By Edward Krudy
NEW YORK (Reuters) - Federal authorities have dramatically lowered the amount that New York state can claim from the federal government for certain medical services, costing the state an estimated $1.2 billion.
The Center for Medicaid Services (CMS), the federal agency that administers the nation's medical insurance system for people on low incomes, cut the per-patient reimbursement rate for patients in developmental centers to $1,200 from $5,100 from April 1, according to CMS documents seen by Reuters.
The move by CMS had been expected ever since a bipartisan congressional report said overbilling for the centers reached $15 billion over the last 20 years. The centers serve people with developmental illnesses.
In February, in anticipation that the federal government would reduce its funding for the centers, New York state Governor Andrew Cuomo cut $1.1 billion from the state's $135 billion budget plan.
The budget for fiscal year 2013-2014 was passed by New York lawmakers last week, in time for the start of the state's fiscal year on April 1. There was, however, a failed amendment in the Assembly that tried to torpedo the $90 million in cuts for the developmentally disabled that resulted from the loss of funding.
Although the budget anticipated the federal cut, there is still uncertainty about whether the federal government will seek reimbursements for past years.
The present move does not cover past years and CMS is still continuing its audit, according to a person familiar with the matter. Earlier, CMS said it expects to conclude its audit later this year.
A report in March by Standards & Poor's Rating Services said repaying five years of overbilling could cost the state $7 billion.
The House Oversight and Government Reform Committee, the Congressional panel that issued the report into overbilling, is pushing for New York to reimburse the federal government for past years and wants a root and branch audit into the state's $54 billion Medicaid system, where it says overbilling is rife.
"This is a step in the right direction, but HHS needs to pursue recovery of the decades of overpayments and guarantee an end to all similar overpayments," said Committee Chairman Darrell Issa in a statement emailed to Reuters.
"Fraudulent and wasteful spending remain a serious problem throughout New York's bloated Medicaid system, and vigorous federal oversight is still necessary," he said.
The committee said the move would save federal tax payers $1.2 billion over the next 18 months.
(Reporting by Edward Krudy; Editing by Nick Zieminski)