[House Report 113-11]
[From the U.S. Government Publishing Office]
113th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 113-11
_______________________________________________________________________
Union Calendar No. 7
``BILLIONS OF FEDERAL TAX DOLLARS MISSPENT ON NEW YORK'S MEDICAID
PROGRAM''
__________
REPORT
by the
COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
March 5, 2013.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
LETTER OF TRANSMITTAL
----------
House of Representatives,
Committee on Oversight and Government Reform,
Washington, DC, March 5, 2013.
Hon. John Boehner,
The Speaker, House of Representatives,
Washington, DC.
Dear Mr. Speaker: By direction of the Committee on
Oversight and Government Reform, I submit herewith the
Committee's report to the 113th Congress. This report was
adopted by the Committee on February 13, 2013, in a meeting
that was open to the public.
Sincerely,
Darrell Issa,
Chairman.
C O N T E N T S
----------
Page
Executive Summary................................................ 1
I. Introduction.....................................................3
II. New York's Medicaid Program is the Largest in the Country........5
III. Examples of Problems in New York's Medicaid Program..............6
Lack of Controls and Misspending in New York's Personal Care
Services Medicaid program\1\
Overpayments to New York Developmental Centers
Abuses of Medicaid Eligibility Rules in New York
Excessive Salaries Paid to Executives of Medicaid-funded
Organizations
IV. Patient Abuse Within the Developmentally Disabled System in New
York............................................................13
V. Past Health Care-related Corruption by Elected Officials........14
VI. Allegations of Problems with State Oversight of the Medicaid
Program.........................................................16
VII. Reforms in the Last Two Years and Additional Concerns...........17
VIII.Recommendations.................................................23
IX. Conclusion......................................................25
Appendix A....................................................... 26
Appendix B....................................................... 26
Appendix C....................................................... 29
Committee Consideration; Statement of Oversight Findings and
Recommendation of the Committee; Statement of General
Performance Goals and Objectives............................... 32
__________
\1\For more information about Personal Care Services in New York and
Dr. Feldman's testimony before the Committee, see the Committee Staff
Report entitled Uncovering Waste, Fraud, and Abuse in the Medicaid
Program, U.S. House Committee on Oversight & Gov't Reform (April 25,
2012) [hereinafter Committee Staff Report].
Union Calendar No. 7
113th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 113-11
======================================================================
``BILLIONS OF FEDERAL TAX DOLLARS MISSPENT ON NEW YORK'S MEDICAID
PROGRAM''
_______
March 5, 2013.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Issa, from the Committee on Oversight and Government Reform,
submitted the following
R E P O R T
Executive Summary
New York State's Medicaid program is the largest in the
country. In fiscal year 2010, New York's $2,700 per resident
Medicaid spending exceeded per capita Medicaid spending in the
rest of the country by more than $1,500. When problems have
been identified, the cost associated has often been large as
well. Poor program oversight by both the State and federal
Government has contributed to these problems.
This report discusses past findings of the Office of
Inspector General (OIG) of the Department of Health and Human
Services (HHS), investigative reporters, whistle-blowers and
this Committee of waste, fraud, and abuse within New York's
Medicaid program. It also discusses positive steps taken by
Governor Andrew Cuomo to address many of those problems,
highlights continuing concerns, and offers several
recommendations aimed at protecting future tax dollars from
being misspent. Several of the costly problems discussed in
this report include:
In 2010, the Poughkeepsie Journal reported that
Medicaid was paying extremely high payment rates for residents
in New York's State-operated developmental centers. The high
payments resulted from a complicated methodology that was
initially approved more than two decades ago by the Federal
Government. This methodology resulted in daily payment rates
exceeding $5,000 for each institutional resident by 2011. The
Committee majority estimates that the Federal share of total
payments going to the State through these facilities was
approximately $15 billion in excess of a reasonable amount. The
Centers for Medicare and Medicaid Services (CMS) believes that
the developmental center payments exceeded Medicaid upper
payment limits established by Congress. The excessive rates
have remained in place for two-and-a-half years after the
Federal Government began asking the State for information about
the developmental center payment rates.
Over the past decade, HHS OIG has uncovered ten
instances in which New York State has improperly claimed at
least $50 million in Federal Medicaid dollars. Moreover, in the
past four years, the Federal Government has successfully sued
New York for unlawful Medicaid expenditures twice, recovering
more than $600 million.
In 2009, a whistle-blower sued New York City for
rampant inappropriate and fraudulent spending in Medicaid's
Personal Care Services (PCS) program.
The Committee has learned that Medicaid estate
planning is a long-standing practice and significant problem
across the nation and in New York State. The Committee has
learned that relatively affluent people in New York
artificially impoverish themselves in order to qualify for
Medicaid and have taxpayers pick up the cost of their long-term
care services and supports. At least in Suffolk County, New
York, a relatively affluent part of the State, a legal
technique called spousal refusal, which is essentially when one
spouse abandons all financial care of a sick or disabled spouse
and leaves him or her as a ward of the State, is widely used.
The Committee has uncovered excessive salaries
paid to executives of nonprofit institutions that are nearly
completely financed by Medicaid. The Committee found that at
least 15 of these executives received yearly compensation
exceeding $500,000 and at least 100 others received yearly
compensation exceeding $200,000.
Over the past decade, many powerful elected
members of New York's State legislature, including two recent
State Senate majority leaders, have been convicted of fraud or
corruption charges related to health care.
Reforming Medicaid in New York faces several
significant challenges. For one, many powerful special interest
groups in New York benefit from the State's large Medicaid
expenditures and lobby strongly against changes that would
reform the State's program. Another challenge is the long-
standing New York practice of increasing Medicaid as a way to
leverage extra Federal money into the State.
At the beginning of his term, Governor Andrew Cuomo called
New York's Medicaid program ``bloated'' and argued that it
``must be reformed to help [New York] [S]tate begin to make
ends meet.'' The Committee has also found that despite these
obstacles, several program reforms are being orchestrated by
the Cuomo Administration, including:
The Cuomo Administration has enacted many new
policies through a Medicaid Redesign program, including the
first-in-the-nation Medicaid global cap, which places a budget
constraint on the State's Medicaid spending. There is also
evidence that the State has had some initial success with
reducing waste, fraud, and abuse within New York City's PCS
Medicaid program.
Finally, after two decades of overpayments, New
York and CMS are in the midst of negotiations to develop an
appropriate rate and come to an appropriate amount for the
Federal Government to recoup for past overpayments in excess of
reasonable costs.
Early last year, Governor Cuomo issued an
executive order which limits executive compensation at
Medicaid-financed institutions to less than $199,000.
While New York's actions over the past few years are a step
in the right direction, it is clear to the Committee that there
is more that New York and the Federal Government can do to make
the State's Medicaid program more cost-effective. The Committee
recommends six specific actions that should be taken
immediately to reduce Medicaid waste, fraud, and abuse in New
York's program and potentially save both Federal and New York
State taxpayers significant amounts of money each year:
CMS or a qualified government watchdog agency
should conduct a complete and independent audit of New York's
Medicaid program, including the work of New York State's Office
of the Medicaid Inspector General;
CMS should finalize an agreement with New York on
a corrected payment methodology that ends the developmental
center overpayments as soon as possible. CMS should pursue
recovery of an appropriate portion of previous overpayments in
excess of reasonable costs for Federal taxpayers;
CMS' review of New York's Section 1115 waiver
request, to allow the State to keep a portion of the savings
its Medicaid reforms are projected to achieve should follow all
applicable statutory requirements, particularly with respect to
budget neutrality. CMS should also ensure that the baseline
from which New York is calculating the savings does not include
developmental center overpayments or other overpayments;
New York's PCS program must only enroll
individuals who meet the eligibility thresholds required by
law;
New York's legislature should ban ``spousal
refusal'' and other abuses of Medicaid eligibility rules, as
Governor Cuomo has proposed in each of his three budgets. New
York must also aggressively pursue estate recovery against
people who abuse Medicaid eligibility rules; and
New York's legislature should codify Governor
Cuomo's executive order limiting compensation of executives at
organizations receiving nearly all their money from tax
revenue. New York must also aggressively monitor and enforce
these limits.
I. INTRODUCTION
In June 2011, nearly 53 million Americans were enrolled in
Medicaid, a joint Federal-State program that finances health
and long-term care services for a diverse group of
individuals.\2\ While Federal law currently mandates certain
minimum coverage standards for state Medicaid programs, states
can--and very often do--expand eligibility criteria and
benefits beyond mandated thresholds. Adjusted for inflation,
Medicaid spending has increased over 250 percent since 1990,\3\
and government experts estimate that Medicaid cost American
taxpayers $440 billion in 2012.\4\ The Federal Government
reimburses state Medicaid spending, typically equal to half of
Medicaid expenditures in states with the highest per capita
income, and about 75 percent in states with the lowest per
capita income.\5\ In aggregate, the Federal Government
typically reimburses about 57 percent of state Medicaid
spending, and in New York the typical Federal reimbursement is
50 percent.\6\
---------------------------------------------------------------------------
\2\Kaiser Commission on Medicaid Facts, Medicaid Enrollment: June
2011 Data Snapshot, available at: http://www.kff.org/medicaid/upload/
8050-05.pdf.
\3\In 1990, national expenditures on Medicaid equaled $73.7
billion. (See National Health Expenditures, Levels and Annual Change,
Table 3, Center for Medicaid and CHIP Services, available at http://
www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-
Reports/NationalHealthExpendData/Downloads/tables.pdf.) Adjusted for
inflation, this would equal about $129.5 in 2012 dollars since the
average annual consumer price index was 130.7 in 1990 and 229.594 in
2012. (See Consumer Price Index, Bureau of Labor Statistics, U.S. Dept.
of Labor, available at ftp://ftp.bls.gov/pub/special.requests/cpi/
cpiai.txt.)
\4\Spending and Enrollment Detail for CBO's February 2013 Baseline:
Medicaid.
\5\Federal Financial Participation in State Assistance
Expenditures; Federal Matching Shares for Medicaid, the Children's
Health Insurance Program, and Aid to Needy, Aged, Blind or Disabled
Persons for FY 2012, 75 Fed. Reg. 69082, 69083 (Nov. 9, 2010),
available at http://aspe.hhs.gov/health/fmap12.shtml.
\6\The American Recovery and Reinvestment Act raised the average
reimbursement rate for the U.S. States to nearly 70 percent for fiscal
years 2009 through 2011. Between fiscal year 2008 and fiscal year 2009,
the average State FMAP increased from 59.7% to 70.0%. Kaiser Family
Foundation State Health Facts, Federal Medical Assistance Percentage
(FMAP) for Medicaid and Multiplier, available at http://
www.statehealthfacts.org/comparetable.jsp?ind=184&cat=4.
---------------------------------------------------------------------------
To put the size of the program in context, annual Medicaid
spending now exceeds Wal-Mart's worldwide annual revenue and is
more than 50 percent larger than Greece's entire economy.\7\
The Committee majority believes an uncapped Federal
reimbursement makes this the program particularly susceptible
to waste, fraud and abuse. As explained in an April 2012
Republican staff report:
---------------------------------------------------------------------------
\7\According to the World Bank, Greece's Gross Domestic Product was
slightly under $290 billion in 2011. See Greece, The World Bank,
available at http://data.worldbank.org/country/greece.
The policy of an open-ended federal reimbursement of
state Medicaid spending significantly reduces the
incentives for states to act as wise stewards of
federal tax dollars. For example, in order to return
$1,000 in fraudulent Medicaid funding for state
purposes, a state with a 60% federal Medicaid
reimbursement rate would have to identify and recover
$2,500 of waste, fraud, and abuse in its program. Since
60% of the total recovery would have to be returned to
the U.S. Treasury, the state would have to refund
$1,500 of the $2,500 it recovered. Moreover, due to the
open-ended federal Medicaid reimbursement, many states
view Medicaid as an economic growth engine and
therefore lack much interest in where the money is
going. States would also have to increase resources to
uncover the waste, fraud, and abuse. For these reasons,
the federal Medicaid reimbursement demonstrates one of
the core reasons the Medicaid program suffers from
rampant waste, fraud, and abuse.\8\
---------------------------------------------------------------------------
\8\See Committee Staff Report, supra note 1.
Each Federal dollar misspent on Medicaid is one less dollar
for the country to use for better health care for the poor,
education, infrastructure, national defense, deficit reduction,
or any other priority. One concern is that some politicians and
policymakers view Medicaid not only as a program to assist low-
income and disabled persons access health care and long-term
care services, but also as a way to bring Federal dollars into
the State.
The Committee discovered a decades-long problem in New
York's Medicaid program, which is the subject of this Committee
Report.
II. NEW YORK'S MEDICAID PROGRAM IS THE LARGEST IN THE COUNTRY
New York's spending on Medicaid is the highest in the
country by a considerable amount. Table 1 shows Medicaid per
resident spending in Fiscal Year (FY) 2010 on the program's
three main spending categories--acute care, long-term care, and
disproportionate share hospitals (DSH)\9\--for California, New
York, Pennsylvania, and the entire country. The numbers in
parentheses show how many dollars New York spends per resident
on Medicaid spending for every dollar spent per capita in each
of the other three regions. As Table 1 shows, New York's per
resident Medicaid spending is nearly double that of
Pennsylvania and more than double that of California and the
entire country. Appendix A contains a table that shows the
Federal share of state Medicaid spending for FY 2010 on a per
capita basis for all 50 States. Federal taxpayers contributed
$1,657 toward New York's Medicaid program per State resident in
FY 2010, an amount nearly 20 percent greater than that of
Vermont, the State with the second highest per resident Federal
Medicaid contribution, and more than 60 percent greater than
the median per resident Federal Medicaid contribution.
