The Colorado Department of Heath Care Policy and Financing may have paid millions of dollars in claims for ineligible Medicaid patients last year due to staff errors, state Auditor Dianne Ray told the Legislative Audit Committee on Feb. 26.

A recent state audit of accounting practices of state agencies uncovered a half-dozen “material weaknesses,” the most serious problems that can arise in an audit.

Among those findings: Department of Health Care Policy and Financing (HCPF) staff made a host of errors in its determinations of Medicaid eligibility.

Auditors estimated those errors may mean that millions of dollars were paid last year on claims for patients who weren’t eligible for Medicaid – and, in a few cases, for patients whose Medicaid eligibility had ended, but for which information had not been updated in the Coordinated Benefit Management System.  

Lawmakers accused HCPF staff of being dismissive and defensive about the audit’s claims at the late February meeting. The committee’s chair – Democratic Sen. Nancy Todd of Aurora – warned HCPF officials that they would face scrutiny by the press or public if they didn’t clean up internal issues. She later told Colorado Politics that she’s had it with the agency’s Medicaid problems.

The Feb. 26 committee hearing was the second on the state’s financial books for 2018.

Last month auditors released their first report on the statewide audit, in which they pointed out that hundreds of millions of dollars in errors were made by the state controller’s office on the state’s annual financial report.

The report is submitted to agencies that review the state’s books in preparation for issuing bonds. Those errors were caught before the annual statement was finalized.

RELATED: Audit: Colorado controller’s office accounting errors total millions of dollars

In the case of HCPF, auditors tested 200 case files for Medicaid eligibility and found 56 with mistakes. 

“As a statistically valid sample,” the report said, the auditor “was able to project this data to the nearly 1 million beneficiaries and estimated with 95 percent confidence that at least $30 million was spent on claims for individuals who were ineligible for Medicaid benefits.”

According to the audit, HCPF took a different perspective and said the estimate was “a mathematical calculation of costs that does not represent actual money or potential savings.”

That did not go over well with the audit committee, comprised of eight lawmakers.

Kim Bimestefer, executive director of HCPF, told the committee that the agency will take the recommendations seriously.

However, the department will not owe any monies back to the federal government, and federal funds are not at risk, she said.

“We strive for 100 percent accuracy in all state files,” she said, adding that the agency relies on 4,500 county workers who provide eligibility services.

“The most important thing to me … is to ensure that those on the Medicaid rosters are indeed eligible,” she said.

The department has also asked for funding in its 2019-20 budget for a vendor to help identify errors and reduce the impact of those errors, as well as for more trainers to work with county employees.

“I’m not buying it,” Republican Rep. Lori Saine of Firestone said.

“We may not be serving the population” that should be served, Saine said, adding that she doesn’t want the federal government to ask for funds to be returned.

“I don’t want you to have any doubt that we’re … using these resources responsibly,” Bimestefer told Saine.

“This is … $30 million,” Todd said. “We can’t just blink that away.”

The auditors and the committee received more pushback from HCPF’s Chris Underwood, who is responsible for eligibility controls.

These numbers presented in the audit are not real, he said.

“They’re basically meaningless” to the department, he said.

The auditors used incorrect costs, he told the committee, attributing missing documents to lack of staff in some rural facilities that serve Medicaid clients.

“Services were rendered appropriately,” but the facility just didn’t fill out the paperwork,” he said. “When you project these costs for this one person to the entire population, it distorts the numbers.”

Republican Sen. Paul Lundeen of Monument took issue with Underwood’s defense.

“I read in this report that the department agrees with the recommendation, and then I hear a patent dismissal that there is a problem,” Lundeen said.

If sampling and identification aren’t an appropriate method to understand what is going on, what is the correct way, he asked.

Bimestefer replied that HCPF disagreed with the auditors’ extrapolating of errors in the 56-case sample to the entire Medicaid population.

“We’re disagreeing with the methodology,” she said.

“What happens when we don’t follow the rules?” Lundeen said, raising the specter that the federal government might demand its money back.

Underwood said the federal government would use a different sample size and would not take money back based on the auditors’ projections.

“Every time I hear you respond, I feel you’re not listening. It’s defensive and dismissive,” Democratic Sen. Rhonda Fields of Aurora later told Underwood.

“Every member on the audit committee wants to hear, ‘Yes, we see gaps and issues.’ There should not be a misunderstanding of what to do,” Todd added. 

“The department appreciates the auditors’ work, and we will implement every recommendation,” Bimestefer said. Underwood also apologized for appearing dismissive.

Todd warned HCPF at the conclusion of the audit report that they’d better get their house in order or face the consequences.

“I know this has not been a fun morning,” she told the HCPF staff. “If we can take care of business within the government of Colorado, we don’t need this to be scrutinized by the press or by public. Let’s do our work and make sure we’re taking care of business.”

The auditor also had issues with how the state Department of Corrections (DOC) records some of its payments, noting errors that resulted in the department exaggerating what it’s spending on construction and listing those expenditures in the wrong years, for example.

The audit attributed the errors, in part, to a lack of training for certain DOC accounting staffers. The bottom line, according to the audit, is that DOC “cannot ensure the accuracy and completeness of its financial information and, ultimately, the state’s financial statements.”

The DOC agreed with the recommendation to fix identified issues.