Maryland health insurance exchange racked up more than $28 million in misappropriated funding

A long-awaited report from the U.S. Department of Health and Human Services Office of Inspector General (OIG) found that the federal government overpaid the state of Maryland $28.4 million in grant money for its health insurance marketplace. Auditors said the state did not have "adequate internal controls to ensure the proper allocation of costs."

Specifically, auditors found that, of the $76.6 million provided to the state to establish its own marketplace, $15.9 million was allocated using outdated estimated enrollment data instead of updated, actual enrollment data, while $12.5 million was allocated using a methodology that included a "material defect." According to The Baltimore Sun, the first to publish the results of the report days before its release, the contractor that used that incorrect projection methodology was the Hilltop Institute at the University of Maryland.

State health officials balked at the report, arguing that the agency complied with Centers for Medicare & Medicaid Services guidance. According to the OIG, in March 2014, there was a 37 percent difference between the estimated enrollment split and the actual enrollment split. Although officials publicly acknowledged that enrollment projections were incorrect, they did not correct or update the data for months afterwards. Prior to that, technical glitches plagued the exchange; at one point as many as 5,000 people thought they were fully enrolled, even though the system had not accounted for them.

Although the report focused on a lack of oversight rather than criminal intent associated with the misappropriated funding, Gov. Martin O'Malley (D) came under fire for mismanaging the program.

"How do you misallocate that large amount of money?" Rep. Andy Harris (R-Baltimore) told The Sun. "Neither answer is good: It was either incompetence or it was intended."

The OIG recommended that the state pay back the misappropriated funding in full. The state's exchange director, Carolyn Quattrocki, told The Sun that she is working with federal legislators to resolve the issue, adding that the agency felt it had followed federal guidelines.

Maryland is one of many states that have faced financial challenges associated with health insurance exchanges, FierceHealthPayer previously reported; both Hawaii and Vermont have faced financial setbacks in establishing the state run exchanges. In other states, meanwhile, lawmakers have scrutinized the technical and financial problems that have plagued many exchanges.

For more:
- here's the OIG report
- read The Baltimore Sun article

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