Billions of Federal Tax Dollars Misspent on New York’s Medicaid Program

March 5, 2013
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.