Single Audit for State of Oregon: The Games People Play

Interesting tidbit from (pg.81) the State of Oregon Single Audit (of federal spending) illustrates the games that grantees play to cleverly stay within the law. This relates to Maintenance of Effort requirements similar to those likely found in the Recovery Act.

Oregon Office of Private Health Partnerships State Children’s Insurance Program, CFDA 93.767 Maintenance of Effort & Eligibility – Advanced Subsidy Payments Questioned Costs $4.6 Million

In 2002 the Centers for Medicare and Medicaid Services (CMS) authorized a five-year waiver, expiring October 31, 2007, that allowed eligible uninsured children and adults to receive insurance premium subsidies for the purchase of private health insurance. The waiver also included a maintenance of effort requirement that the amount of state funds expended for the program be maintained or increased above the state fiscal year 2002 level.

To meet the maintenance of effort requirement as of October 31, 2007, the Office of Private Health Partnerships (department) made advanced subsidy payments to three private insurance carriers for the periods of December 2007 through February 2008. The department had not incurred an obligation to pay the insurance premium subsidies. If the department had not paid the insurance premium subsidy payments in advance, it would not have met the required maintenance of effort by approximately $2 million.

In addition, effective November 1, 2007, adults became ineligible for State Children’s Insurance Program (SCHIP) funding as the waiver that allowed it had expired. The department used $4.6 million of SCHIP funding to prepay for insurance premium subsidies for adults from November 2007 through February 2008. If the prepayment had not occurred, the department would have paid the subsidies with either Medicaid funds, if eligible, or state funds.....

We recommend department management consult with CMS to determine whether subsidy prepayments are allowed to be counted toward maintenance of effort, and whether prepayments made for adults were allowable since the adults were ineligible for SCHIP funding for the time period prepaid.

AGENCY’S RESPONSE: The agency believes it operated within its contractual obligation with the Centers for Medicare and Medicaid Services (CMS). Prior to making advance subsidy payments, the agency worked with the Department of Human Services (DHS) and the Department of Administrative Services (DAS) to discuss the appropriateness of the payment. Notwithstanding our disagreement with this finding, the agency agrees to consult with the Department of Human Services (DHS) to raise the issue with CMS.