---------------------------------------------------------------------------
\9\DSH spending is intended to benefit hospitals that treat a large
number of uninsured patients and patients with Medicaid. See
Congressional Research Service, Medicaid Disproportionate Share
Hospital Payments, December 18, 2012, available at http://www.fas.org/
sgp/crs/misc/R42865.pdf.
TABLE 1--PER RESIDENT MEDICAID SPENDING (FY 2010), BY SERVICE
----------------------------------------------------------------------------------------------------------------
Long-term
Geographic area Acute care care DSH Total
----------------------------------------------------------------------------------------------------------------
New York.................................................... $1,404 $1,122 $161 $2,687
California.................................................. $728 $343 $58 $1,129
(1.93) (3.28) (2.78) (2.38)
Pennsylvania................................................ $873 $536 $66 $1,476
(1.61) (2.09) (2.42) (1.82)
USA......................................................... $805 $396 $57 $1,258
(1.74) (2.83) (2.82) (2.14)
----------------------------------------------------------------------------------------------------------------
The Committee chose the states of California and Pennsylvania to compare to New York because California is the
largest state and has the second largest Medicaid program, and Pennsylvania borders New York and also has a
large population. USA represents national figures for the U.S. states plus the District of Columbia.
Source: Data is from the Kaiser Family Foundation.
Table 2 shows how much certain states spend on Medicaid
divided by the number of individuals in the state who have
income below the poverty line. The numbers in parentheses show
how many dollars New York spends on Medicaid for every dollar
spent by the three other regions, divided by the number of
people in poverty. Although a significant amount of Medicaid
spending is for individuals above the poverty line, Table 2
provides perspective about State Medicaid spending relative to
the number of individuals at or below the poverty line. Table 2
shows that New York's Medicaid expenditures exceed $18,000 for
each person in poverty, well over double the corresponding
figure for both California and the entire country, and 62
percent more than the corresponding figure for Pennsylvania.
The disparity is especially pronounced for spending on long-
term care services, on which New York spends more than three
times what California spends and nearly three times what the
country spends.
TABLE 2--MEDICAID SPENDING PER PERSON IN POVERTY (FY 2010), BY SERVICE
----------------------------------------------------------------------------------------------------------------
Long-term
Geographic area Acute care care DSH Total
----------------------------------------------------------------------------------------------------------------
New York.................................................... $9,653 $7,716 $1,105 $18,473
California.................................................. $4,701 $2,213 $373 $7,287
(2.05) (3.49) (2.96) (2.54)
Pennsylvania................................................ $6,737 $4,137 $512 $11,386
(1.43) (1.87) (2.16) (1.62)
Rest of USA................................................. $5,385 $2,654 $380 $8,419
(1.79) (2.91) (2.91) (2.19)
----------------------------------------------------------------------------------------------------------------
USA represents national figures for the U.S. states plus the District of Columbia.
Source: Data is from the Kaiser Family Foundation.
Table 3 offers another comparison that demonstrates how New
York spends significantly more through Medicaid, and
particularly on elderly and disabled enrollees, compared to
other States.
TABLE 3--MEDICAID SPENDING PER ENROLLEE (FY 2009)
----------------------------------------------------------------------------------------------------------------
Geographic area Aged Disabled Adults Children Overall
----------------------------------------------------------------------------------------------------------------
New York....................................... $22,494 $29,881 $4,277 $2,505 $8,960
California..................................... 10,528 16,269 1,073 1,567 3,527
(2.14) (1.84) (3.99) (1.60) (2.54)
Pennsylvania................................... 21,268 12,883 3,692 2,748 7,397
(1.06) (2.32) (1.16) (0.91) (1.21)
USA............................................ 13,149 2,900 15,840 2,305 5,527
(1.71) (1.89) (1.47) (1.09) (1.62)
----------------------------------------------------------------------------------------------------------------
USA represents national figures for the U.S. states plus the District of Columbia.
Source: Data is from the Kaiser Family Foundation.
III. EXAMPLES OF PROBLEMS IN NEW YORK'S MEDICAID PROGRAM
State and Federal entities and media organizations have all
found problems in the past regarding wasteful spending in New
York's Medicaid program. In 2003, then-president of the United
Hospital Fund, a health care policy and research organization,
commented that ``Medicaid became a verb--to Medicaid.''\10\
According to the New York Times, up to and including Governor
Pataki, New York governors treated Medicaid like a political
tool to get additional money from Washington.\11\ Last year,
the New York Times quoted Paul Castellani, former Director with
New York's Office of Mental Retardation and Developmental
Disabilities and now a public service professor at Rockefeller
College in Albany,\12\ that since 1966, New York took an
aggressive approach, typified by the budget division's mantra:
``[i]f it moves, Medicaid it; if it doesn't, depreciate
it.''\13\ This historical State-approach to Medicaid financing
may be a reason for the State misspending tens of billions of
Federal tax dollars over the past few decades.
---------------------------------------------------------------------------
\10\Joyce Purnick, `Medicaid' as a Verb, Then a Crutch, New York
Times (July 18, 2005), available at: http://www.nytimes.com/2003/02/24/
nyregion/metro-matters-medicaid-as-a-verb-then-a-crutch.html
\11\Id.
\12\Paul J. Castellani, is also the author of From Snake Pits to
Cash Cows, which was published in 2005 and details the continued
operation of developmental centers in the State and its implications on
Medicaid policymaking.
\13\Nina Bernstein, Cuomo's Medicaid Changes Are at Washington's
Mercy, New York Times (October 23, 2012), available at: http://
www.nytimes.com/2012/10/24/nyregion/new-yorks- medicaid-program-is-at-
the-mercy-of-washington.html?pagewanted=all&_r=0.
---------------------------------------------------------------------------
During the administration of Governor George E. Pataki,
James Mehmet, a former chief Medicaid investigator in New York
City, estimated that at least ten percent of New York City's
Medicaid spending was lost on fraudulent claims, while another
20 percent to 30 percent was misspent on unnecessary
services.\14\ In 2005, the New York Times criticized New York's
Medicaid program for ``misspending billions of dollars annually
because of fraud, waste, and profiteering'' after a year-long
investigation into the State's program.\15\ According to the
Times, State oversight authorities failed to detect egregious
examples of fraud in the Medicaid program, such as a dentist
who billed Medicaid for 991 procedures in a single day and a
Buffalo school district that rubber-stamped 4,434 special
education students--nearly 60 percent of the district's special
education population--onto the Medicaid rolls in a single
day.\16\
---------------------------------------------------------------------------
\14\Clifford J. Levy and Michael Luo, New York Medicaid Fraud May
Reach Into Billions, New York Times (July 18, 2005), available at:
http://www.nytimes.com/2005/07/18/nyregion/
18medicaid.html?pagewanted=all&_r=0.
\15\Id.
\16\Id.
---------------------------------------------------------------------------
These problems were mainly undetected or unacted upon by
the State prior to the Times article. Moreover, the Times
investigation revealed that New York had virtually no oversight
of its Medicaid program at the time.\17\ In 2005, largely in
reaction to the Times investigation, Governor Pataki issued an
executive order creating the Office of the Medicaid Inspector
General (OMIG), and he appointed New York's first Medicaid
inspector general.\18\ In 2006, the New York State legislature
codified the executive order. In April 2007, in a statement
nominating James Sheehan to be Medicaid Inspector General,
Governor Eliot Spitzer said, ``New York State's health care
spending is the highest in the nation and our system requires
dramatic reform.''\19\
---------------------------------------------------------------------------
\17\Id.
\18\Brian McGuire, Pataki Appoints Inspector General to Oversee
Medicaid Program Reform, New York Sun (July 20, 2005) available at:
http://www.nysun.com/new-york/pataki-appoints- inspector-general-to-
oversee/17291/.
\19\Paul Davies, Gov. Spitzer Snags Top Health-Care Fraud Buster,
Law Blog, Wall Street Journal (April 6, 2007), available at: http://
blogs.wsj.com/law/2007/04/06/gov-spitzer-snags-top-health-care-fraud-
buster/.
---------------------------------------------------------------------------
Over the past decade, the Office of the Inspector General
(OIG) for the U.S. Department of Health and Human Services
(HHS) found ten specific instances in which New York State
received improper Federal Medicaid payments in excess of $50
million, with six of these instances exceeding $170
million.\20\ Each of these OIG reports pointed out problems in
New York's Medicaid program, but New York State, under both
Republican and Democratic governors, disagreed with the OIG's
findings in all ten reports.\21\ In 2009, New York reached a
settlement with the Federal Government over false reimbursement
claims for speech therapy services delivered in New York
schools, which was the subject of one of the OIG reports.\22\
New York agreed to pay the Federal Government $540 million to
settle the lawsuit, which was filed under the Federal False
Claims Act.\23\ Although the $540 million amount is the largest
Medicaid recovery in history, the State believed that the
settlement was approximately $1 billion less than what the
State would have potentially had to pay if the matter had gone
to litigation.\24\
---------------------------------------------------------------------------
\20\Schedule of Federal Produced Audits and Monetary
Recommendations 01/01/2001-04/30/2012, Office of the Inspector General
at the Department of Health and Human Services.
\21\Id.
\22\Nicholas Confessore, City and State Agree to Repay U.S. for
Improper Medicaid Claims, New York Times (July 21, 2009), available at:
http://www.nytimes.com/2009/07/22/nyregion/22whistle.html.
\23\Id.
\24\Id.
---------------------------------------------------------------------------
The following examples highlight a sampling of waste,
fraud, abuse, and mismanagement in New York State's Medicaid
program that have been highlighted or uncovered by the
Committee:
1. Lack of controls and misspending in New York City's Personal Care
Services Medicaid program\25\
---------------------------------------------------------------------------
\25\For more information about Personal Care Services in New York
and Dr. Feldman's testimony before the Committee, See Committee Staff
Report supra note 1.
---------------------------------------------------------------------------
In 2009, Dr. Gabriel Feldman, a local medical director
employed by the New York County Health Services Review
Organization, filed a Federal lawsuit against the City of New
York under the False Claims Act alleging fraud, abuse, and
misspending within the Personal Care Services (PCS)
program.\26\ The PCS program, which cost up to $150,000 per
enrollee per year, was designed to provide qualifying Medicaid
beneficiaries services such as cleaning, shopping, grooming and
basic aid.\27\ The United States Attorney for the Southern
District of New York joined Dr. Feldman's lawsuit, alleging
that ``the City improperly authorized and reauthorized 24-hour
care for a substantial percentage of the thousands of Medicaid
beneficiaries enrolled in the PCS program'' by disregarding the
requirements for enrollment.\28\ According to Timothy Wyant,
the expert hired by the U.S. Attorney's Office to calculate the
measure of fraud, the total damages caused by the City's
conduct ranged from $990 million to $2.581 billion using
conservative assumptions.\29\ The City of New York eventually
settled this lawsuit with the Federal Government for $70
million.\30\
---------------------------------------------------------------------------
\26\First Amended Complaint-In-Intervention of Plaintiff-Intervenor
United States of America, United States of America ex. rel. Dr. Gabriel
Feldman v. The City of New York, 09 Civ. 8381 (JSR) (S.D.N.Y. 2011).
\27\Daniel R. Levinson, HHS OIG Review of Personal Services Claims
Made by Providers in New York (A-02-07-01054), Office of the Inspector
General, U.S. Department of Health and Human Services (June 3, 2009),
available at: http://www.oig.hhs.gov/oas/reports/region2/20701054.pdf.
\28\Id.
\29\First Amended Complaint-in-Intervention, Expert Report of
Timothy Wyant, Ph.D, supra note 26 at 4.
\30\Anemona Hartocollis, City to Pay $70 Million in Medicaid Suit,
N.Y. Times, Oct. 31, 2011.
---------------------------------------------------------------------------
2. Overpayments to New York developmental centers
In May 2012, the OIG released a report\31\ that found
developmental centers in the State received nearly $1.7 billion
in Medicaid payments beyond the facilities' reported costs in
state fiscal year (SFY) 2009 alone.\32\ In September 2012, the
Committee released a majority staff report motivated by the OIG
report showing an estimate that New York State received roughly
$15 billion in excess of reasonable costs over the past two
decades from large Federal Medicaid over-payments received by
certain State-operated institutions that treat and house
patients with developmental disabilities.\33\ (This estimate
calculates the difference between what Medicaid paid and the
Committee's estimate of what Medicare would have paid for these
patients, which is the legal allowable limit. The calculation
is explained in Appendix C). The minority, while not
independently verifying the methodology, agrees the figure is
in the billions of dollars.
---------------------------------------------------------------------------
\31\Medicaid Rates for NY State-Operated Developmental Centers May
Be Excessive (A-02-11-01029), Office of the Inspector General, U.S.
Department of Health and Human Services (2012), available at: http://
oig.hhs.gov/oas/reports/region2/21101029.pdf [hereinafter OIG Report].
\32\According to the OIG Report, New York claimed Medicaid
reimbursement totaling $2,266,625,233 in SFY 2009 and the State's
actual costs for the developmental centers that year totaled
$577,684,725. See id.
\33\Staff Report, The Federal Government's Failure to Prevent and
End Medicaid Overpayments, U.S. House Committee on Oversight & Gov't
Reform (September 20, 2012).
---------------------------------------------------------------------------
Although these facilities housed roughly 1,700 patients in
2009, total Medicaid payments to New York's developmental
centers were nearly equal to the total payments Indiana's
Medicaid program made for long-term care services during that
year and were greater than the total Medicaid long-term care
expenditures of 36 states.\34\ In SFY 2011, these State-
operated developmental centers in New York charged the Medicaid
program $5,118 per patient per day, or the equivalent of $1.9
million per year, for a single patient.\35\ One former New York
State official dubbed developmental center residents ``cash
cows'' because of the excessive payments received by the State
on behalf of the residents.\36\
---------------------------------------------------------------------------
\34\Kaiser Family Foundation, Distribution of Medicaid Spending by
Service, FY 2010, available at: http://www.statehealthfacts.org/
comparetable.jsp?typ=4&ind=178&cat=4&sub=47.
