Oregon Health Authority Misspent Millions, State Audit Finds

By Lauren Dake (OPB)
Nov. 29, 2017 6:55 p.m.

The Oregon agency charged with managing health care for the state’s most vulnerable citizens likely misspent millions of taxpayer dollars, stymied an effort to shed light on its problems and failed to keep pace as the state’s Medicaid caseload nearly doubled.

The findings are detailed in a Secretary of State audit released Wednesday.


Related: After Director's Resignation, More Leadership Changes At OHA

The audit notes that the task of managing the state’s $9.3 billion Medicaid program is complex. But in Oregon, despite a surge in those eligible to receive benefits, the state agency did not prioritize ensuring the program was running efficiently.

Instead, the Oregon Health Authority, the agency that oversees the state’s Medicaid program, lacked tools to detect improper payments and failed to act swiftly when trying to determine who was eligible for Medicaid.

The Medicaid program swelled in Oregon under the Affordable Care Act. Today, more than one in every four Oregonians relies on Medicaid for their health coverage. With the state's increase in population coupled with vast technology problems, the health authority fell behind.

Once officials worked through a backlog of 115,200 Medicaid recipients, an approximate 41 percent of enrollees were found ineligible. “Failure to address this issue in a timely fashion resulted in approximately $88 million in avoidable expenditures (from March 1 to Aug. 31, 2017),” the audit states.

While the audit was underway, The Oregonian/OregonLive reported an additional $74 million of improper payments were made. A recent change of leadership also prompted the disclosure of another $112 million of wrongful payments, first reported by The Portland Tribune.

The state’s health authority disputed some of the audit claims, including the $88 million figure, but agreed the agency has not been able to create “a foundation of consistent operational rigor and accountability in our Medicaid operations.”

Lack Of Transparency

The Oregon Health Authority did not like being under the microscope, according to auditors.

“At times, we were prevented direct access to staff, had our interviews with staff monitored, had our information requests delayed, and were occasionally provided with incomplete and/or inaccurate information,” the audit reports.

In September, Gov. Kate Brown ousted the director of the Oregon Health Authority, Lynne Saxton, and replaced her with Patrick Allen. With the new director in place access improved, the audit states.

A Complicated System

There are about a million Oregonians enrolled on the state’s Medicaid system. The audit points out that this safety net, which helps low-income individuals and families, is one of the most complicated government programs.

Nationwide, it’s estimated about 10 percent of Medicaid payments are made improperly. This includes fraud, waste and both under-and-over payments, according to the audit. With the billions that flow through the program each year, those kinds of mistakes add up to millions of wasted taxpayer dollars.

In Oregon, the system is particularly convoluted because much of the service is administered through what are called coordinated care organizations. These organizations are a network of health care providers working in communities across the state to give a range of health care services to those under the Oregon Health Plan or Medicaid.

A glaring problem is the huge discrepancy in how the individual CCOs work to detect fraud and waste. Some of these health organizations don’t even track improper payments. The contracts with these organizations are unclear and don’t articulate clear expectations.

At every level, the state needs to be able to detect improper payments.


“The lack of strong improper payment detection procedures poses a significant risk to Oregon’s Medicaid program,” the audit states.

With the amount of money flowing through these state subcontractors, a lack of ability to detect improper payments threatens the entire system, the audit notes.

Possible Solutions From Elsewhere

Although Oregon has carved out a reputation as a leader in the health care industry, it could learn from other states.

In both Arizona and Tennessee, state contracts with care organizations have clearly articulated what’s expected of them in the contract. They include clear deliverables, timelines and contacts, the audit says. In Washington, the state health authority has been working with a federal data-matching program to more quickly determine who is eligible for the payments.

Other states have also taken advantage of more sophisticated data tools to identify fraud and overpayments. Massachusetts identified more than $521 million in improper payments in a five-year span after working with auditors.

The Oregon audit suggests the state’s health authority also use some of the federal data matching techniques — some of which is free — to identify improper payments.

Additionally, the state needs to establish clearer standards with the state’s coordinated care organizations.

OHA’s Response

The agency’s new director, Allen, has been on the job for about 90 days. He said the audit’s findings are consistent with what his staff has found within the health authority.

“The audit itself is not something that is unexpected or we would consider in any way hostile,” Allen said in a press conference on Wednesday afternoon. “It’s a useful tool to operate the organization.”

He did take issue with some of the characterizations, including the audit’s finding that some $88 million in improper payments were “avoidable.”

“First, Oregon Health Plan clients remain eligible for benefits until they are determined no longer eligible,” Allen writes in his response. “Second, it is not possible to assess whether a client who was determined no longer eligible would have also been determined no longer eligible at some earlier date.”

Allen said he hopes to have the recommendations outlined by the Secretary of State’s office implemented by January 2019.

The Impact On Measure 101?

The audit will likely be politicized in the ongoing battle over whether to preempt a tax on hospitals and other health care providers that lawmakers created during the most recent legislative session to help pay for Medicaid.

Related: Oregon Voters Will Decide The Provider Tax, But What Is That?

Oregon voters will decide Jan. 23 whether to keep the tax intact. Proponents of the measure say that without it, poorer Oregonians will lose their health care.

But opponents point to mismanagement of state funds as a reason to overrule the Legislature and will likely use the audit as a campaign talking point.

Republican State Rep. Knute Buehler, who is running for governor, immediately sent out a press release seeking an independent investigation and calling out what he perceives as a lack in leadership from Kate Brown.

Even Secretary of State Richardson, a Republican who ostensibly heads a nonpartisan agency, veered into the political in his press release accompanying the audit:

“Soon Oregon voters will be considering whether or not to approve tax increases intended to provide additional funding to the OHA,” he wrote. “With such abysmal examples of OHA misfeasance and obfuscation, OHA faces tough questions about its credibility and its ability to appropriately spend the money it is provided.”