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Legislators question state Medicaid contracts

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RALEIGH -- The legislative committee charged with oversight of state programs had a lot of questions Wednesday about a recent audit of the Division of Medical Assistance's Medicaid fraud and abuse program.

The audit found that the contracts were written in a way that during these first years of the program,the state did not see a lot of return for its millions of dollars of investment.

“Everything was going to be in place and working for the IBM contract in three months that it was going to be up and going,” said State Auditor Beth Wood. “After 19 months we have only seen $420,000 dollars, when the return on investment was expected to be 900 percent.”

Wood said three of the four contracts were not written in the best interest of the state and that creates no incentive for these companies to bring in big bucks for North Carolina.

“The vendor would have been a little better, maybe, in identifying the fraudulent practices, the risk of being able to collect on what was identified as fraud,” said Wood. “The actual recoupment may have been a lot higher percentage.”

The Division of Medical Assistance says while it agrees that the contracts need some work, there are things the audit is not looking at.

“What isn't being measured here to is the deterrent effect,” said DMA Director Michael Watson. “What we are finding is as we are identifying providers as having problems, their billings go down, the costs go down.”

Watson told the committee that there had to be higher fees off the top as software was created and sold to the state but the costs will go down.

“As collections start to flow through the system, you'll start to see that flat fee look very good in terms of return on investment,” said Watson.

Wood said she believes these contracts could have been written to have the state only pay out after fraud was detected and money was collected.

The Department of Health and Human Services said since North Carolina is the first state using these practices, it was not clear how the contracts should be written.

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