\35\See OIG Report, supra note 31.
\36\Mary Beth Pfeiffer, State won't release Wassaic resident data,
Poughkeepsie Journal (Oct. 29, 2010), available at: http://
www.poughkeepsiejournal.com/article/20101029/NEWS01/106070006/State-
won-t-release-Wassaic-resident-data.
---------------------------------------------------------------------------
In 1991, Elin Howe, the then-Commissioner of the New York
State Office of Mental Retardation and Developmental
Disabilities, and New York Governor Mario Cuomo called for the
closure of New York State developmental centers by 2000.\37\
According to Howe, ``[i]ndependent fiscal analyses of closure
demonstrate that it is the most cost-effective course to
take.''\38\ Former New York State Senator Nicholas A. Spano,
then-Chairman of the Committee on Mental Hygiene, concurred,
recommending that ``all developmental centers in the State of
New York be permanently closed by the year 2000.''\39\ However,
Governor Pataki scrapped the plan to close the developmental
centers by 2000, in large part because the centers generated so
much revenue for the State.\40\
---------------------------------------------------------------------------
\37\Mary Beth Pfeiffer, At $4,556 A Day, N.Y. Disabled Care No. 1
in Nation, Poughkeepsie Journal (June 20, 2010), available at: http://
www.poughkeepsiejournal.com/article/20100620/NEWS01/6200374/At-4-556-
day-N-Y-disabled-care-No-1-nation.
\38\Id.
\39\Id.
\40\See supra note 13.
---------------------------------------------------------------------------
The payment rates ratcheted up so high because of a formula
New York first negotiated with the Centers for Medicare and
Medicaid Services (CMS), formerly the Health Care Financing
Administration, in 1984 and then amended several times
since.\41\ The payment rate formula includes a factor that
allows the developmental centers to maintain nearly two-thirds
of the payment for a patient after the patient leaves the
facility.\42\ Since most of the individuals moving out of the
developmental centers transition into another setting financed
by Medicaid, taxpayers are effectively paying twice for
individuals who leave the developmental centers.\43\ In
addition, CMS believes that the developmental center payments
exceeded Medicaid upper payment limits established by
Congress.\44\
---------------------------------------------------------------------------
\41\Examining the Administration's Failure to Prevent and End
Medicaid Overpayments: Hearing Before the H. Comm. on Oversight & Gov't
Reform, 112th Cong. (2012) (testimony of Penny Thompson, Deputy
Director, Center for Medicaid and CHIP Services).
\42\See OIG Report supra note 31.
\43\See supra note 33.
\44\``[T]he Upper Payment Limit is the maximum a given State
Medicaid program may pay a type of provider in the aggregate, Statewide
in Medicaid fee-for-service. State Medicaid programs cannot claim
Federal matching dollars for provider payments in excess of the
applicable UPL. . . . To create an upper bound to Medicaid spending on
fee-for-service hospital rates, Congress imposed an Upper Payment Limit
based on what Medicare would have paid facilities for the same
services.'' (See Kip Piper, Medicaid Upper Payment Limits:
Understanding Federal Limits on Medicaid Fee-for-Service Reimbursement
of Hospitals and Nursing Homes, The Piper Report (April 25, 2012),
available at: http://www.piperreport.com/blog/2012/04/25/medicaid-
upper-payment-limits-understanding-federal-limits-medicaid-fee-for-
service-reimbursement- hospitals-nursing-homes/.)
---------------------------------------------------------------------------
CMS shares a large share of the blame for permitting the
overpayments to rise. According to OIG:
CMS did not adequately consider the impact of State
plan amendments on the developmental centers' Medicaid
daily rate. Specifically, CMS approved more than 35
State Plan Amendments related to the . . . rates,
including some that pertained only to developmental
centers. CMS reviewed the proposed amendments and, in
some cases, asked the State for additional information
to address concerns CMS had about the rate-setting
methodology. However, CMS's efforts did not prevent the
rate from increasing to its current level.\45\
---------------------------------------------------------------------------
\45\See OIG Report, supra note 31.
At a 2012 Committee hearing on these overpayments, CMS
agreed that the payment rates were ``excessive and
unacceptable'' and committed to reducing the payment rates to
``about one-fifth of its current level.''\46\ While CMS's
admission was a positive sign, it only occurred after the media
and the Committee shed light on decades of Federal overpayments
in excess of reasonable costs and argued strongly that these
rates should be immediately corrected.\47\
---------------------------------------------------------------------------
\46\See supra note 41.
\47\See Committee Staff Report, supra note 1.
---------------------------------------------------------------------------
3. Abuses of Medicaid eligibility rules in New York
While Medicaid is commonly considered a program for the
poor, middle-class and upper-class individuals often qualify
for Medicaid long-term care benefits.\48\ Although not specific
to New York, David Armor and Sonia Sousa of George Mason
University have found that nearly 80 percent of the non-
disabled elderly population on Medicaid is above the poverty
line, and about half of this population is over 200 percent of
the poverty line.\49\
---------------------------------------------------------------------------
\48\See e.g., Stephen A. Moses, Medi-Cal Long-Term Care: Safety Net
or Hammock?, Pacific Research Institute (January 2011) available at:
http://www.centerltc.com/pubs/Medi-Cal-LTC- SafetyNet_or_Hammock.pdf.
\49\David J. Armor and Sonia Sousa, Restoring a True Safety Net,
National Affairs (Fall 2012), available at: http://
www.nationalaffairs.com/publications/detail/restoring-a-true-safety-
net.
---------------------------------------------------------------------------
A legal industry, dubbed ``Medicaid estate planning,''
helps Medicaid applicants and their children shelter savings
and future inheritances by creatively arranging applicants'
finances to meet Medicaid eligibility rules. Medicaid estate
planning, a nationwide phenomenon, has been prevalent in New
York State for some time, as Ned Regan, the former State
Comptroller in New York, explained in a 1996 article in City
Journal:
At an unknown cost, middle- and even upper-income
families often take advantage of these Medicaid
services to avoid the major costs of caring for their
elders. To qualify for Medicaid, middle-income people
often feign poverty by placing money in a trust, by
transferring assets to children or a spouse, and by
preserving in their own name only assets not counted in
eligibility tests--houses and cars. These middle-class
Medicaid recipients are yet another addition to
Medicaid's powerful political base.\50\
---------------------------------------------------------------------------
\50\Ned Regan, Medicaid's Fatal Attraction, City Journal (Winter
1996), available at: http://www.city-journal.org/html/
6_1_medicaids_fatal.html.
---------------------------------------------------------------------------
Congress has attempted to reduce the problem of improper
Medicaid estate planning several times over the past few
decades.\51\ Most recently, as part of the Deficit Reduction
Act (DRA) in 2005, Congress addressed areas related to
transfers of assets for less than fair market value.\52\ One of
the key provisions of the DRA imposed a longer look-back
period, which is a period of time that states are supposed to
use to review whether an individual transferred assets to
another person or party for less than fair market value in
order to obtain Medicaid eligibility. The DRA lengthened the
look-back period from 36 months to 60 months.\53\
---------------------------------------------------------------------------
\51\For example, prior to the Deficit Reduction Act, Congress
passed the Omnibus Budget Reconciliation Act (OBRA) in 1993. One of the
key provisions of OBRA, which had a few provisions to address the
problem of Medicaid estate planning, was to require States to recover
Medicaid spending on behalf of beneficiaries from their estates after
death.
\52\Centers for Medicare and Medicaid Services, Important Facts for
State Policymakers: Deficit Reduction Act (January 8, 2008), available
at: http://www.cms.gov/Regulations-and- Guidance/Legislation/
DeficitReductionAct/downloads/TOAbackgrounder.pdf.
\53\Id.
---------------------------------------------------------------------------
During a hearing on September 21, 2011, the Committee's
Subcommittee on Health Care, District of Columbia, Census, and
National Archives examined abuses of Medicaid eligibility
rules.\54\ Although the DRA has been in place for many years,
Janice Eulau, assistant administrator of the Medicaid Services
Division at the Suffolk County Department of Social Services,
testified about the ease with which relatively wealthy New York
residents, can protect their assets by enrolling in Medicaid
and how roughly 60 percent of Medicaid applicants in Suffolk
County\55\ engage in estate planning to gain program
eligibility:
---------------------------------------------------------------------------
\54\Examining Abuses of Medicaid Eligibility Rules: Hearing Before
the H. Comm. on Oversight & Gov't Reform, 112th Cong. (2011).
\55\Between 2007 and 2011, median household income was $87,187 in
Suffolk County compared to a median household income of $56,951 in the
State. Between 2007 and 2011, 5.7% of persons in Suffolk County were
below the poverty level compared to 14.5% of people in the State. See
United States Census Bureau, U.S. Dep't. of Commerce, State and County
Quick Facts, Suffolk County New York, available at: http://
quickfacts.census.gov/qfd/states/36/36103.html (last visited February
2013).
As a long-time employee of the local Medicaid office,
I have had the opportunity to witness the diversion of
applicants' significant resources in order to obtain
Medicaid coverage. It is not at all unusual to
encounter individuals and couples with resources
[beyond exempt resources] exceeding $500,000, some with
over $1 million. There is no attempt to hide that this
money exists; there is no need. There are various legal
means to prevent those funds from being used to pay for
the applicant's nursing home care. Wealthy applicants
for Medicaid's nursing home coverage consider that
benefit to be their right, regardless of their ability
to pay themselves. . . . [I]ndividuals with resources
above and beyond the level prescribed by law should not
be allowed to fund their children's inheritance while
the taxpayers fund their nursing home care. I strongly
believe that this is not a partisan issue. I also
believe in the merits of the Medicaid program, but feel
just as deeply that these issues regarding resource
diversion need to be addressed.\56\
---------------------------------------------------------------------------
\56\Examining Abuses of Medicaid Eligibility Rules: Hearing Before
the H. Comm. on Oversight & Gov't Reform, 112th Cong. (2011) (testimony
of Janice Eulau, Assistant Administrator for Medicaid, Suffolk County,
New York Department of Social Services).
Eulau also testified about a technique called ``spousal
refusal,'' a provision of the Medicare Catastrophic Coverage
Act of 1988 that is being misused in New York.\57\ Under
spousal refusal, a couple shifts assets from a sick or disabled
spouse to a healthy spouse in order to ``artificially
impoverish'' the sick or disabled spouse and qualify him or her
for Medicaid. The healthy spouse then invokes spousal refusal
and declines to provide financial support for the spouse who is
on Medicaid.\58\ Moreover, under spousal refusal, income earned
by the healthy spouse is exempt from being considered available
to the impoverished spouse.
---------------------------------------------------------------------------
\57\Id.
\58\Allan Rubin and Harold Rubin, Spousal Refusal to Pay for
Nursing Home Costs, therubins.com (Feb. 7, 2009), available at: http://
www.therubins.com/legal/refusal.htm.
---------------------------------------------------------------------------
According to the New York Times, ``[w]hile many state and
local governments do not openly acknowledge the spousal refusal
option, New York City actually provides a form letter for
it.''\59\ In 2009, more than 1,200 people in New York City
invoked spousal refusal, a significant increase from prior
years.\60\ The Times article also indicated that the City
reviewed spousal refusal applications to recover money, but
only $3.7 million was recovered in 2009, or less than $3,000 on
average for each individual invoking spousal refusal.\61\ Eulau
testified that most married people in Suffolk County, New York,
who apply for Medicaid use spousal refusal, and she confirmed
to Committee staff that the use of this technique has grown
over time.\62\ Governor Cuomo's recently introduced 2013-2014
executive budget proposes the elimination of spousal refusal
with an estimated annual State savings of $137 million.\63\
---------------------------------------------------------------------------
\59\Anemona Hartocollis, Full Wallets, but Using Health Program for
Poor, New York Times (December 10, 2010), available at: http://
www.nytimes.com/2010/12/12/nyregion/12 medicaid.html?pagewanted=all.
\60\Id.
\61\Id.
\62\See supra note 56.
\63\New York State 2013-2014 Executive Budget Matrix, (viewed
February 12, 2013), available at: http://www.health.ny.gov/health_care/
medicaid/redesign/docs/2013-14_exec_budget_matrix.xls
---------------------------------------------------------------------------
4. Excessive salaries paid to executives of Medicaid-funded
organizations
The Committee has found that Federal taxpayers have
subsidized lavish lifestyles for many executives in
organizations that receive almost all of their funding through
Medicaid. The Committee's oversight work in this area was
informed by an August 2011 New York Times article that exposed
how top executives at the Young Adult Institute (YAI)--a
nonprofit that runs group homes for the developmentally
disabled--used Medicaid funds to lease luxury cars, to pay
tuition bills and living expenses for their children, and to
reward themselves with generous compensation packages.\64\ In
fact, four executives at the YAI (Phillip Levy, Joel Levy, Tom
Dern, and Stephen Freeman) each received compensation in excess
of $1 million in 2008, with money derived almost entirely from
Medicaid.\65\
---------------------------------------------------------------------------
\64\Russ Beuttner, Reaping Millions in Nonprofit Care for Disabled,
New York Times (August 2, 2011), available at: http://www.nytimes.com/
2011/08/02/nyregion/for-executives-at-group-homes-generous-pay-and-
little-oversight.html?pagewanted=all.
\65\This information obtained from publicly available 990 forms.
