HB 1274: RELATING TO THE STATE AUDITOR.

A BILL FOR AN ACT

relating to the state auditor.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that the effective oversight of managed care organizations that are under contract with the department of human services to provide managed care health insurance plans under the state medicaid program is essential to ensure the proper use of public funds and the delivery of quality health care services to medicaid beneficiaries.  The state auditor plays a critical role in this oversight by conducting audits to assess the performance, compliance, and financial integrity of entities receiving state funds.

     The legislature further finds that medicaid is a significant component of the State's budget.  Ensuring the integrity and efficiency of medicaid health care insurance contractors is crucial for the sustainability of the program.  Given the complexity and scale of medicaid operations, it is imperative to have a robust audit mechanism to identify and address any issues related to financial management, service delivery, and compliance with federal and state regulations.

     The legislature further finds that auditing Hawaii's medicaid health care insurance contractors will promote transparency; ensure medicaid funds are used appropriately and for their intended purpose; ensure Hawaii's medicaid beneficiaries are receiving the requisite quality of care; ensure compliance with all applicable state and federal laws, regulations, and contractual obligations; and improve the efficacy and effectiveness of medicaid health care insurance contractors, leading to better health care outcomes for beneficiaries.

     The legislature further finds that the Medicaid Program Integrity Manual, published by the Centers for Medicare and Medicaid Services, outlines the importance of audits in identifying and addressing medicaid fraud, waste, and abuse.  The manual emphasizes the need for proactive project development and collaboration between state agencies and auditors to ensure program integrity.  Additionally, a report by the United States Government Accountability Office published on September 21, 2023, highlights the critical role of state auditors in medicaid oversight.  The report found that state auditors identified an average of over three hundred medicaid audit findings per year, including overpayments and payments to ineligible providers.  The report also noted that nearly sixty per cent of medicaid audit findings were repeated from the prior year, indicating the need for more effective corrective actions.

     Specific incidents in Hawaii have highlighted the need for rigorous audits.  For example, the department of human services identified multiple cases of medicaid overpayments due to provider ineligibility, noncovered services, and lack of prior authorization in 2021 and 2022.  These overpayments were resolved through recoupment, tax offset, and circuit court judgments.  Additionally, a focused program integrity review by the Centers for Medicare and Medicaid Services in 2023 found that Hawaii's medicaid managed care program had several areas needing improvement in terms of fraud, waste, and abuse prevention.  The review identified issues such as inadequate oversight of managed care organizations, insufficient fraud detection and prevention measures, and lack of coordination between state agencies and managed care organizations.

     The legislature further finds that the focused program integrity review also highlighted that the state medicaid program lacked effective mechanisms to detect and prevent fraud within managed care payments.  This included issues with incorrect fee-for-service payments and inaccurate state payments to managed care organizations.  The review additionally found that there was a lack of coordination between state agencies and managed care organizations, which led to inefficiencies and potential financial losses.  Although a memorandum of understanding between the department of human services and department of health was established to improve coordination and alignment, challenges remain.

     The legislature believes that the findings of the 2023 Center for Medicare and Medicaid Services focused program integrity review report necessitate a state audit to address the identified issues and ensure the integrity and efficiency of the state medicaid program.  The legislature further finds that the state auditor has had legal authority since 1975 to audit medicaid health care insurance contractors but has never exercised this authority, making these audits long overdue.

     Accordingly, the purpose of this Act is to require the state auditor to conduct management and financial audits of the State's medicaid health care insurance contractors on a biennial basis.

     SECTION 2.  Chapter 23, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§23-     Medicaid health care insurance contractors; audit; report.  (a)  The auditor shall conduct at least once every two years a management and financial audit of all medicaid health care insurance contractors.  The first audit shall be conducted within six months of July 1, 2025, with the first audit report to be submitted no later than twenty days prior to the regular session of 2027.

     (b)  Audits under this section shall:

     (1)  Assess the financial integrity, performance, and compliance with all applicable federal and state laws, regulations, and contractual obligations of each medicaid health care insurance contractor; and

     (2)  Review documents, including but not limited to any books, records, or other evidence, related to the financial and operational activities of each medicaid health care insurance contractor.

     (c)  All medicaid health care insurance contractors shall cooperate with and assist the auditor as needed in conducting the audit, including promptly providing all records, documents, and any other information requested by the auditor in the course of the audit.

     (d)  The auditor shall submit a report of its findings and recommendations to the governor, legislature, and director of human services no later than twenty days prior to the convening of the regular session following the year in which the audit is conducted.

     (e)  The auditor may conduct additional audits as deemed necessary based on risk assessments or at the request of the governor, legislature, or director of human services.

     (f)  As used in this section, "medicaid health care insurance contractors" means managed care organizations that are under contract with the department of human services to provide managed care health insurance plans under the state medicaid program."

     SECTION 3.  There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 to conduct management and financial audits of medicaid health care insurance contractors as required by this Act.

     The sums appropriated shall be expended by the office of the state auditor for the purposes of this Act.

     SECTION 4.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on July 1, 2025.

Report Title:

Medicaid; Managed Care Organizations; Medicaid Health Care Insurance Contracts; Auditor; Management and Financial Audits; Appropriation

Description:

Requires the State Auditor to conduct management and financial audits of Medicaid health care insurance contractors at least once every two years, with the first audit report to be submitted no later than twenty days prior to the Regular Session of 2027.  Appropriates funds.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.