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Is Michigan Misspending Medicaid Dollars? A Battle Between Auditor and Agency.


The Michigan Office of the Auditor General (OAG) recently came out with a scathing performance audit about the state’s Medicaid and Children’s Health Insurance (CHIP) programs. With some 2.8 million people in the state enrolled in Medicaid and another 237,500 in CHIP, this is a matter of serious concern, not just to recipients but to Michigan residents who don’t want their tax money wasted.


But beyond the actual audit findings, we found the back and forth between the agency responsible for these payments, the Michigan Department of Health and Human Services (MDHHS), and the Auditor General to be of interest. In our experience it’s relatively rare for this kind of back and forth to find its way into newspapers. But in this case, the headline of an article about the audit in the Detroit News read: “Audit flags $2.4B in ‘improper’ Medicaid, CHIP payments; Michigan cries foul.”


We must admit to having a little problem with the wording of the headline, which seems to indicate that the Auditor General isn’t just as much a part of Michigan government as one of the executive branch agencies. But that’s just a quibble. We took a close look at the report and thought you’d find the back and forth between the two – transparently displayed in the audit – to be of interest.


We’ll focus on one of the findings. In its effort to assess the effectiveness of the “efforts to complete accurate Medicaid and CHIP client eligibilty determinations,” the auditor found that there were “inaccurate eligibility determinations and failure to maintain documentation resulting in estimated improper payments of $2.3 billion and $89.5 million for Medicaid and CHIP, respectively.” With $14.7 billion in direct Medicaid payments in fiscal year 2019, that means that about one out of six of those dollars was paid out improperly.


But MDHHS, didn’t like this finding. As its response was stated in the audit report, “MDHHS strongly disagrees that the estimated improper payments are an accurate depiction of payments in error.”


The agency indicated that it had requested an audit conference to discuss this disagreement, during which time it provided additional background and details. “Given the complexity of Medicaid eligibility, MDHHS took this additional step to partner with the OAG to help educate them on state and federal policy, operations and technology and resolve concerns with incorrect audit findings to ensure an accurate and representative audit product.”


This complaint didn’t seem to faze the OAG much, and it defended its background and knowledge and capacity to understand the complexities of the Medicaid program. It wrote that “Our professional audit staff has decades of experience auditing the Medicaid program via mandated federal single audits (required since the mid 1980s) and various performance audits.”


It then went on to address the specifics of MDHHS’s issue, writing that “Late during this audit, MDHHS brought new concerns to the OAG which were discussed in the audit conference, a process the OAG affords to all auditees. We removed 4 exceptions from the findings. THE OAG did not remove the remaining exceptions requested by MDHHS because the department could not provide sufficient evidence . . . “


The pages of the audit report are a study in how this kind of disagreement can be veiled in words that are the model of politeness but reveal a thorough lack of genuine consensus about pretty much anything.


The agency’s overall comment included this: “MDHHS is always looking for opportunities to improve its programs and how they are operated. . . The efforts we have underway to improve this program and its activities are not necessarily a direct result of audit activity and does not mean that MDHHS agrees with all components of a finding. MDHHS can disagree with the OAG’s methodology, interpretations of policy and determinations on particular cases, without conceding our commitment to continuous improvement.”

The OAG’s response: “Regardless of whether MDHHS’s efforts to improve processes or implement corrective actions are a direct result of our audit, it does not negate our responsibilities to communicate reportable issues. The department’s actions further support this weakness exists and that the finding ws warranted. Therefore, the finding stands as written.”


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