,” Maciver wrote.

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