AHCA got $160M to cover a Medicaid discrepancy, then spent it elsewhere. Now the agency wants more

The Legislature in 2023 budgeted $160 million for the Agency for Health Care Administration (AHCA) to cover a Medicaid disallowance. But the state agency spent that money in other ways instead.

The federal government says AHCA still must settle the cost, so agency leaders are now asking lawmakers for the same amount again.

It’s a disagreement generating tension between the executive branch agency and the Florida House at a moment when Gov. Ron DeSantis and House Speaker Daniel Perez already appear at frequent loggerheads.

The proposed House health care budget doesn’t currently include money specially earmarked for the $160 million disallowance, though the full House budget does have more than $183 million available to cover disallowances that could be used for this purpose.

But as the issue looms over budget negotiations, it has already garnered the attention of Washington, where Republicans continue a push to reduce spending.

“I don’t understand how the state could lose $160 million in federal funding, but it’s concerning,” U.S. Sen. Rick Scott said in a statement to Florida Politics.

“We have to know where the dollars went and there must be accountability and transparency on how it was spent. Taxpayers cannot be on the hook and the state should find a way to pay it back to the federal government. The last thing the state should be doing is asking for even more of Floridians’ tax dollars to pay back the federal government.”

The matter became the topic of a lengthy exchange at a House Health Care Budget Subcommittee meeting on March 12, where Republican members of the House sought an accounting of how the money was spent from Bryan Meyer, Deputy Secretary of Medicaid, and Lynn Smith, Deputy Secretary of Operations.

“It’s my understanding that the Legislature appropriated $160 million to cover a disallowance with the federal government,” noted Rep. Hillary Cassel, a Dania Beach Republican. “That funding was provided, but that disallowance has actually not been paid to date, and there’s a request pending with this legislative budget that we refund that $160 million so can you provide some insight to the committee on that transaction?”

A Medicaid disallowance arises when the Centers for Medicare & Medicaid Services (CMS), which pays the majority of Medicaid costs to states, determines a state has not properly administered the funding. In this case, the federal agency determined AHCA mismanaged intergovernmental transfers.

But rather than assessing a fine on the state, the disallowance meant money that would normally be sent from CMS to AHCA would be withheld, and the state would need to use its own revenues to cover those costs while administering the Medicaid program. After settlement discussions, it was ultimately determined the state had to absorb $160 million in costs.

Smith, who joined the agency one year ago, said it was her understanding that the money appropriated in 2023 went into the state’s Medical Care Trust Fund. But various other expenses meant the fund no longer has the money to cover the disallowance.

“As of Monday, it was about $139 million,” Smith said during the March hearing, “so if we were to pay the $160 (million) we wouldn’t have any cash. We’d be negative. So that surplus has been carrying the trust fund as funds go in and out.”

It wasn’t until a once-a-year reconciliation of spending and expenses that the state agency realized it could not cover the costs of the disallowance.

“So what happened? It should have been paid right off the bat,” Smith acknowledged.

“As soon as we got it, should have been paid. But I think with it there, as we did Medicaid runs — which on average, are over $500 million in one week and up to $2 billion in another — the system, we’re looking for cash. There’s a kind of an order of succession looking for cash based on the kind of payment it is. And if the cash not is not where it should be, it goes to a next kind of thing. So on these runs in the influx of revenue going in and out, it had to tap into where the cash was.”

The bottom line: The funds went to support other Medicaid expenditures, so now the money is gone. But the state’s obligation remains.

AHCA is headed today by Shevaun Harris, but she only moved over to AHCA this February, weeks before the appropriations were discussed in committee. The spending happened while Jason Weida, now DeSantis’ Chief of Staff, served as AHCA Secretary.

Still, the Governor’s Office referred any questions about the matter to the agency, which said the situation has been fully explained.

“The rhetoric going around that the $160 million is ‘lost’ is inaccurate and, at this point, fodder for click bait. The Agency has been completely transparent with the Legislature that the money was used to pay providers for legitimate services rendered to Medicaid recipients,” reads a statement provided by AHCA.

“Since this issue was identified, the Agency has made staffing changes, and hired an independent contractor to recommend opportunities for improvement. Secretary Harris has also implemented process changes in the last three weeks that enhance communication between Divisions involved in financial management and better insulate us from human error.”