By MADISON HIRNEISEN
THE CENTER SQUARE STAFF REPORTER
(The Center Square) — A California state department responsible for administering tobacco tax funds to increase payments for certain types of health care provided by Medi-Cal has inadequately monitored provider payments, according to a new report from the California state auditor.
The audit, released Tuesday, overviewed the distribution and administration of Proposition 56 funds — a measure passed by voters in 2016 that increased taxes on cigarettes and other tobacco products. Prop. 56 added $2 in taxes per pack of 20 cigarettes and imposed an equal tax on other products like chewing tobacco and cigarettes, according to the report. At the time, supporters of Prop. 56 said the measure would improve public health by increasing the prices of tobacco products. They hoped higher prices would discourage use.
The tax increase generated $1.3 billion in tax revenue in 2020-2021 alone, and the majority of those funds — nearly $900 million — was used to “increase payments for certain types of health care, treatment and services provided under the Medi-Cal program,” according to the audit.
The Department of Health Care Services is responsible for administering the funds to healthcare providers, but auditors discovered that DHCS lacks the oversight necessary to ensure healthcare providers who deliver services to Medi-Cal beneficiaries “always receive the Proposition 56 supplemental payments to which they are entitled.” The review also found some providers may have engaged in fraud, as auditors found some managed care plans were unable to provide evidence that their providers performed certain medical procedures.
On top of that, auditor’s reviews of fee-for-service claims by providers that received payments found DHCS paid out nearly $380,000 in Prop. 56 funds and other Medi-Cal funds to 14 providers that state and federal officials identified as ineligible.
“DHCS’s failure to promptly cease payments to these providers placed Medi‑Cal beneficiaries at unnecessary risk,” the audit states.
To address these issues identified and better protect Medi-Cal beneficiaries, auditors recommend that by June 2023, DCHS should investigate instances where care plans are unable to provide evidence that medical services were provided and require care plans to submit Medi-Cal beneficiary information in quarterly reports, among other recommendations.
On the legislative side, auditors recommend lawmakers consider amending state law to permit DHCS and boards that license Medi-Cal providers to execute agreements allowing boards to provide DHCS with timely information when Medi-Cal providers are arrested or investigated for allegations of fraud.
DHCS responded to each of the recommendations, outlining actions it is already taking or plans to take to make corrections. The department said it has updated its annual managed care plan audit program to test for compliance among managed care plans and require plans to submit health records confirming whether certain medical services were provided.
Madison Hirneisen covers California for The Center Square.