Montana Budget Director Disputes Medicaid Eligibility Audit

Legislative auditors set out to prove theory of 'rampant ineligibility' among participants, according to Tom Livers

By Tristan Scott

HELENA — Legislative auditors appeared to approach a recent review of the state’s Medicaid program with a predetermined conclusion that there is “rampant ineligibility” among participants and then set out to prove that theory, according to Montana’s budget director.

“I recognize the significance of what I’ve said,” Budget Director Tom Livers said Tuesday in response to a question from Legislative Audit Committee member Rep. Matt Regier, R-Kalispell.

Livers and Department of Public Health and Human Services employees said rather than listening to department explanations about how they determined people were eligible for coverage, auditors instead used state income tax data to determine that 26 of 63 sample applicant files improperly received benefits.

Assuming that error rate applied to all the state’s 270,000 Medicaid recipients, auditors argued the state general fund could have to repay millions of dollars to the federal government.

The disagreement over whether the disputed potential debt needed to be reported on state financial disclosures delayed the sale of $80 million in bonds to pay for infrastructure projects from November to April.

Erica Johnston, operations service branch manager for the Department of Public Health and Human Services, said auditors made a series of mistakes, improper calculations and refused to look at additional information that would have shown that, in fact, five of those people received improper benefits.

Johnston said federal government rules only call for repayment of spending in cases that were audited, and the state has repaid the $13,546 it owed for spending on behalf of the five ineligible recipients.

Auditors didn’t use all the 27 tools the agency uses to determine eligibility before it decided to test compliance using state tax records — records the department could not have legally used at the time, Johnston said. The audit covered spending in the two fiscal years ending June 30, 2019.

Sheila Hogan, the director of the health department, said the agency lawfully operates its Medicaid program.

“The audit should have been about how well we played by the rules approved in our state plan,” Hogan told the committee. “The audit team made the decision to evaluate the program against criteria that was not approved at the federal or state level at the time of the audit.”

She said that by focusing solely on tax information, the audit team demonstrated “a profound misunderstanding of this complex program that resulted in faulty conclusions.” The agency made multiple attempts to clarify information, but auditors would not look at it, she said.

“We lost any ability to gain any benefit from this audit,” she said.

The Bullock administration held a press conference in January saying the ongoing audit, and the auditor’s office’s insistence that a $130 million potential liability be included in the state’s financial disclosures, held up the infrastructure bond sale. The administration argued the audit division used a small sample and the wrong criteria in finding a 50% error rate in determining Medicaid eligibility, compared to the 04% error rate the federal government found.

At the time, Legislative Auditor Angus Maciver nearly accused Livers and Democratic Gov. Steve Bullock of an “undue influence threat” because of their public objections to the audit.

On Tuesday, Maciver told the Missoulian the audit team followed professional standards.

“Are audit standards sometimes crosswise with programmatic standards of Medicaid?” Maciver asked. “Yeah.”

Montana ended up selling its infrastructure bonds at historically low rates during the economic downtown due to the coronavirus pandemic.

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