Feds take issue with Maine over Medicaid drug rebates

Posted Jan. 10, 2010, at 9:18 p.m.

AUGUSTA, Maine — The inspector general of the U.S. Department of Health and Human Services has warned the Maine DHHS for a second time that it is not keeping proper records of the tens of millions of dollars in Medicaid drug rebates it receives, but state officials point out the problem is being remedied.

“The State agency had not implemented the recommendations from our prior audit,” the inspector general wrote last month. “Specifically, the State agency had not established procedures to provide accurate pending rebate amounts and properly report drug rebate receivables in its quarterly report.”

Maine DHHS Commissioner Brenda Harvey acknowledged last week that the report is correct and added that the state’s formal response to the Centers for Medicaid and Medicare, due later this month, will say the state is moving toward compliance as quickly as it can be done.

“The new claims management system will have the functionality that is going to address all of the issues they identify that have to do with documentation, recording and further addressing overdue payments by the pharmaceutical companies,” she said.

Last year, Maine received about $100 million in rebates under a federal law that requires a drug manufacturer to enter into an agreement to rebate a portion of the cost of the drugs purchased under Medicaid. Nearly all drug manufacturers enter the agreement because the joint federal-state Medicaid program is the largest buyer of drugs.

Harvey said the state is keeping records, but cannot give the feds the level of detail they require until the new computer system is functioning. She said testing of the new system is under way, and she expects it will be fully operating this spring.

“We do have much better financial controls in place now between the divisions that deal with this in the department now than we did in 2005,” she said.

A computer system failure in 2005 was a major reason the state has not been able to comply with the federal requirements. That failure led to estimated payments being sent to providers, and a cumbersome, lengthy process to recover resulting overpayments still has not been completed.

The inspector general’s report also noted that although Maine DHHS has developed policies for resolving disputed items, it has not implemented these policies. Harvey said that policy for resolving disputes and the continuous ability to track and calculate the amount of interest owed on unpaid drug rebates are being implemented with the new computer system.

Roseanne Pawelec, a spokeswoman for the Centers for Medicaid and Medicare, the federal agency overseeing Medicaid, said the agency is “well aware” of the state’s computer problems in 2005 and agrees that is the principal reason why the state has not been able to meet the required standards of reporting how the federal funds were spent.

“Maine is not alone in this kind of situation,” she said. “Other states are also having difficulties with getting in compliance with the reporting requirements.”

Pawelec said the ultimate sanction could be the withholding of a portion of Medicaid funds from a state, but she was quick to add that will not happen in Maine’s case. She said the state has been working with CMS to get the new computer system operating and CMS is paying for most of its cost.

“The ultimate goal is to bring a state into compliance,” she said. “The expectation is that the corrections can and will be made with the full implementation of the new system.”

While the feds appear to be willing to give the state more time to implement required oversight procedures, some lawmakers are not.

Sen. Bill Diamond, D-Windham, the co-chairman of the Appropriations Committee, said the state has had to pay back millions to the feds for errors at DHHS over the years, and he said that has to stop.

“You can bet it will come up during the hearings on the budget,” he said.

When informed that Harvey said the reporting requirements will be met when the new computer system is on line in March, Diamond bluntly said that was not good enough for him.

“We do need to take a look at this,” he said. “It warrants thorough review why this happened and simply saying another computer problem, another glitch, really doesn’t carry water.”

The committee holds hearings on proposed changes to the DHHS budget for the first three days of this week.

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