---------------------------------------------------------------------------
While YAI may be the worst offender, a number of Medicaid-
financed organizations in New York paid exceptionally high
executive salaries funded with tax revenue. A review conducted
by the Committee of a sample of Medicaid-financed organizations
found that at least 15 executives received yearly compensation
exceeding $500,000 and more than 100 other executives received
yearly compensation exceeding $200,000 per year.\66\ The
Committee's study was not a comprehensive or exhaustive search
of compensation packages received by top employees at Medicaid-
funded organizations, but rather a simple search of publicly
available IRS 990 Forms for 2008 and 2011.
---------------------------------------------------------------------------
\66\See Appendix B for Committee's data on salaries for executives
at nonprofits funded by Medicaid in New York State.
---------------------------------------------------------------------------
IV. PATIENT ABUSE WITHIN THE DEVELOPMENTALLY DISABLED SYSTEM IN NEW
YORK
In 2011 and 2012, the New York Times ran a series titled--
`Abused and Used' chronicling how the large expenditures New
York's Medicaid program do not necessarily translate into
quality care received by the developmentally disabled.\67\ For
example, despite the large payments received by the State for
the residents of developmental centers, the Times reported that
patient care is often substandard:
---------------------------------------------------------------------------
\67\See Abused and Used, New York Times, available at http://
www.nytimes.com/interactive/nyregion/abused-and-used-series-page.html.
[T]he institutions are hardly a model: Those who run
them have tolerated physical and psychological abuse,
knowingly hired unqualified workers, ignored complaints
by whistle-blowers and failed to credibly investigate
cases of abuse and neglect, according to a review by
The New York Times of thousands of state records and
court documents, along with interviews of current and
former employees. Since 2005, seven of the institutions
have failed inspections by the State Health Department,
which oversees the safety and living conditions of the
residents.\68\
---------------------------------------------------------------------------
\68\Danny Hakim, A Disabled Boy's Death, and a System in Disarray,
New York Times (June 5, 2011), available at: http://www.nytimes.com/
2011/06/06/nyregion/boys-death-highlights-crisis-in-homes-for-
disabled.html?pagewanted=all&_r=0.
According to the New York Times, New York State
consistently failed to take complaints from employees of the
developmental centers or family members of residents
seriously.\69\ According to the Times, employees who reported
problems experienced retaliation by other employees, and the
length of time it took to settle complaints disincentivized
employees from filing complaints in the first place.\70\
According to the Times, a number of residents suffered
significant verbal, emotional, and physical abuse at the
developmental centers.\71\ Several residents at New York's
developmental centers, and at numerous Medicaid-financed group
homes across the State, have died directly because of employee
incompetence or negligence, and in some cases even from
manslaughter at the hands of their caretakers.\72\
---------------------------------------------------------------------------
\69\Id.
\70\Id.
\71\See supra note 67.
\72\Id.
---------------------------------------------------------------------------
The Poughkeepsie Journal reported that a large part of the
problem of poor resident care appears to be the difficulty of
firing incompetent or neglectful employees:
Since 2007, the state has tried to fire employees of
a dozen local facilities for the developmentally
disabled 20 times. It has failed 18 times. Quite
simply, it's nearly impossible to get fired from state-
run facilities that care for people with autism, Down
Syndrome and other mental disabilities, according to a
Poughkeepsie Journal review of 1,900 pages of
disciplinary documents involving 98 group homes and six
institutions statewide. Just 2 percent of cases
resulted in termination, with workers keeping jobs even
in cases of serious alleged abuse and neglect.\73\
---------------------------------------------------------------------------
\73\Mary Beth Pfeiffer, Caregivers of Mentally Disabled Keep Jobs,
even in cases of abuse, neglect, Poughkeepsie Journal (September 17,
2011), available at: http://www. poughkeepsiejournal.com/article/
20110918/PROMO/109180384/Journal-investigation-Caregivers-mentally-
disabled-keep-jobs-even-cases-abuse-neglect.
The Poughkeepsie Journal found that workers who left
disabled people alone in a running vehicle or outside in the
rain kept their jobs. Additionally, workers who stole State
property, brought drug paraphernalia to work, or harassed
disabled residents almost always kept their jobs.\74\ An
article in the New York Times suggests that the Civil Service
Employees Association (CSEA) is partially to blame for this
problem.\75\ According to the New York Times, ``the union's
approach--contesting just about every charge leveled at a
worker--contributed to a system in which firings of even the
most abusive employees are rare.''\76\ Office of People with
Developmental Disabilities (OPWDD) former spokesman Herm Hill
said OPWDD's hands were often tied in cases against abusive
workers because of the disciplinary and arbitration rules
involving the workers' union.\77\ The union's representation of
repeat offenders made it possible for employees to rack up
serious offenses before losing their jobs.\78\
---------------------------------------------------------------------------
\74\Id.
\75\Danny Hakim, At State-Run Homes, Abuse and Impunity, New York
Times (March 12, 2011), available at: http://www.nytimes.com/2011/03/
13/nyregion/13homes.html?pagewanted=all.
\76\Id.
\77\Id.
\78\Id.
---------------------------------------------------------------------------
V. PAST HEALTH CARE-RELATED CORRUPTION BY ELECTED OFFICIALS
In the last decade, at least half a dozen elected State
representatives, including two State Senate Majority leaders,
have been convicted of theft, bribery, or honest services
fraud,\79\ related to health care:
---------------------------------------------------------------------------
\79\Honest services fraud is Federal crime defined in Skilling v.
United States as ``fraudulent schemes to deprive another of honest
services through bribes or kickbacks supplied by a third party who has
not been deceived.'' (Skilling v. United States 130 S. Ct. 2896,
(2010))
---------------------------------------------------------------------------
On May 14, 2012, former New York State Senate
Majority Leader Pedro Espada was convicted in Federal court on
four counts of theft for stealing over $500,000 from Soundview,
the nonprofit health care network he founded in the Bronx which
received Federal funding in excess of $1 million per year.\80\
Federal Medicaid money that was intended to be used for health
care for the city's poorest residents instead paid for private
family parties, school tuition, luxury car payments and
$100,000 in lobster, sushi and other meals.\81\ Additionally,
Espada packed the Soundview board and staff with members of his
own family and close personal friends.\82\
---------------------------------------------------------------------------
\80\Espada is expected to face a retrial on four other counts of
theft, fraud and conspiracy on which the jury failed to agree after his
six-week trial. See Mosi Secret, Ex-State Senator Guilty of Theft from
Nonprofit, New York Times (May 14, 2012), available at: http://
www.nytimes.com/2012/05/15/nyregion/ex-senator-espada-guilty-of-
embezzling-from-soundview-health-network. html?pagewanted=all.
\81\Id.
\82\Julia Marsh and Dan Mangan, Pedro's board stiffs were his
puppets, New York Post (March 21, 2012), available at: http://
www.nypost.com/p/news/local/bronx/pedro_
board_stiffs_EjyOnu7lWNZZyXtXqtzpBM.
---------------------------------------------------------------------------
In May of 2012, former New York Senate Majority
Leader Joseph Bruno was charged with two counts of fraud for
accepting $440,000 from a businessman who managed the assets of
a health and welfare fund and sought the then-Senator's
influence in legislative matters.\83\
---------------------------------------------------------------------------
\83\Joseph L. Bruno, Times Topics, New York Times (updated May 4,
2012) available at http://topics.nytimes.com/top/reference/timestopics/
people/b/joseph_l_bruno/index.html?inline=nyt-per (``The indictment,
unsealed in Federal District Court in Albany, came nearly six months
after a Federal appeals court vacated Mr. Bruno's previous conviction
because of a ruling in a separate case by the United States Supreme
Court that undermined the government's legal claims against Mr. Bruno,
a Republican from Rensselaer County. But the appeals court said Mr.
Bruno could be retried on different charges.'')
---------------------------------------------------------------------------
Former New York State Senator Carl Kruger was
sentenced to seven years in prison after pleading guilty to two
counts of conspiracy to commit honest services fraud\84\ and
two counts of conspiracy to commit bribery.\85\ Mr. Kruger
accepted bribes from two hospital executives, a prominent
lobbyist and a healthcare consultant in exchange for taking
official action on behalf of those parties, including
sponsoring and supporting legislation, favorably directing
state grants, and writing to State officials in his capacity as
State legislator.\86\
---------------------------------------------------------------------------
\84\See supra note 79.
\85\Benjamin Weiser, Former State Senator Is Sentenced to 7 Years
in Vast Bribery Case, New York Times (April 26, 2012), available at:
http://www.nytimes.com/2012/04/27/nyregion/carl-kruger-sentenced-to-
seven-years-in-corruption-case.html.
\86\Id.
---------------------------------------------------------------------------
In 2005, former New York State Senator Guy Velella
pled guilty to one count of bribery and was sentenced to one
year in prison for the felony conviction.\87\ He was charged
with a 25-count indictment alleging the solicitation of
$250,000 in bribes for steering public works contracts to those
who paid the bribes.\88\ During the 1990s, his law firm was
given hundreds of thousands of dollars in legal work by large
insurance companies while he headed the State Senate Committee
that oversaw legislation affecting them.\89\
---------------------------------------------------------------------------
\87\Liz Krueger, Former Senator Guy Velella: Convicted Felon,
$80,000-A-Year Public Pensioner, Gotham Gazette (October 25, 2004),
available at: http://www.gothamgazette.com/article/fea/20041025/202/
1156.
\88\Id.
\89\Clifford J. Levy and Christopher Drew, In Albany, Ally of
Insurers Profits From Them, New York Times (February 4, 2011),
available at: http://www.nytimes.com/2001/02/04/nyregion/in- albany-
ally-of-insurers-profits-from-them.html.
---------------------------------------------------------------------------
In 2004, New York State Assemblyman Anthony
Seminerio pled guilty to a single fraud count for influence
peddling and was sentenced to six years in prison.\90\
Seminerio admitted to promoting the interests of Jamaica
Hospital Medical Center, from which he received over $300,000
for obtaining State financing and lobbying legislators on
behalf of the hospital's efforts to take over other
hospitals.\91\
---------------------------------------------------------------------------
\90\David M. Halbfinger and William Rashbaum, Ex-Assemblyman From
Queens Dies In Federal Prison, New York Times (January 7, 2011),
available at: http://query.nytimes.com/gst/
fullpage.html?res=9D02EFD7143AF934A35752C0A9679D8B63.
\91\Id.
---------------------------------------------------------------------------
Outright corruption and favoritism has occurred in New
York. For example, Kenneth Bruno, son of former New York State
Senate Majority Leader Joseph Bruno, was hired as a lobbyist
for the New York Ambulette Coalition on the same day that the
State Legislature eliminated $4.4 million in Medicaid
transportation funding that would have gone to the Coalition's
members.\92\ Within ten days, the funding was restored ``at the
insistence of the Senate,'' according to a senior State
official.\93\ Bruno reportedly called his father's top aides
personally to ask them to restore the funds.\94\ Leaders
throughout New York State voiced their disapproval about
Bruno's lobbying deal. Conservative Party Leader Michael Long
said the deal ``shows the system is broken,'' and Rachel Leon,
executive director of Common Cause, called the action by
Bruno's son ``an instant symbol of what's wrong in
Albany.''\95\
---------------------------------------------------------------------------
\92\Fredric U. Dicker, It Pays (4.4 million) to Hire Bruno's Son,
New York Post (April 25, 2005), available at: http://www.nypost.com/p/
news/item_Usy1VfKTPyNavkRCN2mb4K.
\93\Id.
\94\Id.
\95\Fredric U. Dicker, Pol Son Burned--Right & Left Agree: Bruno
Kin's Deal Is Wrong, New York Post (April 26, 2005), available at:
http://www.nypost.com/p/news/item_ IwRwuubUpAd1M23lYXtDCK.
---------------------------------------------------------------------------
VI. ALLEGATIONS OF PROBLEMS WITH STATE OVERSIGHT OF THE MEDICAID
PROGRAM
Several whistle-blowers within the New York State health
care system have brought to light serious failures indicating
that the State bureaucracy historically failed to adequately
police Medicaid waste, fraud and abuse. Paul F. Stavis, counsel
to three different New York State health agencies during his
28-year career, alleged that ``anti-fraud efforts in New York
have not been taken seriously by the State's executive
agencies.''\96\ In an April 2011 article in Newsday, Stavis
cited multiple examples of Medicaid-related fiscal abuse\97\
and how both the State's Department of Health (DOH) and the
State's Office of the Medicaid Inspector General (OMIG) looked
the other way when faced with evidence of Medicaid fraud.\98\
---------------------------------------------------------------------------
\96\Paul Stavis, NY too weak on Medicaid fraud, Newsday (April 1,
2011), available at:
http://www.newsday.com/opinion/oped/stavis-ny-too-weak-on-medicaid-
fraud-1.2795786.
\97\See id. Stavis states that New York State law contains a
loophole that prevents the State from prosecuting certain types of
Medicaid fraud, which then necessitates the Federal Government's
intervention when such misappropriation crimes are committed. Stavis
characterized the inability of New York State to prosecute and the
resulting need for Federal involvement as an ``embarrassment.''
Although Stavis drafted legislation to close the loophole during his
tenure as counsel for the State, Stavis writes that the New York State
legislature refused to pass this legislation.
\98\Id. In addition to outright fraudulent activities, New York
State historically has had numerous cases of fiscal abuse regarding
Medicaid. In an outstanding example of fiscal abuse, Stavis cites
instances where providers diverted Medicaid funds to make donations to
charities in foreign countries, give nearly $2 million per year to a
house of worship, fund religious schools, and pay excessively high
salaries to executives at nonprofit corporations.
---------------------------------------------------------------------------
According to Stavis, New York State continued to pay
providers who were suspected of abusing the Medicaid system.
