Repaying Medicaid Overpayments – New Procedures and Requirements

A significant change in how the State of Indiana (the “State”) recoups alleged overpayment of Medicaid funds from providers takes effect on July 1, 2011.  The new law, which was part of the Budget Bill (HEA 1001), will dramatically change the procedure for all Medicaid providers when contesting a recoupment attempt by the State for allegedly overpaid Medicaid funds.  The statute, codified at IC 12-15-13-3.5 and -4, addresses the new recoupment procedures for non-institutional providers and institutional providers and will be administered by the Family and Social Services Administration through the Office of Medicaid Policy and Planning.
The Current Law (soon to be expiring)

Under current law, which is only effective through the end of June 2011, when a Medicaid provider is notified by the State that an overpayment may have occurred, the provider has three options when contesting the notice of overpayment.  The provider can:

• Pay the money back within 60 days with interest;
• Pay the money back within 60 days and request a hearing; or
• Not pay the money back and request a hearing.

If the provider chose the third option and lost the appeal the provider is required pay interest on the amount from the date of the notice of overpayment.  Many providers chose to exercise their rights under this third option.

The New Law

As applied to Indiana’s comprehensive care facilities, the new Medicaid overpayment statute provides a preliminary administrative reconsideration process during which the State and facility discuss draft audit findings that may lead to the State issuing a final recalculated Medicaid rate in order to recoup alleged overpayments from the facility.  It is critical that facilities take action at each step in the new process to protect their rights.  Failure to act may result in waiver or surrender of appeal rights.

Under the new law, a facility that receives draft audit findings from the State can provide comments to the State and then the State will issue a preliminary recalculated rate for the facility.  Once the facility receives this preliminary recalculated rate, the facility has 45 days to request administrative reconsideration of the preliminary rate.  A facility that receives a preliminary recalculated rate must request administrative reconsideration or the facility will not be permitted to appeal the final determination of the State.

Once the State and the facility conclude the reconsideration hearing, and if the State believes an overpayment has occurred, the State will notify the facility in writing that the State believes an overpayment has occurred and is issuing a final recalculated Medicaid rate.  The final recalculated Medicaid rate will be implemented retroactively upon the next payment cycle.

If a facility disagrees with the final recalculated rate the facility may file an appeal with the State no later than 60 days after issuance of the notice of final recalculated Medicaid rate.  If, after the appeal and hearings, the State determines that no overpayment has been made, then the State must pay back to the facility the amount of the overpayment, any interest paid by the facility to the State, and interest on the overpayment amount and interest paid by the provider.

Conclusion

With this significant change to the procedure that the State must utilize to recoup alleged overpayment to providers, there are bound to be problems that occur.  It is possible that this new statute, with the reconsideration process, will provide for a more transparent approach to settling alleged overpayments of Medicaid funds.  However, the reconsideration process in the new law is not yet tested and all Medicaid providers should take great care in handling each step of the process, which will help in any subsequent appeal pursued by a provider.

Please contact Zach Cattell at zcattell@ihca.org or 317-616-9001 with comments, questions or for more information.