Department of Health and Human Services 
OFFICE  OF 

INSPECTOR  GENERAL 

Controlling  Medicaid  Non-Emergency 
Transportation  Costs 
JUNE GIBBS BROWN 
Inspector  General 
April 1997 
OEI-O4-95-00140 

I 
 OFFICE OF INSPECTOR GENERAL 
The  mission  of the  Office  of Inspector  General  (OIG),  as mandated  by Public  Law 95 
452, is to protect  the  integrity  of the  Department  of Health  and  Human  Services 
programs  as well  as the  health  and  welfare  of beneficiaries  served  by them.  This 
statutory  mission  is carried  out  through  a nationwide  program  of audits,  investigations, 
inspections,  sanctions,  and  fraud  alerts.  The  Inspector  General  informs  the  Secretary 
of program  and  management  problems  and  recommends  legislative,  regulatory,  and 
operational  approaches  to correct  them. 
Office of Evaluationand Inspections 
The  Office  of Evaluation  and  Inspections  (OEI)  is one  of several  components  of the 

Office  of Inspector  General.  It conducts  short-term  management  and  program 

evaluations  (called  inspections)  that  focus  on issues  of concern  to the  Department,  the 

Congress,  and  the  public.  The  inspection  reports  provide  findings  and 

recommendations  on  the  efficiency,  vulnerability,  and  effectiveness  of departmental 

programs. 

OEIs  Atlanta  Regional  Office  prepared  this  report  under  the  direction  of Jesse  J. 

Flowers,  Regional  Inspector  General,  and  Christopher  Koehler,  Deputy  Regional 

Inspector  General.  Principal  OEI  staff  included: 

REGION  HEADQUARTERS 

Jacqueline  Watkins,  Project Leader  Winnie  Walker,  Program Specialist 
Betty  Apt,  Team Leader 

Josiah  Townsel,  ProgramAnalyst 

To obtain  a copy of this report,  call the  Atlanta  Regional  Office  at 404-730-9452.  EXECUTIVE  SUMMARY 
PURPOSE 
To  identify  and  describe  effective  practices  for  controlling  non-emergency 
transportation  costs in the  Medicaid  program. 
BACKGROUND 
The  U.S. Health  Care  Financing  Administration  estimated  that  nationally  non-
emergency  transportation  costs increased  10 percent  per  year  from  1990 until  1995. 
Some  individual  States  reported  that  their  non-emergency  transportation  costs 
increased  substantially  more.  For  example,  one  State  reported  a 250 percent  increase 
in 4 years,  another  a 230 percent  increase  in only  one  year,  and  another  a  136 percent 
increase  in two years. 
,We used  a case  study  method  to identify  and  describe  practices  for  controlling 
Medicaid  non-emergency  transportation  costs.  We selected  programs  in Miami, 
Florida;  Philadelphia,  Pennsylvania;  Louisiana,  and  Washington  for  review.  Various 
experts  recommended  these  Medicaid  programs  for  case  study  because  they  were 
unique  cost  saving  programs,  and  had  significantly  reduced  or maintained  low non-
emergency  transportation  costs  over  several  years. 
FINDINGS 
selected  case study pnqrams  reported significant sav@sjk~m  conbdkg  non-emergency 
tranqmation  cosfs. 
Each  of the  four  programs  we studied  reported  that  savings  can  result  from  controlling 
non-emergency  transportation  costs.  For  example,  Louisiana  reported  reductions  in 
non-emergency  transportation  costs  of $52 million  in  1 year.  Miami,  Florida  claims  to 
have  decreased  average  Medicaid  non-emergency  transportation  costs  per  beneficiary 
from  $630 per  month  to  $30 per  month  in two years.  Washington  State  and 
Philadelphia,  Pennsylvania  reported  increases  of less than  8 percent  per  year  during  an 
8 year  period. 
--4Y  prqpms fmuwdcontrol@OHSon the kin&  of fraud and abuse which were 
most&~tom~ 
--people  who  have  other  means  of transportation, 