For instance, the DOH gave a $1 million grant to Pedro Espada's
nonprofit, Soundview, even after seeing evidence of ongoing
fraud.\99\ In fact, Stavis brought evidence of Espada's illegal
activities to the attention of the DOH in 2005 and OMIG in
2007, years before the former State Senate Majority leader was
convicted of Medicaid fraud. No action was taken by either
State office.\100\ The illegal payments continued until 2011,
when the Federal Government ordered the payments stopped and
commenced criminal proceedings against Espada.\101\
---------------------------------------------------------------------------
\99\Jacob Gershman, State Ignored Call to Probe Espada Clinics,
Wall Street Journal (December 17, 2010), available at: http://
online.wsj.com/article/SB100014240527
48703395204576023843352497746.html.
\100\Id.
\101\See Stavis, supra note 96.
---------------------------------------------------------------------------
Earlier, this report highlighted the suit Dr. Gabriel
Feldman brought against the City of New York in 2009.\102\ As a
medical director, Feldman determined which individuals met the
qualifications for Medicaid-funded home health care services.
Despite firm criteria outlining program eligibility, Feldman
encountered ``tremendous pressure'' from advocacy groups,
politicians, and family members of clients to approve service
requests for individuals who did not meet the
qualifications.\103\ When he refused to grant such requests,
Feldman found that his decisions were ``knowingly,
intentionally and routinely being overridden without legal
basis''\104\ in order ``to admit as many clients as possible
who apply for the PCS Program regardless of his or her
condition, fitness or qualification for the program.''\105\ In
testimony before the Committee, Feldman stated that pre-2011
``a pervasive culture of non-accountability and non-compliance
to PCS State regulations made it simply far too easy for local
social service offices in New York City to spend billions in
taxpayer money without regard to common sense oversight,
regulations of the State, or patient safety concerns.''\106\
---------------------------------------------------------------------------
\102\Is Government Adequately Protecting Taxpayers from Medicaid
Fraud?: Hearing Before the H. Comm. on Oversight & Gov't Reform, 112th
Cong. (2012) (testimony of Gabriel Feldman, Local Medical Director, New
York Personal Care Services Program).
\103\Id.
\104\First Amended Complaint-In-Intervention of Plaintiff-
Intervenor United States of America, United States of America ex. rel.
Dr. Gabriel Feldman v. The City of New York, 09 Civ. 8381 (JSR)
(S.D.N.Y. 2011).
\105\Id.
\106\See supra note 102.
---------------------------------------------------------------------------
During the Committee's hearing, Feldman used the term
``Medicaid industrial complex''\107\ to refer ``to the New York
State Government, the healthcare providers and the unions
essentially operating as one unified entity and making any
enforcement and recovery actions largely unsuccessful.''\108\
Feldman further explained that the pre-2011 ``system of quality
assurance, oversight, and rate setting was completely
dysfunctional'' and there were and still are ``insufficient
resources and staff in the [Medicaid] Inspector General's
Office and in New York City's Human Resource Administration,
devoted to enforcing fiscal discipline and fraud oversight in
the system.''\109\ Like Stavis, Feldman also indicts the DOH
for having ``utterly failed in their oversight
functions.''\110\
---------------------------------------------------------------------------
\107\Id.
\108\Letter from Gabriel Feldman to H. Comm. on Oversight & Gov't
Reform, Response to Questions for the Record (May 10, 2012) (on file
with Committee).
\109\Id.
\110\Id.
---------------------------------------------------------------------------
VII. REFORMS IN THE LAST TWO YEARS AND ADDITIONAL CONCERNS
During his first month as New York's Governor, Andrew Cuomo
called for Medicaid reform, stating, ``New York's bloated
Medicaid program, which spends at a rate more than twice the
national average, must be reformed to help our state begin to
make ends meet.''\111\ The administration of Governor Cuomo has
taken positive steps to reform some of the problems discussed
in Section III and Section IV of this report. These efforts
have been dubbed by the New York Post as ``a break with past
efforts'' because of the support he obtained from the Service
Employees International Union and the hospital
association.\112\
---------------------------------------------------------------------------
\111\Governor Andrew M. Cuomo, Press Release, Governor Cuomo Issues
Executive Order Creating Medicaid Redesign Team (January 5, 2011)
available at http://www.governor.ny.gov/press/01052011medicaid.
\112\Id.
---------------------------------------------------------------------------
New York State implemented the first-in-the-nation
statutory ``global'' spending cap. This State spending cap
imposes an annual limit on the growth of State Medicaid
expenditures, not to exceed the medical Consumer Price Index.
The cap remains in effect, even if the number of eligible
Medicaid beneficiaries rises. In FY 2012-2013, New York
experienced a 4 percent increase in Medicaid spending from the
previous year, one of the nation's lowest rates of increase.
New York State projects that their newly-implemented Medicaid
reforms will save the Federal Government $17 billion over five
years.\113\
---------------------------------------------------------------------------
\113\Governor Andrew M. Cuomo, Press Release, Governor Cuomo
Announces that New York Submits Federal Waiver to Invest $10 Billion in
Medicaid Redesign Team Savings to Transform the State's Health Care
System (August 6, 2012), available at: http://www.governor.ny.gov/
press/08062012-federal-waiver-health-care.
---------------------------------------------------------------------------
In the first year of the Cuomo administration, the State
started a phase-out of fee-for-service home care, an action
which may ensure greater integrity in the PCS program. This
effort began in New York City, where the State converted the
City's fee-for-service PCS program to the State's Medicaid
Managed Long Term Care program.\114\ According to Dr. Feldman,
there have been some additional measures ``taken by New York
City and New York State to ensure proper compliance with
Federal and State regulations'' for the PCS program.\115\
---------------------------------------------------------------------------
\114\New York 2013-2014 Executive Budget, NY Rising, (January 22,
2013), available at:
http://publications.budget.ny.gov/eBudget1314/fy1314littlebook/
BriefingBook.pdf.
\115\See supra note 108.
---------------------------------------------------------------------------
New York and CMS have entered negotiations about reducing
the developmental center payment rate through the Medicaid
State Plan Amendment process.\116\ According to the Wall Street
Journal, ``New York has agreed to give up about $800 million in
payments to the developmental centers.''\117\ CMS is currently
reviewing a State Plan Amendment submitted by New York that
would reduce the payments received by New York through the
State-operated developmental centers.
---------------------------------------------------------------------------
\116\Laura Nahmias, Budget Hole Seen After Loss of Aid, Wall Street
Journal (January 24, 2013), available at: http://online.wsj.com/
article/SB100014241278873245393 04578262311978071202.html.
\117\Id.
---------------------------------------------------------------------------
On January 18, 2012, Governor Cuomo issued an executive
order to address the problem of outrageous executive
compensation packages at taxpayer-financed organization.\118\
The order recognized that ``New York has an ongoing obligation
to ensure that taxpayers' dollars are used properly,
efficiently and effectively to improve the lives of New Yorkers
and our communities,'' and that ``in certain instances
providers of services that receive State funds or State-
authorized payments have used such funds to pay for excessive
administrative costs and outsized compensation for their senior
executives.''\119\ The Governor's order directed that payments
to ``providers of services that receive reimbursements directly
or indirectly'' from State agencies ``shall not be provided for
compensation paid or given to any executive by such provider in
an amount greater than $199,000.''\120\ The Governor's order
also stated: ``A provider's failure to comply with such
regulations established by the applicable State agency shall,
in the commissioner's sole discretion, form the basis for
termination or non-renewal of the agency's contract with or
continued support of the provider.''\121\
---------------------------------------------------------------------------
\118\Governor Andrew M. Cuomo, State of New York, Executive Order
38 (Jan. 18, 2012), available at: www.governor.ny.gov/executiveorder/
38.
\119\Id.
\120\Id.
\121\Id.
---------------------------------------------------------------------------
Governor Cuomo proposed eliminating spousal refusal in New
York in his first and second budget.\122\ However, powerful
interest groups, especially the elder law bar, lobbied strongly
to prevent the change. The interest groups' opposition proved
successful, and New York did not enact legislation to end the
abuse of spousal refusal.\123\ In his 2013-2014 budget
proposal, Governor Cuomo has again proposed changes that would
reduce the ability of individuals in New York to abuse the
spousal refusal technique by passing inappropriate private
costs onto taxpayers.\124\
---------------------------------------------------------------------------
\122\Carl Campanile, Andy to end `rich' home-care ruse, New York
Post (March 7, 2011), available at: http://www.nypost.com/p/news/local/
andy_to_end_rich_home_care_ ruse_UO5gsIz0Fcat1zrZ1XwXdP.
\123\Sanford Altman, Better With Age: NY seniors win as Legislature
drops provision, Times Herald-Record (April 10, 2012), available at:
http://www.recordonline.com/apps/pbcs.dll/article ?AID=/20120410/BIZ/
204100328.
\124\Memorandum in Support, Health and Mental Hygiene Article VII
Legislation, 2013-2014 New York State Executive Budget available at
http://publications.budget.ny.gov/eBudget1314/fy1314artVIIbills/
HMH_ArticleVII_MS.pdf.
---------------------------------------------------------------------------
Through a series of recommendations by Cuomo's Medicaid
Redesign Team and implemented by the State, New York has
expanded the definition of an estate for the purpose of estate
recovery. The State also centralized responsibility for
Medicaid estate recovery process in OMIG. Like most States, New
York has not historically been aggressive recovering from
estates of individuals who utilize Medicaid to pay for their
long-term care services. In 2004, only 0.8 percent of Medicaid
expenditures on nursing homes was recovered nationally, and
only 0.5 percent of Medicaid expenditures on nursing homes was
recovered by New York.\125\ The hope is that these reforms will
make it easier for New York to recover from the estates of
individuals who have inappropriately used Medicaid to pay for
long-term care services and supports.
---------------------------------------------------------------------------
\125\Medicaid Estate Recovery Collections, U.S. Department of
Health and Human Services (September 2005), available at: http://
aspe.hhs.gov/daltcp/reports/estreccol.htm#table1.
---------------------------------------------------------------------------
In 2011, after what was dubbed ``an unprecedented string of
corruption cases'' by the Huffington Post New York,\126\ the
State legislature passed the Public Integrity Reform Act of
2011.\127\ The new law requires members of the State
legislature to accurately disclose any outside income, as well
as the names of clients. It also created a new Joint Commission
on Public Ethics, with the power to investigation lawmakers,
their staff and members of the executive branch for legal and
ethical violations.\128\ According to the New York Times, there
are ``questions whether the reforms would be weaker than
expected.''\129\ For instance, the Times points out that a 12-2
vote of the new Commission in favor of an investigation could
still lose.\130\
---------------------------------------------------------------------------
\126\Michael Gormley, The Clean Up Albany Act of 2011 Proposed,
Huff Post New York (June 3, 2011), available at: http://
www.huffingtonpost.com/2011/06/04/the-clean-up-albany-act-o_n_
871329.html.
\127\Jisha V. Dymond, Governor Cuomo Signs Ethics Bill, Corporate
Political Activity Law Blog (August 16, 2011), available at: http://
www.corporatepoliticalactivitylaw.com/index.php/2011/08/governor-cuomo-
signs-ethics-bill/.
\128\Id.
\129\Danny Hakim and Thomas Kaplan, As Ethics Measure Emerges, So
Do Questions About Its Teeth, New York Times (June 7, 2011), available
at: http://www.nytimes.com/2011/06/08/nyregion/ny-ethics-bill-may-lack-
some-teeth.html.
\130\Id.
---------------------------------------------------------------------------
New York State is taking steps to improve the protection
and safety of disabled children and adults in the State's
care.\131\ In 2011, Governor Cuomo appointed a special advisor,
Clarence Sundram,\132\ to identify gaps in care that create a
potentially harmful environment for disabled persons.\133\ The
resulting analysis became the basis for the reforms. The Cuomo
reform efforts forced the resignations of top officials in the
Office for People with Developmental Disabilities (OPWDD) and
the Commission on Quality of Care and Advocacy for Persons with
Disabilities.\134\
---------------------------------------------------------------------------
\131\Andrew Cuomo's worthy attempt to fix shameful, dangerous state
programs for the disabled, New York Daily News (May 8, 2012), available
at: www.nydailynews.com/opinion/andrew-cuomo-worthy-attempt-fix-
shameful-dangerous-state-programs-disabled-article-1.1074021.
\132\Sundram is a national expert on institutions and programs for
the mentally disabled.
\133\Memorandum for Program Bill #35, New York Governor's Program
Bill 2012, available at: www.governor.ny.gov/assets/documents/GPB35-
PEOPLE-WITH-SPECIAL-NEEDS-MEMO.pdf.
\134\Danny Hakim, State Faults Care for the Disabled, New York
Times (Mar. 22, 2012), available at: www.nytimes.com/2012/03/22/
nyregion/new-york-state-draft-report-finds-needless-risk-in-care-for-
the-disabled.html?pagewanted=all&_r=0).
---------------------------------------------------------------------------
New initiatives include enhanced training and recruitment
and higher employment standards. Strict policies regarding
abuse and neglect were adopted, with immediate suspensions of
employees in substantiated cases of physical and sexual abuse.
New hires now face drug testing, comprehensive background
checks, and employment screening through an Excluded Provider
Registry.\135\
---------------------------------------------------------------------------
\135\New York State Office of the Medicaid Inspector General,
Restricted, Terminated or Excluded Individuals or Entities, available
at: www.omig.state.ny.us/data/content/view/72/52/).
---------------------------------------------------------------------------
The hope is that the reorganizing of management will better
integrate services with law enforcement and separate operations
from investigations.\136\ All OPWDD investigators receive law
enforcement investigative training, and, starting in 2012, new
State police cadets receive training to support OPWDD
standards.\137\
---------------------------------------------------------------------------
\136\New York Office for People With Developmental Disabilities,
Commissioner's Page, available at: www.opwdd.ny.gov/opwdd_about/
commissioners_page/accomplishments).
