OIG: NJ Improperly Claimed $606M in Medicaid Reimbursements

New Jersey did not follow federal regulations and CMS guidance when it developed payment rates for Medicaid school-based services that resulted in $606.7 million in unallowable or unsupported costs, according to the HHS Office of Inspector General.

New Jersey improperly claimed $606.7 million for its school-based Medicaid services, federal auditors allege, and they want a reimbursement.

Federal law requires schools to perform evaluations of children with disabilities to determine whether they are entitled to services, but Medicaid covers only those portions of evaluations that are medically necessary. 

New Jersey's Department of Human Services has contested the findings in a detailed response appended to the audit.

Nicole Brossoie, assistant commissioner for public affairs for the department, said the state would rigorously contest the audit’s findings.

“It’s important to note that the report is just the first of many steps in the process of a federal audit,” Brossoie said. “The audit will go to CMS, and CMS will review the state’s response, consider the validity of documentation and make a determination regarding repayment. At that time, if the state remains opposed to the outcome, it can petition the Departmental Appeals Board. If the conclusion still is not acceptable to the state, the case can go to federal court.”

The audit by the Department of Health and Human Services' Office of Inspector General found that:

• Public Consulting Group, a private company hired by the state of New Jersey to develop and submit Medicaid claims on behalf of the state, improperly altered school employees’ responses to time studies to indicate that their activities were directly related to providing Medicaid services when the responses indicated the activities were unrelated;
   
• New Jersey improperly incorporated into its payment rates more than $400 million owed to the school employees’ pension fund despite not having made scheduled payments to the fund in nearly 20 years;
   
• Salaries of some employees who did not provide health-related services were incorporated into the payment rates.
   
• New Jersey did not maintain documentation related to the time studies, which it used to identify the percentage of time personnel provided particular services.

"We recommended that New Jersey refund $300.5 million in federal Medicaid reimbursement claimed based on payment rates that incorporated unallowable costs, work with the Centers for Medicare & Medicaid Services to determine the allowable amount of the remaining $306.2 million claimed for Federal Medicaid reimbursement, and revise its payment rates so they comply with federal requirements," OIG said.  

Editor's note: This story has been updated to include a statement from a New Jersey Department of Human Services spokesperson.