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Adventures in lousy governance

Tuesday, Aug 19, 2014

* AP

Illinois used faulty methods for withdrawing federal Medicaid money, resulting in “a perpetual ‘treadmill effect’” of regular overdraws of dollars that the state later had trouble repaying, federal auditors said in a report released today.

The state’s withdrawals exceeded its actual Medicaid spending by an average of $60 million per quarter during the three years reviewed, according to the report from the U.S. Department of Health and Human Services’ Office of Inspector General.

The federal government may have lost as much as $792,000 in interest during fiscal 2010 through 2012 because the state repaid the money two to six months later, the report said.

* The Tribune explains why

Because Illinois still relies on a 30-plus-year-old Medicaid software system, it is unable to provide real-time claims information. The state, therefore, must use historical claims data to estimate the federal government’s share of the payments by quarter, Casey said.

Each day the state pays hospitals, doctors and other health care providers, it submits the federal government a bill for its projected share of the costs. At the end of each quarter, it reconciles the difference.

Between fiscal 2010 and 2012, the state’s estimates missed the mark by at least $4 million per quarter, ranging from undrawing $28.6 million from the federal government in one quarter and overdrawing $193.7 million in another, according to the audit.

Even so, Casey said, “When you look at a $60 million variance per quarter, that’s not much of a variance on average when you consider we have $3 billion in claims each quarter.”
Casey said as Illinois moves more of its Medicaid patients into managed care programs, where it will be paid a fixed fee per-patient, per-month, it will be able to better estimate and manage the amount it draws from the federal government.

Illinois won’t have new software to correct this problem until 2017.

But none of that explains why the state was depositing federal Medicaid dollars into GRF, which is why the state couldn’t pay back the money right away at the end of the quarters.

* Meanwhile

The bumpy marriage between the state and the private company that operates the Illinois Lottery is ending in a divorce.

Gov. Pat Quinn’s office confirmed to me [Friday] that it is ending its contract with Northstar Lottery Group LLC to operate the $2 billion-a-year lottery system, seven years earlier than scheduled.

It is not yet certain whether the separation will be voluntary by both parties, but a decision to end the contract has been made.

“The governor’s office has directed the lottery to end its relationship with Northstar,” gubernatorial spokesman Grant Klinzman said in an email that he later verified in a brief phone conversation. “The administration has had serious concerns with Northstar’s performance. The governor demands every state contractor be held accountable for their performance.”

* More

What’s most likely to happen is that Northstar will cease almost immediately to have any say in how the Lottery operates. Though there will likely be a short period of de-entangling transition, the 140 staffers or so staffers believed to work for Northstar will no longer be actively — or majorly — involved in charting the Lottery’s course.

In the short term, Jone’s own Lottery staff likely will take over management. And yes, there most likely will be a new private manager, as the Illinois state law that created a Lottery private manager function is still on the books and isn’t likely to be done away with anytime soon.

* Sun-Times

Northstar’s defense is that state meddling and inaction are to blame for much of the shortfall. The company contends, for example, that state officials endlessly delayed approval of a promising new Lottery game based on the board game Monopoly. Northstar also argues that later final audits will erase much of the supposed shortfall.

We’re loath to take sides too strongly on this one, seeing plenty of blame all around. We suspect Northstar overpromised from the start what it could deliver, but we also know how maddening it can be to get a government bureaucrat to make a decision or get out of the way.

The undeniable fact remains that Northstar grew Lottery sales far faster than the state did. Northstar’s own estimate is that sales grew by 3 percent a year for five years when the Lottery was administered by the state, then grew by an average of 12 percent a year after Northstar took over.

Sigh.

- Posted by Rich Miller        


18 Comments
  1. - Cassiopeia - Tuesday, Aug 19, 14 @ 1:16 pm:

    It is amazing that anyone can say that the 30 year-old Medicaid software system will be updated by 2017.

    Ask them for the project chart Rich. It doesn’t exist. It’s someone’s dream.


  2. - Rufus - Tuesday, Aug 19, 14 @ 1:19 pm:

    Northstar apparently did not make the correct political contribution.


  3. - Stones - Tuesday, Aug 19, 14 @ 1:22 pm:

    The entire Lottery needs to be rethought. Will all the gambling opportunities here and in neighboring states there is nothing less exciting than watching ping pong balls in a blender (other than perhaps watching the grass grow). If the state wants to generate interest they need to come up with something more creative. JMHO


  4. - Rufus - Tuesday, Aug 19, 14 @ 1:25 pm:

    If the same company that was hired to write ABE (Application for Benefits Eligibility) is hired do the the Medicaid rewrite, then $800,000 in lost interest will be the least of the Fed’s worries.


  5. - OneMan - Tuesday, Aug 19, 14 @ 1:26 pm:

    If Northstar got any real growth after the advent of Video poker they should get a medal.

    But they were too far behind what they said they could do so I guess the need to go.


  6. - Demoralized - Tuesday, Aug 19, 14 @ 1:28 pm:

    ==But none of that explains why the state was depositing federal Medicaid dollars into GRF==

    As far as I know that’s where the money has always been deposited, Rich.