\137\New York State Office for People with Developmental
Disabilities, Joint Agreement Announced Between OPWDD and State Police
to Reform Abuse Reporting System (Aug 18, 2011), available at:
www.opwdd.ny.gov/news_and_publications/opwdd_news/joint_agreement
state_ police_abuse_reporting_system.
---------------------------------------------------------------------------
Although long overdue, New York State's current policy is
to pursue termination of employees found to have committed
egregious abuse and neglect of patients. OPWDD pushed for and
obtained CSEA's agreement to negotiate a standardized table of
penalties to remove arbitrator discretion when an employee is
found to have committed a serious act of abuse or neglect. New
State mandates require providers report abuse and neglect cases
to law enforcement and the State, and to verify backgrounds of
job applicants against a database the State will maintain.
The Cuomo administration and the New York legislature also
established the Justice Center for the Protection of People
with Special Needs.\138\ When it is in place, the Justice
Center will maintain a 24-hour hotline to route calls regarding
allegations of abuse and neglect. An in-house special
prosecutor and inspector general at the Justice Center will be
primarily responsible for the investigation of serious
allegations of a criminal nature.\139\ The Center incorporates
many of the responsibilities of the defunct Commission on
Quality of Care and Advocacy for Persons with
Disabilities.\140\
---------------------------------------------------------------------------
\138\Justice Center For the Protection of People with Special
Needs, available at: www.governor.ny.gov/Justice4SpecialNeeds/home.
\139\New York Governor Andrew Cuomo Press Office, Governor Cuomo
and Legislative Leaders Announce Agreement on Legislation to Protect
People with Special Needs and Disabilities (June 17, 2012), available
at: www.governor.ny.gov/press/061712justice4specialneedsagreement.
\140\Id.
---------------------------------------------------------------------------
The Committee minority is greatly encouraged by the
systemic overhaul of New York State's care for the
developmentally disabled led by the OPWDD. The Cuomo
administration engaged new leadership to address the
mismanagement plaguing the system.\141\ The new OPWDD appears
to be focused on real improvements with the Commissioner
providing reports detailing areas of progress at the six-month,
one-year and eighteen-month intervals.\142\
---------------------------------------------------------------------------
\141\New York Governor Andrew Cuomo Press Office, Governor Cuomo
Announces New Leadership for State Agencies that Serve disabled New
Yorkers (Mar. 7, 2011), available at: www.governor.ny.gov/press/
leadership.
\142\New York Office for People with Developmental Disabilities,
Commissioner's Page, available at: www.opwdd.ny.gov/opwdd_about/
commissioners_page.
---------------------------------------------------------------------------
While those and other reforms are significant steps
forward, the Committee has some ongoing concerns.
CMS first inquired about the excessive payment rates in
2010, over two-and-a-half years ago.\143\ CMS and New York have
finally agreed to an audit, scheduled to begin this month, to
uncover the magnitude of the excessive developmental center
payments. Correcting overpayments of this magnitude should not
be a multi-year process.
---------------------------------------------------------------------------
\143\Letter from Sue Kelly, Associate Regional Administrator,
Division of Medicaid and Children's Health, CMS to Donna Frescatore,
Deputy Commissioner, NY State Department of Health, (July 13, 2010) (on
file with Committee).
---------------------------------------------------------------------------
The Committee is concerned by the lack of State cooperation
with the Committee's oversight in this area. On July 19, 2012,
Chairman Issa and Congressman Gowdy sent a letter to Nirav
Shah, the Commissioner of New York's Department of Health
requesting information related to the developmental center
overpayments.\144\ The Committee received indication throughout
the next few weeks that the State was going to provide the
requested information. However, the State ultimately decided
not to cooperate with the Committee's request by citing that
providing the information would not be in the State's best
interests.\145\ To date, the State of New York has not supplied
any of the requested information to the Committee.
---------------------------------------------------------------------------
\144\Letter from Darrell Issa, Chairman of House Committee on
Oversight and Government Reform, and Trey Gowdy, Chairman of House
Committee on Oversight and Government Reform Subcommittee on Health
Care, District of Columbia, Census and National Archives.
\145\Email from New York Counsel to Committee on Oversight and
Government Reform staff (September 4, 2012) (on file with Committee).
---------------------------------------------------------------------------
The Committee is also concerned by recent allegations
relating to the State's OMIG, the agency tasked with
``preventing and detecting fraudulent, abusive, and wasteful
practices within the Medicaid program and recovering improperly
expended Medicaid funds.''\146\ In November 2012, the Albany
Times Union ran a story based largely on the reporter's
interviews with ten current and former OMIG employees.\147\
According to these current and former employees, New York's
OMIG suffers from misdirection and its investigations lack a
sense of urgency.\148\ Former employees allege that OMIG has
recently backed off audits and investigations of organizations
suspected of Medicaid fraud and abuse for politically-motivated
reasons.\149\ According to the Times Union article, ``One
veteran employee said when factoring for the recoveries made by
outside contractors, particularly one cracking down on third-
party claims, the sums recovered by OMIG staff are pretty
dismal.' Data from the reports [shared with the reporter] back
up the contention.''\150\
---------------------------------------------------------------------------
\146\Office of the New York State Medicaid Inspector General,
Mission Statement, available at http://www.omig.ny.gov/data/content/
blogcategory/20/192/
\147\James M. Odato, Fraud agency called adrift: Office of Medicaid
Inspector General is ineffective and mismanaged, critics say, Times
Union (November 19, 2012), available at http://www.timesunion.com/
local/article/Fraud-agency-called-adrift-4047131.php
\148\Id.
\149\Id.
\150\Id.
---------------------------------------------------------------------------
Articles in the Times Union and the New York Times suggest
that problems began at OMIG when Governor Cuomo replaced James
Sheehan, who took an aggressive approach to combating problems
in the State's Medicaid program and was largely credited with
recouping $1.5 billion in Medicaid overpayments in a four-year
period, with James Cox, a former Regional Inspector General of
the HHS OIG as Medicaid Inspector in July 2011.\151\ Sheehan
believes that he was removed as the Inspector General of OMIG
because he represented a challenge to a powerful Medicaid
industry in New York that is a large employment engine.\152\
According to Sheehan, ``Medicaid is to New York what corn is to
Iowa. It's a heavy lift.''\153\ It should be noted that Paul
Stavis, who also worked for Sheehan in addition to his other
positions, was also critical of OMIG during Jim Sheehan's
tenure stating ``Fraud litigation is very difficult and
expensive and OMIG has not equipped itself to cope with such
cases. [OMIG doesn't] look for fraud as a matter of
practice.''\154\
---------------------------------------------------------------------------
\151\See Nina Bernstein, Under Pressure, New York Moves to Soften
Tough Medicaid Audits, New York Times, (March 18, 2012), available at:
http://www.nytimes.com/2012/03/19/nyregion/new-medicaid-inspector-
general-supports-less-adversarial-audits.html?pagewanted=all and supra
note 148.
\152\See Nina Bernstein, Under Pressure, New York Moves to Soften
Tough Medicaid Audits, New York Times, (March 18, 2012), available at
http://www.nytimes.com/2012/03/19/nyregion/new-medicaid-inspector-
general-supports-less-adversarial-audits.html?pagewanted=all.
\153\Id.
\154\Jacob Gershman, Medicaid Fraud Unit Falls Short, Wall Street
Journal (January 27, 2011), available at: http://online.wsj.com/
article/SB200014240527487032932045761062601 59071844.html 155 See supra
note 153.
---------------------------------------------------------------------------
Eight months before the Times Union article, a New York
Times article reported that audits released by the State show
that Cox's findings of overpayments fell steeply after
September 30, 2011, the deadline for the State to meet a $1.5
billion Federal target imposed when the New York OMIG was
created in 2006.\155\ According to the New York Times, New York
was on target to avoid $1.1 billion in the previous year.\156\
Cost avoidance is an estimate of public money not spent because
of education and discussions with providers. However, the Times
article also pointed out that most of the important audits
responsible for the avoided cost were started under
Sheehan.\157\
---------------------------------------------------------------------------
\155\See supra note 153.
\156\Id.
\157\Id.
---------------------------------------------------------------------------
Sheehan's aggressive approach was not without controversy.
According to the New York Times, the health care industry
lobbied for James Sheehan's removal as New York's Medicaid
Inspector General\158\ and also for legislation that would
limit ``what are perceived to be overzealous and unfair tactics
employed by OMIG in audits.''\159\ At a New York State
legislature hearing in 2010, a lawyer for the health care
industry accused Sheehan's auditors of ``gangster-style
tactics.''\160\ This legislation, which cut the government's
time to reclaim overpayments in half and let providers submit
corrected bills rather than repay, overwhelmingly passed the
New York State legislature.\161\ To Governor Cuomo's credit, he
vetoed the legislation stating that ``the bill seeks to make
changes to the law that are too far-reaching and would
potentially allow fraudulent and abuse activity to go
undetected and unprosecuted.''\162\
---------------------------------------------------------------------------
\158\Id.
\159\Governor Cuomo, Statement of Disapproval for Senate Bill
Number 3,184-A (September 23, 2011), available at: http://
blog.nysarc.org/wp-content/uploads/2011/09/Veto-Message.jpg.
\160\Gale Scott, Calling Dr. Fraud, Crain's New York Business
(March 21, 2010), available at: http://www.crainsnewyork.com/article/
20100321/SUB/303219992.
\161\See supra note 153.
\162\See supra note 160.
---------------------------------------------------------------------------
The Committee minority believes that the allegations
contained in the New York Times and Albany Times Union articles
are inconsistent with some of the evidence. The minority is
aware that the number of OMIG investigations has remained
consistent and in some cases exceeded the performance of the
agency under Sheehan since the Cuomo administration's
appointment of Cox. According to information in reports
published by OMIG, OMIG's cost savings activities, which
include avoided costs as well as recovered improper payments,
rose significantly--by 34 percent in 2011, and recoveries,
which totaled about $700 million in 2011, also continue to
grow.\163\
---------------------------------------------------------------------------
\163\Comparison of Recoveries to date, NYS Global Cap report
November 2012 compared to NYS Global Cap report November 2011,
available at: http://www.health.ny.gov/health_care/medicaid/
regulations/global_cap/monthly/docs/november_2012_report.pdf and http:/
/www.health. ny.gov/health_care/medicaid/regulations/global_cap/
monthly/docs/november_2011_report.pdf.
---------------------------------------------------------------------------
The Committee minority believes that while it is too soon
to tell how OMIG's recovery performance will turn out for 2012,
a partial year analysis of New York Medicaid Global Cap Reports
suggests that OMIG is on course to surpass that mark.\164\
Using these trends, the minority believes there is not evidence
in the data to substantiate the claims that OMIG is suffering
under Cox's leadership.
---------------------------------------------------------------------------
\164\Id.
---------------------------------------------------------------------------
The Committee majority staff believes it is impossible to
use annual figures to characterize a trend since James Sheehan
was Inspector General at OMIG for more than half of 2011 and
many audits begun under Sheehan's guidance would not have
resulted in recoveries until later in the year or in subsequent
years.
VIII. RECOMMENDATIONS
New York's State Medicaid Plan, like almost all State
Medicaid Plans, consists of thousands of pages of dense rules
and reimbursement methodologies. According to Paul Stavis, who
served as counsel to three different New York State health
agencies during his 28-year health care career,\165\ New York
has made its Medicaid program ``so utterly complicated that
nobody completely understands it. It allows New York [S]tate to
pull the wool over the feds' eyes.''\166\
---------------------------------------------------------------------------
\165\The complaints Mr. Stavis brought against New York's Medicaid
program are discussed in Section III of this Report.
\166\Mary Beth Pfeiffer, Feds audit N.Y.'s Medicaid rates,
Poughkeepsie Journal (May 14, 2011).
---------------------------------------------------------------------------
The Federal Government, particularly CMS, has been culpable
in New York's historical Medicaid program integrity problems.
No example better illustrates this failure better than CMS's
approval of 35 modifications related to the excessive
developmental center payment rate over the past 25 years. These
modifications have collectively caused the State to receive an
estimated $15 billion beyond a reasonable amount for just one,
relatively small, part of the State's Medicaid program.
New York State has submitted several waiver applications to
CMS that relate to the financing of its Medicaid program.\167\
The Medicaid Redesign Team (MRT) Waiver Amendment asks CMS to
allow New York to keep $10 billion of the anticipated Federal
savings from the waiver. According to the State, it will use
that money to increase primary care capacity, invest in new
patient-centered models of care, strengthen safety-net programs
and institutions, invest in the health care workforce, and
improve management of chronic disease.\168\
---------------------------------------------------------------------------
\167\See Achieving the Triple Aim, New York State Medicaid Redesign
Team Waiver Amendment, New York State Department of Health, http://
www.health.ny.gov/health_care/medicaid/redesign/docs/2012-08-
06_waiver_amendment_request.pdf; See also It's Going to be a 1915 b/c
Waiver, New York State Office for Persons With Developmental
Disabilities, People First Waiver (June 6, 2012) available at http://
www.opwdd.ny.gov/opwdd_services_supports/people_first_waiver/
1915_b_c_waiver (``During discussions with CMS in May, OPWDD determined
that a combination of a 1915 b and 1915 c waiver will provide the
flexibility needed to redesign the delivery system to provide person-
centered, need-focused supports and services as outlined under the
People First Waiver. Therefore, OPWDD will pursue a combination of
these two types of waivers rather than an 1115 Research and
Demonstration Waiver.'').
\168\New York State Medicaid Redesign Team (MRT) Waiver Amendment,
available at: http://www.health.ny.gov/health_care/medicaid/redesign/
docs/2012-08-06_waiver_amendment_request.pdf.
