State Auditor Issues Report on Chronic DHCS Medi-Cal Eligibility Issues

California State Auditor Elaine Howle this week issued Report 2020-613 following the state’s high-risk audit of the California Department of Health Care Services’ (DHCS) management of federal funds that began last year. Recall, Auditor Howle last year identified the significant amount of funds to be received by state agencies and departments to be a “high-risk statewide issue,” authorizing her office to undertake specified actions to prevent adverse outcomes among state agencies and departments.

Given the significant influx of resources in the state’s Medi-Cal program as a result of the COVID-19 pandemic, Auditor Howle sought to assess DHCS’ administration and management of the Medi-Cal program. According to the State Auditor’s Office, DHCS “is not doing enough – not withstanding the [COVID-19] emergency – to resolve eligibility questions about Medi-Cal beneficiaries and avoid federal financial penalties” associated with beneficiaries that should not be enrolled in Medi-Cal.

While Auditor Howle identified many actions appropriately implemented by DHCS during the COVID-19 emergency, including communicating with stakeholders about applicable COVID-19-related Medi-Cal program changes, she expressed concerns that DHCS has halted its efforts to resolve hundreds of thousands of known Medi-Cal eligibility discrepancies that indicate some beneficiaries may no long meet Medi-Cal eligibility criteria. Many of the discrepancies identified by the State Auditor were issues highlighted in previous State Auditor reports and existed before the COVID-19 emergency. Over the past year, the number of Medi-Cal beneficiaries with questionable or undetermined eligibility has grown by 22 percent. Notably, the Auditor Howle indicates this eligibility issue has cost California tens of millions of dollars in federal reimbursements, and the risk that the state will have to pay future financial penalties to the federal government “continues to grow unabated.”

The State Auditor outlines the following recommendations for DHCS:

  • To reduce inappropriate payments to health care providers and ensure that eligible individuals have access to care, DHCS should by August 2021:
    • Begin monitoring instances of individuals identified as eligible for Medi-Cal in a county data system but not the state data system.
    • Instruct counties to resume overdue processing of applications for beneficiaries awaiting final eligibility determinations.
    • Expand planning efforts to address all high-risk eligibility discrepancies.
    • Resume monitoring counties’ progress in resolving high-risk eligibility discrepancies.
  • To ensure it is addressing weaknesses in counties’ processes for making eligibility redeterminations, DHCS should:
    • Review data collected during the focus reviews it conducted in recent years to identify areas in which further county guidance is needed; by September 2021, DHCS should advise counties of improvements they must make to their redetermination process.
    • Resume its focus reviews within four months of the end of the public health emergency.

In its response to the State Auditor report, DHCS agreed with all recommendations set forth by Auditor Howle. However, DHCS timelines for resolving issued flagged by the auditor are longer than recommended by the State Auditor’s Office, leading Auditor Howle to express concerns with the length of time DHCS plans to take to correct issues.

The full State Auditor report is available here.