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March 21, 2005

The Honorable Rick Perry
The Honorable David Dewhurst
The Honorable Thomas R. Craddick
Members of the 79th Legislature

Fellow Texans:

I am delivering the Texas Health Care Claims Study pursuant to my obligation under Government Code Section 403.028. This study measured the incidence of potential overpayments in the Medicaid acute fee-for-service program, the Medicaid Vendor Drug Program, and the state employees workers' compensation program administered by the State Office of Risk Management. This Study was conducted in consultation with the State Auditor's Office and with the cooperation of many state agencies.

The Study found that 13.7 percent of the paid amount of services were potentially overpaid in the Medicaid fee-for-service sample; 21.2 percent were potentially overpaid in the Vendor Drug Program sample; 2.2 percent were potentially overpaid in the Medicaid Managed Care program sample; and 13.7 percent were potentially overpaid in the state employees workers' compensation sample. These potential annual overpayments could be as much as $544 million in the Medicaid fee-for-service program; $491 million in the Medicaid Vendor Drug program; $18.9 million in the Medicaid Managed Care program; and $5 million in the state employees workers' compensation program.

There is a slight increase in the overpayment rates between the 2003 and 2005 Medicaid fee-for-service findings using the same methodology that indicates the Study is a stable measurement tool. A slight decrease in the Medicaid Vendor Drug study also indicates the Study is accurate. The decrease in the state employees workers' compensation program is due to the program change to a new fee schedule based on the Medicare fee guidelines effective August 1, 2003, and cost containment efforts by the State Office of Risk Management.

The Study provides updates on March 2003 recommendations to improve payment processes and also provides new recommendations. The 2005 study includes a comparison with the Centers for Medicare and Medicaid Services Payment Accuracy Measurement Demonstration Pilot Texas studies, which were performed at the same time as the Texas Health Care Claims Study.

This report is available on my Web site at www.window.state.tx.us/specialrpt/hcc2005/. If you have any questions about this report, please contact Cindy Wiley, of my Fiscal Management Division, by e-mail at mailto:cindy.wiley @cpa.state.tx.us or by phone at 512/475-0155.

[signed]
Carole Keeton Strayhorn,
Texas Comptroller