New Cover Oregon Error May Put State on Hook for $74 Million in Overpayments

An examination of records by the new leadership at the Oregon Health Authority discovered that an error in the Cover Oregon process caused the state to categorize older, Medicare-eligible adults in the Medicaid expansion.

The Cover Oregon debacle continues to dog the Oregon Health Authority. Actuaries have newly discovered that more than 41,000 people were miscategorized over three years, which caused the state to draw down $74 million more federal dollars than it was allowed.

The overpayments are from 2014 to 2016, and the Oregon Health Authority has returned the $10.1 million overpayment from last year. State officials are negotiating with the federal government about whether the state will have to return the remaining $63.9 million.

The error stems from faulty software in Cover Oregon, which placed elderly adults who receive Medicare and Medicaid in the same category as younger low-income adults who received the Oregon Health Plan as a result of the Affordable Care Act expansion.

The federal government paid the entire bill for Medicaid expansion adults in these three years, but it was only set up to pay 63 to 64 percent of the bill for the older adults. Oregon is required to match the remaining 36 to 37 percent.

Gov. Kate Brown’s office said the errors were discovered after the new team at OHA came over from the Department of Consumer & Business Services starting in September, including director Pat Allen and chief financial officer Laura Robison, and they took a closer look at the agency’s books.

“After just two months leading OHA, Allen has directed staff to resolve yet another consequence of the Cover Oregon technology failure,” Brown said in a press release. “This ... population was not correctly categorized due to the limitations of the incomplete Cover Oregon technology and the manual processes put in place to mitigate these limitations.”

The state Legislature killed Cover Oregon, the state's stand-alone health insurance exchange, in 2015, but the Oregon Health Authority tried to salvage the failed Oracle software for Medicaid for over a year before finally abandoning the technology for a working system borrowed from Kentucky.

Part of the penalty for OHA’s error seemed to be passed on once again to its private Medicaid contractors, the coordinated care organizations, which manage population health with payments on a per-person basis.

A chart provided by OHA noted that the state had already recouped overpayment to the CCOs for the recategorized older adults for the first half of 2016. The recoupment would not be the full $10.1 million that the state overcharged the federal government in 2016, but the Medicaid system does pay the CCOs less per older adult than it does per younger adult, as older adults can tap into Medicare for some of their healthcare needs.

"OHA does have the authority to collect recoupments from CCOs, however there was a decision made not to seek recoupment in 2014 and 2015," said OHA spokesman Robb Cowie, even though the mistake was made by state healthcare authorities and not the CCOs.

“They did recoup on 2015 and 2016,” said FamilyCare CEO Jeff Heatherington. “It wasn’t much, and we haven’t heard a word on 2017.” The problem seems to have been fixed midway through 2016, but the state and CCOs were overpaid in 2014.

The recoupment would be less than the $100 million clawbacks that OHA took from the CCOs in 2015, but it would affect all 16 organizations as opposed to just the six that OHA claimed it had overpaid in 2015.

Reach Chris Gray at chris@thelundreport.org.