Are Medicare Pt. D reimbursements subject to Single Audit requirements?
Many municipalities have applied for the employer reimbursement provided for under Medicare Part D. Most assumed the reimbursement, administered by the federal Department of Health and Human Services (HHS), was not subject to the audit requirements provided for under the Single Audit Act. This includes several state comptroller and revenue offices, who have been advising their cities and towns that there was no Single Audit Act requirement. As TLB understands it this guidance is in question.
Since the inception of the Medicare Part D reimbursement it has been widely assumed that this federal reimbursement was not considered a federal award for purposes of determining Single Audit Act requirements. The belief was the reimbursement was exempt under the OMB Circular A-133 medicaid/medicare services exemption or was considered a vendor type payment. However, recently some audit firms have been advising their clients to include these federal awards on their Schedule of Expenditure of Federal Awards (SEFA) report. We believe this guidance is being issued in response to a recently issued A-133 compliance supplement which referred to a Medicare Part D program.
TLB contacted the Department of Health and Human Services Technical Assistance department and according to HHS, this question had not been previously considered and was recently put under review by federal government lawyers. Although the technical assistance people seemed to agree with our interpretation of the rules, an official decision has not yet been determined. TLB also noted the compliance supplement noted above refers to a state program, not the Medicare D plan sponsor reimbursement program, which has a CFDA number of 93.770, and does not have any compliance supplement. A review of the CFDA report for 93.770 only refers to the Center for Medicaid & Medicare Services (CMS) audit requirements and does not reference any requirements under the Single Audit Act.
So, what should an organization do? The general advice governing potential federal awards is to include amounts for which you are unsure on your entities SEFA. By doing so an entity avoids having to reissue the SEFA report in the event that it is subsequently determined to be a federal award. In some circumstances this option is not attractive. Depending on the amount a municipality has received, the Medicare D reimbursement may be considered a major program. Even if less than $300,000 has been received, it is our opinion that Medicare D should be considered a high-risk, type B program - which would require testing as a major program.
Based upon our review of the Medicare D legislation, HHS regulations and the CMS Medicare D audit guide, we project the testing and audit work that would potentially be needed to address Single Audit Act requirements to be extensive - adding significant time to complete audits that have already begun, or completed, and would add a substantial additional cost to these audits.
An additional complication arises from municipal participation in joint purchase groups (health groups). Some health groups have applied to CMS as the “plan sponsor,” on behalf of its members. If it is determined that Medicare D is subject to Single Audit Act requirements, then these joint purchase groups would likely be required to have a so-called Single Audit with Medicare D as the only federal program. Most Massachusetts health groups formed under MGL Ch. 32B do have an audit, and TLB performs audits for these clients in accordance with Government Auditing Standards, however, others are not performed in accordance with these standards. Furthermore, TLB is aware of some health groups who are not audited at all. TLB also posed a not yet considered question to HHS regarding health groups, that is - since municipalities are receiving the benefit of Medicare D from a health group in the form of reduced premiums, does this equate to a subsidy that would be required to be measured and included on each members SEFA? HHS told us that it will include this question in its evaluation.
Finally, TLB advises all municipalites receiving Medicare D reimbursements to become aware of the audit and compliance requirements of CMS, which are comprehensive. CMS has stated that it is expecting to perform audits (separate from any Single Audit requirement) of approximatley one-third of Medicare D plan sponsors each year, focusing on Medicare fraud prevention and detection. This sounds like to us that you should expect your entity to undergo an audit of its Medicare D billings at least once every three years. Contact TLB Partner, Rich Bienvenue if you would like further information on the CMS audit process and requirements.
As always, please post your comments or contact us if you have any questions or any further information on this subject. RB