“Intentional Program Violations” (IPVs): Weaponizing Program Integrity to Undercut Medicaid Expansion

Last November, Utah voters passed an initiative calling for Medicaid expansion.  Since then, Utah policymakers have been fighting a convoluted battle against covering low-income adults that has been chronicled by my colleagues Joan Alker, Adam Searing, and Kelly Whitener.  The latest chapter in this saga is Utah’s “per capita cap” waiver, which is now before CMS. It contains an unprecedented proposal that opens a new line of attack on Medicaid expansion adults.

Specifically, the state is requesting authority to prohibit reenrollment and deny eligibility for a period of 6 months for individuals in its Medicaid Adult Expansion Population who commit an “Intentional Program Violation.” (IPV). (Utah is a “partial” expansion state, covering adults with incomes up to 100% of poverty). The state estimates that 500 individuals per year would be locked out of coverage as a result of this policy.

Even if you’re up to date on your Medicaid acronyms—there is no shortage—you’re probably wondering, “What’s an IPV?”  You are not alone.  There’s no such term in the Medicaid statute or regulations, and no such acronym in MACPAC’s exhaustive list.  The state is making it up out of whole cloth, perhaps taking a page out of CMS Administrator Verma’s initiative to weaponize program integrity in her attack on the Medicaid expansion population. (Another state that has responded to the Administrator’s cues is Tennessee, which in its new “block grant” proposal is seeking permission to suspend or terminate the eligibility of individuals determined to be guilty of fraud.)

Utah’s proposal defines an IPV as one of seven different actions, ranging from “intentionally submitting a signed application containing false or misleading statements in an attempt to obtain medical assistance” to “not reporting a required change within 10 days after the change occurs, and the individual knew the reporting requirements, and the intent was to obtain benefits they were not entitled to receive.”  The proposal treats an IPV as “a Medicaid overpayment.”  Individuals determined to have committed an IPV would be issued an “order of default” including the amount and time period of the “overpayment.”  The 6-month lock-out period would begin the month following the issuance of this order.  Exemptions would be available for individuals who show undue hardship or who qualify for Medicaid on some basis other than Adult Expansion (e.g., pregnancy or disability). Determinations as to whether an IPV has been committed, and whether an exemption is warranted, would be made by state Medicaid agency staff.

We can all agree that individuals who are not in fact eligible for Medicaid should not be receiving Medicaid benefits.  We can also agree that individuals who intentionally submit an application for Medicaid benefits that they know to be false, and who are enrolled in Medicaid based on their false representations, are defrauding the Medicaid program.  There are long-standing (back to 1983) federal regulations that govern how state Medicaid agencies are to respond to beneficiary fraud:  if the agency has reason to believe that a beneficiary has defrauded the Medicaid program, it “must refer the case to an appropriate law enforcement agency,” 42 CFR 455.15(b).  The prosecutors and the courts take matters from there.  The ultimate determination as to whether a beneficiary has committed fraud is made by a court, not the state Medicaid agency.

What Utah is proposing would radically alter these well-established rules.  It would redefine beneficiary fraud as conduct that would be subject to prosecution by state agency staff rather than law enforcement officials.  And it would create a new sanction—a 6-month lock-out—that does not exist in current law or regulation and would be imposed by state agency staff rather than the courts.  This new prosecution and sanction regime would apply only to one group of Medicaid  beneficiaries:  the expansion parents and single adults with incomes below 100% of the poverty level.  It probably goes without saying that the state’s application presents no evidence about the incidence of eligibility fraud or other IPVs among this group of beneficiaries (enrollment began only on April 1 of this year, so there is little operational experience).

The problem here is not just that the state is singling out partial expansion beneficiaries and proposing to strip them of their rights and procedural protections under criminal law by converting allegations of fraud into an administratively adjudicated “IPV.”  The more fundamental issue is that the state is proposing to redefine Medicaid as a cash assistance program, in which payments are made to beneficiaries.  Here’s the rub:  Medicaid, like Medicare, is a health insurance program.  It doesn’t make payments, much less overpayments, to beneficiaries.  It pays providers and managed care plans for furnishing covered services to them.

There are overpayments in Medicaid.  The federal government sometimes overpays the states when it matches their spending on Medicaid.  States sometimes overpay providers or managed care plans for furnishing services to beneficiaries.  In each case, federal Medicaid law has procedures for the reporting and recovery of those overpayments.  But federal law is crystal clear that beneficiaries do not and by definition cannot receive overpayments.

Section 1128J(d) of the Social Security Act sets forth the rules for providers and managed care plans participating in Medicare and Medicaid to report and return “overpayments,” which it defines as “any funds that a person receives or retains under [Medicare or Medicaid] to which the person, after applicable reconciliation, is not entitled under [such program].”  Who is a “person”?  A provider of services, a supplier, a managed care organization, but NOT a Medicare or Medicaid beneficiary: “Such term does not include a beneficiary.”  There’s not a lot of ambiguity here: Medicaid beneficiaries, by statute, cannot be considered to receive an “overpayment.”

No problem, you say; let’s just nullify this provision with our magic section 1115 waiver wand.  And while CMS’s use of its waiver authority has been extremely aggressive, even that overreach has its limits.  Section 1115 allows the Secretary to waive provisions of section 1902 of the Social Security Act if he finds that a demonstration is “likely to assist in promoting the objectives of” the Medicaid program.  But section 1115 does not allow the Secretary to waive the provisions of section 1128J of the Social Security Act, whether or not they are “likely to assist in promoting the objectives of” Medicaid.

The bottom line, ICYMI:  even a waiver fairy couldn’t wave her wand and save the IPV.