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Watchdog says New York misallocated $150 million in ACA exchange money

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A federal agency that’s responsible for keeping tabs on U.S. Department of Health and Human Services programs has gotten into a dispute over accounting with New York state public exchange program officials.

The federal agency, the U.S. Department of Health and Human Services Office of Inspector General, says the New York State Department of Health allocated about $150 million in federal grant money that should have gone to Medicaid to the exchange program.

Related: New York state squeezes individual health rates

Office of Inspector General officials say in a new report that New York officials misallocated the grant money because they started with inaccurate, overly optimistic forecasts about how many people would use New York state exchange plans.

New York officials say the distinction is not very important, because the state uses its Affordable Care Act exchange, NY State of Health, to enroll state residents both in ACA public exchange plans and in the state’s Medicaid program.

The state definitely had the authority to spend its federal funding on exchange development, whether the costs were allocated to the exchange program or to Medicaid programs, New York officials say.

New York exchange builders followed Centers for Medicare & Medicaid Services (CMS) guidance and rules when they allocated the costs, and they used allocation methods approved by CMS, officials say.

Investigators are criticizing New York allocation formulas “despite the fact that these methods were approved by CMS or in accordance with CMS guidance and instructions,” officials say.

The investigators say New York exchange program managers should talk to CMS about sending cash back to CMS.

“We disagree that a refund is due to CMS,” New York officials say. “We maintain that costs during the audit period were correctly allocated and in accordance with federal rules and CMS guidance.”


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