By BRIAN TUMULTY
Gannett Washington Bureau
WASHINGTON - The reimbursements New York receives from the federal government each year for caring for certain developmentally disabled Medicaid patients will be cut by 80 percent, a senior federal health official told House lawmakers Thursday.
New York's current reimbursements are "excessive and inappropriate,'' Penny Thompson, deputy director of the Center for Medicaid and CHIP Services, told members of the House Committee on Oversight and Government Reform.
The committee estimates the state overbilled the federal government $15 billion in Medicaid costs over the last 20 years. Overbilling in 2011 alone amounted to $1.27 billion for 1,313 patients at New York facilities.
Reducing New York's Medicaid reimbursements by 80 percent will cost the state slightly more than $1 billion a year.
A report issued in May by the Department of Health and Human Services' inspector general estimated that the overbilling amounted to less than $15 billion over 20 years but still found it excessive. The report estimated that in 2009, overbilling for a relatively small population of Medicaid patients at 15 state developmental centers amounted to about $701 million.
The report recommended that New York be reimbursed for actual costs. Currently, the state uses a complex formula to bill the federal government for high-needs patients at large state facilities that includes the fixed costs of operating those facilities.
The practice became public in June 2010 when the Poughkeepsie (N.Y.) Journal began publishing stories about the high cost of operating the nearby Wassaic Developmental Center.
Federal officials have known about the overbilling since at least 2007. HHS began making inquiries to the state three weeks after the first story appeared in the Poughkeepsie Journal.
HHS officials had initially intended to tell lawmakers at Thursday's hearing that they planned to gradually change the Medicaid reimbursement formula for New York over five years. But that testimony was scrapped when publicity about the hearing put more pressure on the agency to act, according to congressional staff.
Thompson told Rep. Paul Gosar, R-Ariz., who chaired Thursday's hearing, that HHS will adjust the formula as quickly as possible.
She declined to set a deadline, noting the agency will consider offsetting future reductions in Medicaid payments to New York "if the state has some needs'' it can document.
In a brief hallway interview after the hearing, Thompson said revising the formula "is our first priority with the state of New York.''
"It will be a system based on estimated costs,'' Thompson said.
State officials also have agreed to regular audits, she said.
New York officials did not testify at Thursday's hearing. A spokesman for Gov. Andrew Cuomo, Joshua Vlasto, did not respond to a request for comment.
Gosar expressed confidence that taxpayers will soon begin saving money under a new billing formula. He indicated his committee will continue to monitor HHS until it acts.
"Once we sink our teeth - and my teeth - into this, we keep this on our calendar and continue to ask the questions," he said.
Gosar said he wasn't surprised that no lawmakers from New York attended the hearing.
"I don't think they are in a safe haven any way they go,'' he said.
Gosar noted that New York isn't the only state that has overbilled for Medicaid services. Earlier this year, he said, his panel learned that Texas was billing more for orthodontic services under Medicaid than all 49 other states combined.
"If it isn't in one place, it's in another,'' he said.