Dueling audits and misleading data – NC Blue Cross likely making undeserved millions off of care for low-income NC children.

By: - April 15, 2008 2:21 pm

 Put this one in the “let’s hope everyone forgets about it” file.  Last summer, State Auditor Les Merritt issued a scathing audit (PDF) of Blue Cross’s administration of NC’s healthcare program for low-income kids, Health Choice.  As I noted at the Pulse, Merritt concluded that NC Blue was charging almost 12 times as much as rival claims manager EDS who manages exactly the same claims for children in the NC Medicaid program. 

Merritt said that it costs NC Medicaid 41 cents to process a medical claim compared to the $4.88 it costs for NC Blue Cross to do exactly the same thing.  He suggested moving the Health Choice program to Medicaid and calculated the savings would allow serving 10,000 more children with high-quality health insurance.

There was predictable hemming and hawing from legislators who vowed they’d get to the bottom of this conundrum.  In the fall then, NC DHHS hired a big healthcare consulting firm, MAXIMUS, to figure out if the Merritt was right.  MAXIMUS (and no, there is no connection to the Roman general) did another study which they claimed did not bear out Merritt’s analysis and instead found that it only cost about twice as much for NC Blue Cross to process the claim – not nearly 12 times as much as Merritt had suggested.  The story doesn’t end here however.

Putting aside the fact that simply moving the rest of the kids on Health Choice into Medicaid would at least – even by the lower figure – reduce administrative costs by half, a closer look at the MAXIMUS study  (PDF) reveals some fast and dirty “modifications” to their numbers that look awfully suspicious.  In fact, without those “modifications,” the MAXIMUS numbers are quite close to the State Auditor’s original findings.  Buried in the study are some admissions about how they reached their lower cost figure for NC Blue’s administration:

The $1.76 amount for medical claims for BCBSNC [compared to Merritt’s much higher figure of $4.88 per claim] removes all costs, not directly associated with claims processing. For example booklet and ID card production, full IT support for development and maintenance of services, and provider relations support as needed are excluded from the BCBSNC costs in an attempt to achieve a valid comparison with Medicaid experience.

Eliminate these “modifications” to the MAXIMUS figures and their study finds that a Health Choice claim costs $4.73 to process v. 96 cents for a similar Medicaid claim.  The Blue Cross number is close to what Merritt specified, and the higher Medicaid claims cost number is still under $1 – and it is important to note that Merritt’s original number was never disputed by NC’s Medicaid agency.

So, by taking away claims processing from NC Blue Cross for children’s health insurance we could save at least twice as much, maybe four times as much, or perhaps even twelve times as much.  Seems like a no-brainer to me.  If one price for these savings is to simply make the benefits under Health Choice and Medicaid for kids match exactly (the main reason for MAXIMUS to recommend against this course of action), so be it.  They are already functionally equivalent plans, and there is no reason kids on different health plans in the same family should have different health benefits.

So, why aren’t we doing this already?  Haven’t you been listening every time I talk about those millions in corporate salaries at the top and the political influence of NC Blue Cross executives?

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