Audit of California's Medicaid Payments for State-Employed Skilled Professional Medical Personnel for the Period October 1, 2002, Through September 30, 2003

EXECUTIVE SUMMARY:

We conducted this audit as part of a nationwide review.  Our objective was to determine whether the California Department of Health Services (California) properly claimed Federal Medicaid funding at the enhanced rate for skilled professional medical personnel and their supporting staff for the period October 1, 2002, through September 30, 2003.  Contrary to Federal regulations, California claimed Federal Medicaid funding at the enhanced rate for: (1) overhead costs not eligible for the enhanced rate ($4,795,167 Federal share), (2) salaries and other compensation for 43 supporting staff not directly supervised by skilled professional medical personnel ($352,532 Federal share), and (3) salaries and other compensation for 13 positions not requiring medical expertise ($147,674 Federal share).

We recommended that California: (1) refund $5,295,373 for the Federal share of Medicaid overpayments for skilled professional medical personnel and their supporting staff; (2) strengthen controls to ensure that costs claimed at the enhanced rate for skilled professional medical personnel do not include overhead costs, include only supporting staff directly supervised by skilled professional medical personnel, and are limited to positions that require medical expertise; and, (3) identify and refund the Federal share of Medicaid overpayments for skilled professional medical personnel and their supporting staff improperly claimed after September 30, 2003.  California provided extensive written comments on our draft report, but did not comment on our recommended refund.  We made changes in the final report to reflect California's comments.