  7. - Freeze up - Tuesday, Aug 19, 14 @ 1:47 pm:

    Maybe whoever wrote the ICASE software for ISP is still available.


  8. - West Side the Best Side - Tuesday, Aug 19, 14 @ 3:01 pm:

    Now the really important Lottery question is this - What about Linda Kollmeyer?


  9. - Nearly Normal - Tuesday, Aug 19, 14 @ 3:13 pm:

    Linda is an employee of WGN. IF WGN keeps the contract for televising the lottery draws, Linda has a job. Now that WGN America no longer broadcasts the news programs, that may give another station an opportunity. If there is a change, let’s hope the new station hires Linda.


  10. - walker - Tuesday, Aug 19, 14 @ 3:14 pm:

    Didn’t look like much of a story, given the size of the program.

    Later in the AP story when they talk about “Medicaid fraud” they fail to point out the committers and beneficiaries of that “fraud” are businesses and doctors, not the poor.


  11. - Roamin' Numeral - Tuesday, Aug 19, 14 @ 3:17 pm:

    ==The entire Lottery needs to be rethought. Will all the gambling opportunities here and in neighboring states there is nothing less exciting than watching ping pong balls in a blender (other than perhaps watching the grass grow). If the state wants to generate interest they need to come up with something more creative. JMHO==

    Agreed. We need something like this: http://www.equilottery.com/


  12. - Hoping for Rational Thought - Tuesday, Aug 19, 14 @ 3:32 pm:

    The majority of federal Medicaid money has always been deposited into GRF. When you see GRF revenue estimates that is what most of the federal revenues are. The feds reimburse the State for spending State dollars. So when the State dollars are spent from GRF the federal reimbursement goes into the fund being reimbursed i.e. GRF. Over the years there have been some special Medicaid funds but the large portion remains to be GRF.

    Even if the money was deposited into a special fund they couldn’t pay it back quickly since they always have bills waiting to get paid.

    Also the computer system has been neglected because no administration wants to spend the money to upgrade in past. No one praises you or votes for you because you upgrade Medicaid system computers…


  13. - Budget Watcher - Tuesday, Aug 19, 14 @ 6:30 pm:

    It doesn’t sound like there was any Medicaid fraud. Ultimately HFS claimed federal share only for what they spent on Medicaid. Also, the Medicaid program is funded primarily from GRF, so federal matching funds on the GRF spending would logically flow back to GRF. There’s nothing sinister or controversial about that.


  14. - Arizona Bob - Tuesday, Aug 19, 14 @ 9:29 pm:

    Gee, I’m sure the State Lottery commission has a firm lined up to take over the Lottery; a firm free from political cronysim and patronage, with a record of growing lottery receipts and profits MORE than the 12% per year Northstar was earning.

    Sure… that’s the ticket, no poltics, just good, sound planning and management from the State of Illinois.

    If you believe that, I’ve got some oceanfront property here in Scottsdale in which you may be interested…..


  15. - Jonathan - Wednesday, Aug 20, 14 @ 12:36 am:

    While the majority of Medicaid spending used to occur through the GRF line item, that hasn’t been the case for several years, now. Most Medicaid spending is now “off-budget” (in the sense that nobody talks about non-GRF budget) in special funds, with much less sunshine. (The state has been able to keep the GRF portion at low growth, making the GRF-only budget look better, while the costs are exploding in the special funds.)


  16. - VanillaMan - Wednesday, Aug 20, 14 @ 8:12 am:

    BAD government!


  17. - Losing my Edge - Wednesday, Aug 20, 14 @ 10:03 am:

    ==While the majority of Medicaid spending used to occur through the GRF line item, that hasn’t been the case for several years, now. Most Medicaid spending is now “off-budget” (in the sense that nobody talks about non-GRF budget) in special funds, with much less sunshine.==

    That’s just an inaccurate statement. While it’s true that some Medicaid expenses have been moved to OSF due to alternative revenue resources, the vast majority of Medicaid dollars are spent through GRF. Even with the large changes made to the Medicaid several years through the SMART Act and the other policy changes.

    Additionally, sure some new expenditures aren’t paid out of GRF due to changes enacted through the ACA. Those are 100% federally reimbursable, though, so should that money really be included in a realistic discussion surrounding our state budget?


  18. - Jonathan - Wednesday, Aug 20, 14 @ 10:49 am:

    Losing my Edge:

    So you’re saying HFS, COGFA, GOMB and the Comptroller are all wrong about the state’s Medicaid budget?

    GRF appropriations account for about $7 billion of a $19 billion program. Are you honestly suggesting that 37% of program appropriations equates to the “vast majority” of Medicaid dollars?

    This isn’t a new trend, either. It was underway prior to the ACA and prior to the SMART Act changes. Back in 2008, GRF represented about half of the $14 billion program.

    Despite the fact that program costs have increased by $5 billion, the GRF line item has remained relatively flat. That doesn’t happen if the “vast majority” of Medicaid dollars flow through GRF.


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