---------------------------------------------------------------------------
Before considering the merits of these waivers, CMS and the
State must come to an agreement to reduce the State's
developmental centers to a rate of about one-fifth of their
current levels, as CMS indicated was its intention at the
September 20, 2012 hearing before the Subcommittee on Health
Care, District of Columbia, Census and National Archives.
According to Dr. Feldman, ``[w]hile Governor Cuomo has
taken bold steps to redesign Medicaid in New York State, the
Medicaid industrial complex is thriving, especially in New York
City.''\169\ The Committee recommends six specific actions that
should be taken immediately to reduce Medicaid waste, fraud,
and abuse in New York's program and potentially save both
Federal and New York State taxpayers significant amounts of
money each year:
---------------------------------------------------------------------------
\169\See supra note 102.
---------------------------------------------------------------------------
CMS or a qualified government watchdog agency
should conduct a complete and independent audit of New York's
Medicaid program, including the work of New York State's Office
of the Medicaid Inspector General;
CMS should finalize an agreement with New York on
a corrected payment methodology that ends the developmental
center overpayments as soon as possible. CMS should pursue
recovery of an appropriate portion of previous overpayments in
excess of reasonable costs for Federal taxpayers;
CMS' review of New York's Section 1115 waiver
request to allow the State to keep a portion of the savings its
Medicaid reforms are projected to achieve, should follow all
applicable statutory requirements, particularly with respect to
budget neutrality. CMS should also ensure that the baseline
from which New York is calculating the savings does not include
developmental center overpayments or other overpayments;
New York's Personal Care Services program must
only enroll individuals who meet the eligibility thresholds
required by law;
New York's legislature should ban ``spousal
refusal'' and other abuses of Medicaid eligibility rules, as
Governor Cuomo has proposed in each of his three budgets. New
York must also aggressively pursue estate recovery against
people who abuse Medicaid eligibility rules; and
New York's legislature should codify Governor
Cuomo's executive order that limiting compensation of
executives at organizations receiving nearly all their money
from tax revenue. New York must also aggressively monitor and
enforce these limits.
IX. CONCLUSION
In 2003, the Government Accountability Office (GAO) added
Medicaid to its list of high-risk programs.\170\ This report
highlighted significant problems in New York State's Medicaid
program, and the previous section of this report outlined six
specific steps that CMS and New York can take to protect
taxpayer dollars from being misspent through New York's
Medicaid program. Many of the recommendations discussed in the
report, such as limiting Medicaid eligibility to individuals
who meet the program's criteria, limiting executive
compensation at organizations that receive the vast majority of
their money through Medicaid, and strong state estate recovery
programs should be implemented across the country.
---------------------------------------------------------------------------
\170\See Medicaid Waste, Fraud and Abuse, Threatening the
Healthcare Safety Net: Hearing Before the Senate Comm. on Finance,
109th Cong. (2005) (written statement of Kathryn G. Allen, Health Care
Director, Government Accountability Office), available at http://
www.gao.gov/new.items/d05836t.pdf.
---------------------------------------------------------------------------
It is also important to note that CMS has struggled
historically in protecting Federal tax dollars from being
misspent through Medicaid. CMS has been hampered by poor data
quality, but the agency has historically failed to often
adequately detect and address major problems in state Medicaid
programs. A Committee majority staff report from April 2012
detailed several examples of how CMS has failed to protect
taxpayer dollars spent through the Medicaid program.\171\
Moreover, as GAO has widely reported, states have resorted to
creative techniques such as provider taxes and large
supplemental payments to draw down additional Federal dollars
into their states through the Medicaid program without net
State contributions.\172\ These techniques undermine the nature
of joint Federal-state financial responsibility for the
Medicaid program by significantly increasing the Federal share
of Medicaid expenditures and further undermining State
incentives to run efficient Medicaid programs.
---------------------------------------------------------------------------
\171\See supra note 1.
\172\U.S. Gov't Accountability Office (GAO): CMS Needs More
Information on the Billions of Dollars Spent on Supplemental Payments
(2008), available at: http://www.gao.gov/new.items/d08614.pdf.
---------------------------------------------------------------------------
The national debt of the United States now exceeds $16.4
trillion, with more than $6 trillion added to the national debt
in just the last four years. Congress faces critical and
difficult choices about how to put the Federal budget on a
sustainable path. The ideas in this report, which should
receive bipartisan support, would alleviate some of the most
egregious problems in the program and would begin to put the
Medicaid program on a sustainable path.
APPENDIX A: PER CAPITA FEDERAL MEDICAID DOLLARS, BY STATE (FY2010)
------------------------------------------------------------------------
Federal Federal
State spending State spending
------------------------------------------------------------------------
New York..................... $1,655 Alabama........ $769
Vermont...................... 1,398 Texas.......... 764
New Mexico................... 1,341 Oregon......... 761
Maine........................ 1,295 Maryland....... 754
Louisiana.................... 1,248 Iowa........... 742
Mississippi.................. 1,184 Illinois....... 739
Rhode Island................. 1,170 Montana........ 737
West Virginia................ 1,143 New Jersey..... 716
Arizona...................... 1,111 North Dakota... 713
Massachusetts................ 1,107 Hawaii......... 705
Arkansas..................... 1,095 Idaho.......... 695
Alaska....................... 1,056 California..... 695
Kentucky..................... 1,033 Indiana........ 690
Tennessee.................... 1,010 South Dakota... 680
Missouri..................... 1,008 Washington..... 659
Connecticut.................. 990 Nebraska....... 650
Pennsylvania................. 972 Florida........ 624
Ohio......................... 972 New Hampshire.. 623
South Carolina............... 888 Georgia........ 601
Delaware..................... 885 Kansas......... 594
Minnesota.................... 880 Wyoming........ 586
Michigan..................... 865 Utah........... 499
North Carolina............... 855 Virginia....... 496
Oklahoma..................... 841 Colorado....... 494
Wisconsin.................... 809 Nevada......... 357
------------------------------------------------------------------------
Medicaid expenditures by state as well as FMAP rates are
from the Kaiser Family Foundation's state health care
facts.\173\ Population figures were obtained from the Census
Bureau.
---------------------------------------------------------------------------
\173\Kaiser Family Foundation, Total Medicaid Spending, FY 2010,
available at http://www.statehealthfacts.org/
comparemaptable.jsp?ind=177&cat=4 (last visited January 3, 2012).
APPENDIX B: EXECUTIVE COMPENSATION AT NON-PROFITS FINANCED LARGELY BY MEDICAID
----------------------------------------------------------------------------------------------------------------
County
2008 2010 median
Organization Position Compensation Compensation household
income
----------------------------------------------------------------------------------------------------------------
A.C.L.D (Nassau Co.)...................... Executive Director.......... $525,704 $552,761 $95,823
CFAO........................ 302,883 333,466
Assistant Executive Director 178,026 196,673
Assistant Executive Director 186,836 201,530
Block Institute Inc. (Brooklyn)........... Executive Director/C.E.O.... 201,586 225,114 49,490
The Center for Discovery (Sullivan Co.)... C.E.O....................... 939,280 649,977 48,303
Former C.F.O................ 480,832 N/A
C.F.O....................... 254,595 238,293
Chief of Program............ 262,393 257,200
Chief of Admission.......... 226,224 228,140
Chief of Health Services.... 248,725 223,398
Chief of Development and N/A 223,658
Fundraising.
Center for Disability Services Inc. President/C.E.O............. 247,394 274,818 57,715
(Albany Co.).
Community Services for the Developmentally President & C.E.O........... *214,735 256,816 30,230
Disabled (Buffalo).
Developmental Disabilities Institute, Inc. Executive Director.......... 294,576 N/A 87,187
(Suffolk Co.).
Associate Executive Director 225,589 280,356
Epilepsy Foundation of Long Island (Nassau Executive Director.......... *271,509 282,718 95,823
Co.).
C.F.O....................... 175,174 214,502 95,823
Family Residences and Essential C.E.O....................... 354,308 422,951 95,823
Enterprises Inc (Nassau Co.).
C.F.O....................... 218,146 285,323
Chief Compliance Office..... 234,193 251,422
Associate Director.......... 175,271 201,718
Former C.E.O................ 858,587 N/A
C.O.O....................... N/A 261,327
Associate Director.......... N/A 215,714
Federation Employment and Guidance C.E.O....................... 533,323 582,513 51,270
Services (NYC).
Executive Vice President.... 421,275 403,736
C.O.O....................... 460,158 373,300
C.F.O....................... N/A 316,476
General Counsel............. 222,935 283,784
Chief Development Officer... N/A 267,569
Sr. Vice President.......... 271,870 292,378
Sr. Vice President.......... 256,144 277,437
Sr. Vice President.......... 204,587 227,979
Sr. Vice President.......... 260,302 276,405
Sr. Vice President.......... 206,998 221,836
HASC Center Inc. (Brooklyn)............... Executive Director.......... *231,303 267,715 49,490
Clinical Director........... *244,929 259,641
Head Injury Association Inc. (Suffolk Co.) C.E.O....................... 250,349 370,996 87,187
HeartShare Human Services of New York President and C.E.O......... 479,775 536,796 49,490
(Suffolk Co.).
Executive Vice President.... 317,449 318,481
Executive Director.......... 231,284 247,020
Human Care Services for Families & Executive Director.......... 182,488 372,367 49,490
Children Inc. (Brooklyn).
C.F.O....................... 132,603 234,894
Independence Residences Inc. (Queens Co.). Executive Director.......... 232,213 267,190 56,406
Associate Executive Director 177,627 206,171
Institute for Community Living, Inc. (NYC) C.E.O....................... 752,330 3,048,520 51,270
C.F.O....................... 244,434 268,968
C.O.O....................... 266,752 399,431
Sr. Executive Vice President 222,110 229,904
C.A.O....................... 198,266 209,545
A.C.F.O..................... 202,156 128,106
Jawonio Inc. (Rockland Co.)............... C.E.O....................... 545,783 278,049 84,661
Asst. Exec. Director........ 185,799 301,497
Kelberman Center Inc. (Oneida Co.)........ Treasurer/Secretary......... *323,673 *334,139 48,382
Life's Worc Inc. (Nassau Co.)............. Executive Director.......... 378,502 395,828 95,823
Assistant Executive Director 182,092 209,280 95,823
of Operations.
LifeSpire Inc. (NYC)...................... Unspecified................. 426,843 409,614 51,270
Unspecified................. 209,651 222,119
Maryhaven Center of Hope (Suffolk Co.).... C.E.O....................... 923,878 643,484 87,187
Exec. V.P................... 778,990 1,003,980
C.F.O....................... 344,459 429,328
V.P Finance................. 231,698 244,565
NARCO Freedom Inc. (Bronx)................ C.E.O....................... 382,690 386,018 41,057
NYSARC (Albany Co.)....................... Executive Director.......... 199,284 287,944 57,715
NYSARC (Chautauqua Co.)................... Executive Director/C.E.O.... 325,040 356,988 41,432
NYSARC (Madison/Cortland Co.)............. Executive Director.......... *214,635 237,848 53,473
NYSARC (Monroe Co.)....................... C.E.O....................... 205,151 N/A 52,260
NYSARC (Montgomery Co.)................... C.E.O....................... *1,630,083 512,420 43,254
NYSARC (Nassau Co.)....................... C.E.O....................... *455,431 458,388 95,823
Unspecified................. *272,455 308,756
Unspecified................. *285,394 348,077
Unspecified................. *199,708 269,151
NYSARC (NYC).............................. Assoc. Executive Director... 369,195 149,061 51,270
Assoc. Executive Director... 327,896 422,456
Budget Director............. 300,300 371,766
Chief Compliance Officer.... 263,995 372,667
Senior Policy Advisor....... 243,661 666,444
Director of Employees....... 211,853 351,703
NYSARC (Putnam Co.)....................... Executive Director.......... *234,195 254,251 92,711
NYSARC (Suffolk Co.)...................... C.E.O....................... 349,775 373,220 87,187
Deputy Executive Director... 197,470 215,494
Deputy Executive Director... 198,699 224,673
NYSARC (Sullivan Co.)..................... C.E.O....................... 174,059 211,092 48,303
NYSARC (Westchester Co.).................. Executive Director.......... 226,741 244,885 80,725
Associate Executive Director 200,793 211,860
Occupations Inc. (Orange Co.)............. President/C.E.O............. 272,147 432,958 70,294
Exec. Vice President/ C.O.O. 239,499 308,483
Vice President.............. 119,875 304,884
Ohel Childrens Home and Family Services C.E.O....................... 302,488 392,365 49,490
(Brooklyn).
C.F.O....................... 227,906 248,510
Program Director............ 185,104 198,473
C.O.O....................... 233,447 263,968
C.O.O....................... 245,055 271,481
Chief Development Officer... 297,179 319,405
People Inc. (Erie Co.).................... President/C.E.O............. *424,640 472,419 48,805
Vice President.............. *208,548 205,231
Springbrook NY Inc. (Ostego Co.).......... Executive Director.......... 205,937 217,706 45,334
Staten Island Mental Health Society Inc. Unspecified................. 547,585 498,311 84,308
(Staten Island).
Unspecified................. 190,249 209,342
Unspecified................. 233,740 208,732
Unspecified................. 209,513 223,753
Westchester Institute for Human President/C.E.O............. *249,868 274,793 80,725
Development (Westchester Co.).
C.O.O....................... *204,317 205,910
Westchester School for Special Children Executive Director.......... 271,430 143,378 80,725
(Westchester Co.).
