Million-dollar Medicaid mistake turns into partisan battle

Topeka ? A $1 million Medicaid payment to a southeast Kansas pharmacist for a bottle of eardrops erupted Monday into a political fight.

Senate Democratic Leader Anthony Hensley of Topeka called for an investigation into the pharmacist, while Senate Republican Leader Derek Schmidt of Independence said the pharmacist should be thanked for alerting state officials.

Steve DeFever, the pharmacist, said he agreed with Schmidt.

“I don’t mind or care if they investigate,” said DeFever, owner of DeFever Osborn Drug in Independence. “I wasn’t trying to cheat. I’m the one who put my hand up.”

Meanwhile, EDS, the company that handles the state’s Medicaid payments, said it was implementing new procedures to keep similar errors from happening again.

Payment mix-up

In April, DeFever’s drugstore received reimbursement of $1 million from Medicaid, the state-federal program that provides health care for the poor.

But the reimbursement was for prescription eardrops that cost $1.95 per unit. Officials first reported that the medicine was eyedrops, but later corrected themselves.

When the pharmacy tried to report the payment error to EDS, the store was told to bank the check, and future Medicaid reimbursements would be drawn off the funds until the check was depleted.

Last week, Schmidt criticized state officials for this situation, saying that the pharmacy tried to give money back and couldn’t.

EDS then started investigating the allegation.

On Monday, it reported its findings to the Special Committee on Medicaid Reform, which is chaired by Schmidt.

Here is what EDS says happened:

The mix-up started on DeFever’s end on April 5 when the pharmacy incorrectly filled in a reimbursement form, which is transacted online. The pharmacy left empty the field for the quantity of medicine on the form.

The empty field defaulted to 999,999 units of eardrops, which resulted in the $1 million payment, the allowable payment from Medicaid for that kind of drug. This could have been a simple computer software problem, EDS said.

The EDS system sent an automatic denial to the pharmacy, but the pharmacy overrode the denial to complete the transaction.

On April 27, however, the pharmacy voided the claim and resubmitted a corrected one.

When the pharmacy received its check and recognized the error, it contacted the EDS call center and was told to cash the check, and that overpayments would be recovered by offsetting future claims.

But routine EDS audits flagged the outstanding balance owed, and EDS issued two letters, in June and July, to return the funds to the state. The pharmacy did not answer the letters.

Hensley calls for probe

“I am very concerned about the actions of the provider,” Hensley said, saying the pharmacy had abused the system.

Hensley forwarded questions about the transaction to the head of the Medicaid Fraud and Abuse Division of the attorney general’s office.

But Schmidt said DeFever was a “good-faith actor” who helped uncover a problem with EDS’ system.

Hensley asked Schmidt why he hadn’t notified authorities earlier, when he first learned of the problem. Schmidt said the proper officials knew of the problem.

DeFever said he didn’t know whether he agreed with EDS’ conclusion that he or his staff had made the error.

“It’s possible. But it seems like there should be a system where I would have to call them for huge quantities,” such as what had appeared on the form, he said.

He said his staff ignored subsequent letters from EDS to return the funds because they had already been directed in earlier conversations to put the money in the bank.

For their part, officials from EDS, which has an annual contract with Kansas for approximately $20 million, said it was tightening its procedures.

EDS’ Carol Pangborn, who is responsible for the Kansas program, said call center employees would flag reimbursements for unusually large amounts of drugs.