Report: Colorado paid over $7 million to insurance companies for dead Medicaid patients

COLORADO SPRINGS, Colo. (KRDO) – An audit completed by the Office of Inspector General (OIG) is alleging that the state of Colorado owes $6 million to the federal government after the state paid insurance companies millions to handle the care of patients that had already died.

The report from the U.S. Department of Health and Human Services' OIG estimates that Colorado paid insurers at least $7.3 million – consisting of around $3.8 million in federal funding – for services for deceased Colorado Medicaid patients.

The audit examined 234,096 monthly “capitation payments" totaling nearly $13 million, spanning from 2018 to 2020.

According to the report, 127,874 payments were made on behalf of Medicaid enrollees who were listed in the Social Security Administration's Death Master File (DMF), but not listed as deceased in the state agency's eligibility system. In the majority of these cases, Colorado didn't receive data from the DMF because it had no automated system to check for and verify deaths, the OIG said.

Another 106,222 payments were made on behalf of enrollees who were listed as deceased in the state's system.

The OIG laid down six recommendations for the Colorado Department of Health Care Policy and Financing in the report, including policy and procedure changes and a refund of over $6 million to the federal government.

The state agreed to three of the terms put forth in the report, including refunding $2.2 million in Medicaid expenditures that Colorado had previously overreported.

However, the state disagreed with other recommendations and $3.8 million the OIG recommended refunding, citing that the audit was "inadequate" and that the office used state and federal records rather than reaching out to enrollees to verify its findings.

The payments covered in the audit make up only a small portion of the $15 billion that Colorado spends annually on Medicaid and other health coverage programs – but the report comes at a rough time for the state, as lawmakers discuss federal Medicaid cuts.

Read the full audit here.