Rhode Island overpaid Medicaid MCOs but hasn’t brought payments home

Rhode Island overpaid managed care organizations (MCOs) $208 million under the state’s Medicaid expansion program in fiscal year (FY) 2015. The overpayments resulted from the fact that the state overestimated the volume of services that the state’s 60,000 new Medicaid enrollees would use, according to a report from the Rhode Island Office of the Auditor General.

Capitation rates

In FY 2015, capitation rates designed to cover medical care costs for each new enrollee determined the payments that Rhode Island made to two MCOs, Neighborhood Health Plan of Rhode Island and UnitedHealthcare. When enrollees did not use the expected level of services, the insurers were left with $208 in overpayments. As a result of incentives clauses in the contracts between the state and the MCOs, the MCOs were able to retain some of the overpayments. The gain sharing provisions were intended to reward the MCOs for cost efficiencies attained through enhanced case management, preventive care, and enhanced coordination of services. However, the significant amount due to the state was a result of overestimated capitation rates, not efficiencies.


According to the Auditor General, as of June 20, 2015, approximately $133 million of the overpayment amount remained due to the state. State officials expect to collect most of the remaining overpayments by June and the rest by the end of 2016. Rhode Island’s slow attempts to recoup the payments raised concerns that it did not act fast enough. However, the state did take steps to cut rates. In 2014, it cut capitation rates 15 percent and, in 2015, by 17 percent. Additionally, when UnitedHealthcare resisted the state’s attempts to recoup payments, the MCO’s contract was revised to allow the state to recover overpayments mid-year if the payments exceeded claims by at least 30 percent.