Young Adult institute (NYC)............... President................... 2,106,905 954,912 51,270
C.E.O....................... 1,991,753 1,089,518
Co-C.O.O.................... 1,070,614 563,307
Co-C.O.O.................... 1,191,809 605,039
CFO......................... 404,220 432,339
Unspecified................. 242,973 N/A
Unspecified................. 292,927 319,309
Unspecified................. 221,903 264,948
Unspecified................. 257,510 276,322
Unspecified................. 238,650 288,440
Unspecified................. N/A 330,755
----------------------------------------------------------------------------------------------------------------
Notes:Compensation amounts were found using publicly available IRS Form 990s accessed through guidestar.
Denotes compensation for the year 2009 since 2008 data was not available through guidestar. Median household
income was obtained from Census Bureau County Quick Facts and is annual median household income for the period
from 2007-2011. Median household income for Brooklyn, Staten Island, and the Bronx is from 2009 and was found
at www.city-data.com.
Appendix C: Committee's Methodology for Calculating Medicaid
Overpayments
On July 19, 2012, the Committee sent a letter to Dr. Nirav
Shah, Commissioner of the New York State Department of Health,
asking for detailed information regarding overpayments received
by New York State-operated developmental centers. Despite
initial assurances from State officials that New York would
respond to the Committee's request for information, the State
decided not to comply. Because the State refused to comply with
its request, the Committee compiled as much available
information as possible from reliable sources in order to
estimate the amount of overpayments received by New York
State's developmental centers since 1990.
The Office of Inspector General (OIG) at the U.S.
Department of Health and Human Services (HHS) supplied the
Committee with a significant amount of information on these
overpayments. Chiefly, OIG provided the actual payments
received by New York developmental centers for state fiscal
year (SFY) 2007 ($1.828 billion), SFY 2008 ($2.107 billion),
and SFY 2009 ($2.267 billion), as well as the daily Medicaid
payment rate per patient for New York's developmental centers
over the entire period. Using the actual payments received by
New York's developmental centers and OIG's calculations for
reimbursable expenses, OIG estimated Medicaid overpaid the
State developmental centers by $1.41 billion in SFY 2009,
$1.359 billion in SFY 2008, and $1.063 billion in SFY 2007. The
Committee requested that OIG estimate the developmental center
overpayments over the past two decades using the same
methodology it employed for its 2007-2009 estimates; however,
OIG lacked the necessary information (the same information the
State of New York has refused to provide the Committee) in
order to perform the calculations.
It is important to note that OIG's calculation of
overpayments relies upon the State's reported costs, and the
State's reported costs were not verified or audited by either
OIG or CMS. It is a complex formula with many supplementary and
substantial add-ons that convert a prior year's reported costs
into a current year's reimbursable costs. For example, New
York's total reported costs for SFY 2008 were $581 million.
After adding the various supplementary factors, OIG calculated
the reimbursable cost for SFY 2009 was $858 million, about 48
percent higher than New York's reported costs for the previous
year.
Therefore, there is reason to believe that the reimbursable
costs calculated by OIG are significantly higher than are
necessary to serve the State's developmental center population.
According to the OIG report, the total reimbursement cost per
patient was $1,532 per day for SFY 2009. Since OIG reported
that the average rate received by similar, privately-operated
Intermediate Care Facilities (ICFs) was $444 in SFY 2009, a
$1,532 rate appears very high. Since OIG's report calculates
overpayments by subtracting these inflated ``reimbursable
costs'' from the payments received by State-operated
developmental centers, the overpayments calculated by OIG for
SFY 2007, SFY 2008, and SFY 2009 are likely substantially too
low.
To avoid the shortcomings involved with OIG's somewhat
nebulous ``reimbursable costs,'' the Committee calculated the
developmental center overpayments as the amount received by New
York State-operated developmental centers in excess of the
Medicaid Upper Payment Limit (UPL). According to Federal
Medicaid law, the UPL is the maximum a given state Medicaid
program can pay to Medicaid providers in the aggregate. To
satisfy UPL requirements, Medicaid payments must not exceed
what the Medicare program would pay for the same services. The
Committee therefore estimated the Medicaid UPL using the most
expensive Medicare payment category (see Footnote ii in the
Table). Since the Committee's estimates used Medicare rates for
the most costly patients in skilled nursing facilities (SNFs)
and not all of the developmental center patients would fall
into this category, the Committee's Medicaid UPL is almost
certainly too high. Therefore, since the Committee is
estimating the overpayments in excess of Medicaid UPL amounts
and the Committee assumed the highest possible Medicare
reimbursement rates, the Committee's estimates of the
overpayments received by New York developmental centers are
probably too low.
Medicare's reimbursement rates also vary by geographic
location, and the State of New York has 14 geographic areas.
The Committee calculated a weighted average of Medicare
reimbursements using the geographic breakdown of the State's
developmental centers in 2010. (This was the only year the
Committee found an accounting of each developmental center's
payment). Using developmental center population from that year,
the Committee assigned Medicare payment regions the following
weights: 37.19% to New York City, 21.10% to Binghamton, 15.81%
to Rural New York State, 10.73% to Poughkeepsie, 8.75% to
Rochester, 3.25% to Albany, and 3.18% to Buffalo. The Medicaid
UPL estimates shown in the Table below for SFY 1999 through SFY
2011 were estimated using weighted average calculations. The
Medicare payment information was easily obtainable only for the
years after 1998. The average price change from 1999 to 2005 in
Medicare's reimbursement rate for the most expensive patients
in SNF was $12. Therefore, for purposes of the Committee's
estimates, the Medicaid UPL was increased $12 each year from
SFY 1991 to SFY 1998.
In order to calculate the estimated payments received by
New York developmental centers, the Committee multiplied daily
Medicaid payment rates per patient by the estimated number of
patients residing in developmental centers at one point during
the SFY. OIG provided the daily Medicaid payment rates and the
Committee relied on reports issued by New York's Office for
People with Developmental Disabilities (OPWDD) and its
predecessor agency, the Office of Mental Retardation and
Developmental Disabilities (OMRDD), to estimate patient
numbers.\174\ The fifth column in the Table shows the
Committee's estimate of the amount Medicaid paid New York
State-operated developmental centers beyond the Medicaid UPL
(the amount Medicare would have otherwise paid). The second to
last column is the present value of each year's estimated
overpayment calculated using the consumer price index. Summing
the overpayments from 1991 to 2011 yields a net estimated
overpayment of nearly $28.8 billion beyond what was allowed by
the Medicaid UPL. Finally, the last column shows the Federal
share of the overpayments since the Federal Government
reimburses at least half of New York's Medicaid expenditures.
The total Federal overpayment (in present value terms) between
1991 and 2011 was approximately $15 billion.
---------------------------------------------------------------------------
\174\OMRDD reports from 1999 to 2006 contained annual counts of the
total residents in the State's developmental centers and OIG provided
the actual reimbursements received by the State-operated developmental
centers for 2007 through 2009. The sources for 1991, 1994, 2010, and
2011 are contained in the footnotes below the Table showing the
estimated overpayments by year. For the remainder of the years (1992,
1993, 1995, 1996, 1997, and 1998), the Committee used a linear
interpolation to estimate the number of developmental center residents.
TABLE--ESTIMATED MEDICAID OVERPAYMENT TO NEW YORK STATE-OPERATED DEVELOPMENTAL CENTERS
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated Daily dev. Estimated Overpayment Federal share
State fiscal year dev. center center pay medicaid Over-payment present value of
patients ratei UPLii (2011 $)iii overpaymentiv
--------------------------------------------------------------------------------------------------------------------------------------------------------
1991............................................................ v6,350 $389 $319 vi$162.2M $267.9M $134.0M
1992............................................................ 5,437 442 331 220.3M 353.2M 176.6M
1993............................................................ 4,524 552 343 345.1M 537.2M 268.6M
1994............................................................ vii3,611 654 355 394.1M 598.1M 299.1M
1995............................................................ 3,294 936 367 684.2M 1,009.9M 504.9M
1996............................................................ 2,978 1,093 379 776.0M 1,112.6M 556.3M
1997............................................................ 2,661 1,310 391 892.7M 1,251.1M 625.5M
1998............................................................ 2,345 1,522 403 957.6M 1,321.5M 660.8M
1999............................................................ viii2,028 1,729 415 972.6M 1,313.2M 656.6M
2000............................................................ ix2,020 1,930 426 1,108.9M 1,448.5M 724.3M
2001............................................................ x1,711 2,165 435 1,080.4M 1,372.3M 686.1M
2002............................................................ xi1,692 2,434 474 1,210.4M 1,513.7M 756.8M
2003............................................................ xii1,599 2,723 457 1,322.5M 1,617.1M 808.6M
2004............................................................ xiii1,610 2,934 483 1,440.3M 1,715.1M 882.9M
2005............................................................ xiv1,696 3,063 490 1,592.8M 1,834.5M 944.4M
2006............................................................ xv1,700 3,284 594 1,669.1M 1,862.4M 931.2M
2007............................................................ xviX 3,715 613 1,526.3M 1,655.9M 827.9M
2008............................................................ xviiX 3,736 658 1,736.1M 1,813.8M 906.9M
2009............................................................ xviiiX 4,116 645 1,911.4M 2,004.1M 1,090.0M
2010............................................................ xix1,417 4,556 645 2,022.8M 2,086.6M 1,277.9M
2011............................................................ xx1,313 5,118 751 2,092.9M 2,092.9M 1,274.3M
---------------------------------------------------------------------------------------
Total....................................................... ........... ........... ........... .............. 28,781.6M 14,993.8M
--------------------------------------------------------------------------------------------------------------------------------------------------------
iDevelopment Center payment rates were according to the Office of Inspector General (OIG), Department of Health and Human Services.
iiThe Committee estimated the Medicaid UPL using the Medicare case-mix group with the highest reimbursement rate. For FY 2006 to FY 2011, this group was
the Rehabilitation Plus Extensive Services (RUX) group. Beneficiaries classified under RUX generally have complex needs and require more assistance
with activities of daily living, a greater amount of physical therapy, occupational therapy, and/or speech-language pathology services, and more
complex clinical care. For FY 1999 to FY 2005, the group with the highest reimbursement group was RUC from the Rehabilitation case-mix group.
Medicare's reimbursement rates also vary by geographic location and the State of New York has 14 geographic areas. The Committee calculated a weighted
average of the Medicare reimbursement using the geographic breakdown of the developmental centers in 2010. The following weights were assigned: New
York City 37.19%, Binghamton 21.10%, Rural New York State 15.81%, Poughkeepsie 10.73%, Rochester 8.75%, Albany 3.25%, Buffalo 3.18%. Therefore the
estimates in this category from FY 1999 to FY 2011 were estimated using weighted average calculations. We used the average historical price change
from 1999 to 2005 of $12 to estimate that Medicaid UPL increased $12 each year from FY 1991 to FY 1998.
iiiThis column adjusts the overpayment column for 2011 values using the Consumer Price Index.
ivThis calculation uses the State's Federal Medicaid Assistance Percentage (FMAP). Generally, New York's FMAP is 50%. In fiscal years 2004, 2005, 2009,
2010, and 2011, the Federal Government increased the FMAP so the Federal share of the state's Medicaid expenditures in those years is higher. New
York's FMAP in SFY 2004 and SFY 2005 was 51.48%. In SFY 2009, New York's FMAP was 54.39%. In SFY 2010, New York's FMAP was 61.24%. In SFY 2011, New
York's FMAP was 60.89%.
vPaul J. Castellani, From Snake Pits to Cash Cows: Politics and Public Institutions in New York, State University of New York, 2005, page 249.
viAll of the figures in the table are in the millions. This particular figure is $162.2 million.
viiCastellani, supra note v, at 259.
viiiThe 1998-99 Budget for the New York State Office of Mental Retardation and Developmental Disabilities.
ixA Summary of the 1999-2000 Executive Budget Recommendation.
x2000-01 Executive Budget Recommendation for the New York State Office of Mental Retardation and Developmental Disabilities (OMRDD).
xi2001-02 Fiscal Year Executive Budget Recommendations for OMRDD.
xii2002-03 Fiscal Year Executive Budget Recommendations for OMRDD.
xiii2003-04 Fiscal Year Executive Budget Recommendations for OMRDD.
xiv2004-05 Fiscal Year Executive Budget Recommendations for OMRDD.
xv2005-06 Fiscal Year Executive Budget Recommendations for OMRDD.
xviAccording to information provided by the OIG to the Committee, Medicaid made payments of $1,827,939,932 for State developmental centers in SFY 2007.
Therefore, the Committee did not have to know the number of developmental center residents this year.
xviiAccording to information provided by the OIG to the Committee, Medicaid made payments of $2,107,245,318 for State developmental centers in SFY 2007.
Therefore, the Committee did not have to know the number of developmental center residents this year.
xviiiAccording to information provided by the OIG to the Committee, Medicaid made payments of $2,266,625,233 for State developmental centers in SFY
2007. Therefore, the Committee did not have to know the number of developmental center residents this year.
xixMary Beth Pfeiffer, At $4,556 A Day, N.Y. Disabled Care No. 1 in Nation, POUGHKEEPSIE JOURNAL, June 20, 2010.
xxOPWDD Statewide Comprehensive Plan: 2011-2015.
Committee Consideration
On February 14, 2013, the Committee met in open session and
ordered reported favorably the report, Billions of Federal Tax
Dollars Misspent on New York's Medicaid Program, as amended, by
voice vote, a quorum being present.
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee conducted oversight of the administration of
Federal and state funds within New York's Medicaid program. The
report includes findings from the Committee's investigation and
recommendations to reduce waste, fraud, and abuse within the
program.
Statement of General Performance Goals and Objectives
In accordance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
report makes recommendations to stop Medicaid waste, fraud, and
abuse in New York's Medicaid program, and potentially save both
Federal and New York State taxpayers significant amounts of
money each year.