An Audit Report on the Health and Human Services Commission's Medicaid Managed Care Rate-Setting Process
Learn how the AI-generated research projects were createdOverall Conclusion
Milliman concluded that FY2023 capitation rates were actuarially sound, with no program-wide pattern of under- or over-funding, though improvements were recommended in several rate-setting and governance processes.
Source Document
Audit Scope
Scope: The fiscal year 2023 Medicaid managed care rate-setting process, including contracting activities for the actuarial services contract with Rudd and Wisdom, Inc., through February 2022, and an assessment of key control components related to rate development, oversight communications, and contracting.
Key Findings Summary
Nepotism forms: 5 of 13 required nepotism forms were not obtained from contract team members prior to awarding the contract.
The Commission could enhance communication with oversight entities by explicitly addressing General Appropriations Act requirements in rate reports.
Contract team members did not consistently complete required certification and disclosure forms during vendor selection and procurement; missing nondisclosure and conflict-of-interest forms and nepotism forms.
View the Findings tab to see all 7 findings
AI-Assisted
AI Scope Summary
For future audits, build on this work by evaluating whether corrective actions addressing contract certification controls, data communication with actuarial analysts, and the timeliness of FSR AUPs reconciliations have been effective, and extend scrutiny to compare rate-setting governance across other states and to validate annual experience rebates against actual outcomes.
AI-Generated Insight
The audit generally found that the HHSC Medicaid managed care rate-setting process was actuarially sound for FY2023, but governance and data-communication weaknesses exist, particularly around certifications, conflict-of-interest controls, and timely validation of financial data. Implementing recommended process improvements could strengthen future rate-setting transparency and oversight.
Audit Objectives
Determine if the Health and Human Services Commission complied with applicable requirements related to the procurement of managed care actuarial services.
Evaluate the Commission’s Medicaid managed care rate-setting process, including identifying significant cost drivers.
Evaluate the Commission’s communication of rates with oversight entities in accordance with the General Appropriations Act.
Audit Findings (7)
Nepotism forms: 5 of 13 required nepotism forms were not obtained from contract team members prior to awarding the contract.
The Commission could enhance communication with oversight entities by explicitly addressing General Appropriations Act requirements in rate reports.
Contract team members did not consistently complete required certification and disclosure forms during vendor selection and procurement; missing nondisclosure and conflict-of-interest forms and nepotism forms.
AUP engagements and year-end reconciliations for MCO financial statements were not completed or audited timely; 2018-2021 AUPs were not completed before rate-setting and reconciliations sometimes occurred more than a year after year-end.
FSR data and related reconciliations were not consistently communicated to the Actuarial Analysis Department to inform rate-setting.
Rounding methodologies and the use of Data Analysis Unit analyses were not explicitly explained in rate communications to oversight entities.
Three of twelve required nondisclosure and conflict-of-interest certification forms were not obtained prior to receiving vendor proposals or participating in evaluation activities.
Recommendations (5)
Develop and implement a process to consistently communicate the results of agreed-upon procedures engagements and year-end reconciliations of MCO financial statistical reports to the Actuarial Analysis Department.
Verify that all contract team members provide required certifications and disclosures (nondisclosure, conflict of interest, nepotism) before and during procurement activities.
Enhance communication with oversight entities by explicitly addressing rounding methodologies and whether analyses conducted by the Data Analysis Unit were pertinent to the rate-setting process.
Improve the timeliness and completeness of Financial Statistical Reports (FSRs) and related procedures, including ensuring AUPs are completed and audited on a timely basis.
Ensure that communications regarding rate-setting data and methodologies fully meet General Appropriations Act requirements.