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House of Representatives
Session of 2021 - 2022 Regular Session


Posted: December 21, 2020 02:21 PM
From: Representative Valerie S. Gaydos and Rep. Clint Owlett, Rep. Tommy Sankey, Rep. Wendi Thomas
To: All House members
Subject: Bipartisan Reforms to Prevent Fraud and Stop Improper Payments
The commonwealth operates the third-largest Medicaid program in the country, and the program is growing faster than any other Medicaid program. Due to the considerable amount of taxpayer money used to fund Medicaid and the vulnerable population the program serves; it is important to ensure taxpayer money is used to assist those in need. To this end we will introduce a bipartisan package to reform state government operations including Medicaid. This package will codify the grand jury recommendations along with enacting statutes which mirror federal law to allow the commonwealth to combat fraud in Medicaid and the rest of state government while recouping state tax dollars.

Document #1

Introduced as HB108

Description: State Improper Payment Act

In order to prevent improper payments within state programs, we plan to introduce legislation which mirrors the Federal Improper Payment law.  This bill, introduced by Representative Valerie Gaydos, would require agencies to review their programs and expenditures and assess whether they are highly, moderately or unlikely to be susceptible to an improper payment.   This assessment is sent to the Governor, the Budget Office, the IFO, the General Assembly and the State Inspector General.

As stated in federal law an improper payment in the bill is defined as an overpayment, an underpayment, a payment for an ineligible service or a payment to someone who was ineligible to receive it. Additionally, an improper payment both under the draft and in federal law includes any payment made by a state agency which did not receive a discount or credit which the payment should have received from a vendor or third party.

The bill requires the Inspector General to review at least one state agency per year starting in 2021.If the state agency has an improper payment rate which exceeds 0.3%, the agency must adopt a corrective action plan to reduce the improper payment rate to 0.3%.  This requirement is necessary for the Commonwealth to comply with federal law.  If a state has an improper payment rate which exceeds 0.3% it results in a “disallowance” from the federal government.  Effectively, this means a state government must refund the federal government for improper payments made by the state.  A recent example comes from the State of Florida which now owes the Federal Government over $400 million due to improper payments made under Medicaid.

Under the bill, if an agency has failed to reduce the improper payment rate five fiscal years after the Inspector General’s review, the governor will move funds from the agency into budgetary reserve. The amount moved into budgetary reserved will be taken from the agency’s GGO and will be equal to the total amount of improper payments or equal to the percentage of improper payments whichever is lower.  These funds will remain into budgetary reserve until the Inspector General has reviewed the agency and determined the improper payment rate is not greater than 0.3%.  This will incentivize agencies to address improper payments and prevent the state from owning the federal government money as a result of a disallowance.

This legislation was previously introduced in the 2019-2020 legislative session as HB 2353.

Document #2

Introduced as HB109

Description: Grand Jury Recommendation - Civil Penalties

This legislation, introduced by Representative Wendi Thomas, would increase the penalties for making a false claim against the commonwealth’s Medicaid Program under section 1407 of the Human Services Code.   Under this bill the penalty for knowing or causing to a fraudulent claim to be submitted would commit a felony of the second degree if the fraudulent claim is $100,000 or more.  If the claim is between $2,000 and $100,000 the penalty for the fraudulent claim would be a third-degree felony. If the claim is $2,000 or less the penalty would be a third-degree misdemeanor.

This legislation was previously introduced in the 2019-2020 legislative session as HB 2351.

Document #3

Treasury Do Not Pay Initiative

Rep. Owlett will be reintroducing former HB 2354 (of the 2019-2020 legislative session), modeled after the Federal Do Not Pay Legislation. This bill would establish a state database of organizations, individuals and entities which are not eligible to receive funds from a commonwealth agency. This database managed by the State Treasury shall utilize specific records to provide a comprehensive list to state agencies of who is eligible to receive taxpayer funds. The records, under the draft, include:
  • Death Certificates from Vital Records
  • Debarment and Suspension from the Department of General Services
  • Credit Alert System used by the Federal Department of Housing and Urban Development
  • The list of individuals and entities under the Department of Human Services Medicheck list
  • The list of individuals or entities from the Department of Revenue who owe taxes to the commonwealth
  • The list of individuals who have failed to make child support payments under the Department of Human Services.
  • Any database used by the Federal Department of Treasury for the Federal Do Not Pay Initiative.
By enacting a State Do Not Pay Initiative, the commonwealth can prevent state funds going to any individual, entity or organization which is ineligible to receive funds.

Document #4

Introduced as HB107

Description: Provider Preventable Conditions

Recently, the Inspector General for the U.S. Department of Health and Human Services released a report detailing how the commonwealth spent over $40 million in taxpayer money on “Provider Preventable Conditions” (PPC).  According to the Inspector General, a PPC is a condition acquired in an in-patient setting which has a high cost, or an invasive or surgical procedure performed on the wrong person or wrong body part.

In short, these are Medicaid expenditures should not have been made because the provider made a mistake.  This legislation, as introduced by Representative Tommy Sankey would require any Medicaid Managed Care Organization (MCO) to enter into an agreement with the Department of Human Services (DHS) to allow the department to recoup any Medicaid funds which were spent on a PPC.

The legislation also requires MCO’s to cease expenditures which constitute a PPC and provide the department with documentation to determine if claims were made which constitute a PPC.  Should the MCO fail to keep adequate records DHS is authorized to levy a heavy fine equal ranging between .5% and 5% of the total claims the MCO made under Medicaid.

After reviewing the documents provided by the MCO, the department shall require the MCO to reimburse Medicaid for claims which constituted a PPC.  However, if DHS determines the MCO failed to disclose the PPC to the department they may levy a fine which shall equal 5% of the total amount of claims which constituted a PPC.

This legislation will ensure MCO’s keep proper records of service provided to vulnerable Pennsylvanians under Medicaid.  Additionally, the legislation will ensure taxpayer money is not used to pay for egregious mistakes made by a provider.

This legislation was previously introduced in the 2019-2020 legislative session as HB 2355.