Budget committee orders draft legislation to allow extrapolation audits for PBT and other Medicaid claims

The Joint Budget Committee directed staff to draft legislation to strengthen the state's ability to audit and recover improper Medicaid payments related to pediatric behavioral therapy (PBT) and other programs.

Mr. Kurtz (JBC staff) outlined three options: (1) a claim-by-claim audit (labor intensive, higher upfront contractor cost), (2) an extrapolation audit (use a statistically significant sample to estimate improper payments and extrapolate recoveries), or (3) a combination of both. He explained that extrapolation audits are the methodology used by federal auditors and are more cost-efficient for large pools of claims, but, he added, they may provoke strong opposition from some providers.

Rep. Taggart and other members pressed for action, citing federal exposure and rapidly rising PBT spending. "If we don't do this I think we open ourselves to a major problem with our federal partners," Rep. Taggart said. Staff provided estimated cost/savings scenarios: a claim-by-claim audit would require roughly $13 million in contractor spending and produce recoveries over time; an extrapolation audit would require a smaller one-time investment (roughly $2.7 million general fund in staff estimates for the sample) and generate a projected net general fund savings of several million in the first year and continuing recoveries thereafter.

Several members expressed low confidence in the department's internal controls and urged the draft to include oversight provisions targeting department monitoring practices and documentation. Senator Kirkmeyer pressed that the committee must ensure the department itself is audited or reviewed for the management failures OIG identified. Staff agreed to include oversight language in the draft and to present both audit-method options so the committee can weigh policy and political implications.

The committee voted to proceed to drafting with a "both-option" approach so the bill text could be shaped to permit either claim-by-claim work, extrapolation audits (where permitted), or a staged combination; the motion to draft passed unanimously (6-0) with direction that staff include department oversight measures.