--unnecessary  trips, 

--excessive  claims,  and 

--trips  claimed,  but  not  made  by providers. 

i  cast? st@y  pqpm  aiko reduced rwn-tmmgency .tmnsp~tion  costs by uring least costly 
tram 
Each  program  we surveyed  used  the  least  costly  mode  of non-emergency 

transportation  available.  Even  in instances  where  the  freedom  of choice  provision  of 

the  Medicaid  law applied,  States  offered  beneficiaries  a choice  among  the  lowest  cost 

providers.  The  freedom  of choice  provision  of the  Medicaid  law states  that 

beneficiaries  have  a right  to  choose  their  provider  of services. 

States  that  claimed  Federal  reimbursement  for  non-emergency  transportation  as an 

administrative  expense  did not  have  to adhere  to  the  freedom  of choice  provision.  In 

addition,  States  can  obtain  a waiver  of the  freedom  of choice  provision  from  the 

Health  Care  Financing  Administration. 

Using b&em  may help contd  carts. 
Our  case  study  programs  use brokers  as intermediaries  to  assure  that  transportation  is 
necessary.  Such  brokers  have  a contractual  incentive  to  control  costs. 
RECOMMENDATIONS 
We  recommend  that  HCFA  advise  States  of opportunities  to  establish  controls  to 
reduce  costs  for  non-emergency  transportation.  Most  States  could  adopt  practices 
similar  to  those  used  by the  case  study  programs  described  in this  report.  We  cannot 
accurately  estimate  the  precise  amount  that  could  be  saved.  However,  this  is a 
program  with  over  $1 billion  in expenditures.  If all States  adopted  practices  similar  to 
those  used  by the  case  study  programs,  substantial  savings  could  be  achieved. 
AGENCY  COMMENTS 
The  HCFA  Administrator  concurred  with  our  recommendations.  He  stated  that  the 

report  recommendations  are  consistent  with  existing  HCFA  activities.  The  HCFA 

established  a Non-Emergency  Transportation  Technical  Advisory  Group  comprised  of 

State  and  Federal  Medicaid  staff.  The  group  is currently  developing  recommendations 

for  HCFA  and  the  Executive  Committee  of the  National  Association  of State 

Medicaid  Directors  on  a wide  range  of issues,  including  those  in our  report.  He 

believes  that  their  recommendations  will facilitate  the  changes  we seek. 

The  Principal  Deputy  Assistant  Secretary  for  Planning  and  Evaluation  (ASPE)  also 

concurred  with  our  recommendations. 
 TABLE  OF  CONTENTS 
PAGE 

ExEmnwEsuMMARY 

INTRODUCTION..  ...............................................  1 

FINDINGS  ......................................................  4 

Significant  savings  realized  ........................................  4 

Focus  on  problem  areas  ..........................................  5 

Using  least  costly  providers  .......................................  7 

Brokers  .....................................................  9 

RECOMMENDATIONS  ...........................................  11 

AGENCYCOMMENTS  ...........................................  12 

APPENDIX 

Full  Text  of Agency  Comments  ..................................  A-l  INTRODUCTION 
PURPOSE 
To  identify  and  describe  effective  practices  for  controlling  non-emergency 
transportation  costs  in the  Medicaid  program. 
BACKGROUND 
Medicaid Non-EmergencyTransportationServices 
Federal  regulation  42 CFR  431.53 requires  all States  that  receive  Federal  Medicaid 
funds  to assure  transportation  for  Medicaid  beneficiaries  to and  from  medical 
appointments.  A description  of the  method  of providing  transportation  must  be 
included  in State  Medicaid  plans. 
The  way in which  States  manage  non-emergency  transportation  services  varies.  Some 
States  use regional  offices  while  others  use local  agencies.  An  increasingly  popular 
way to manage  non-emergency  transportation  is through  contracts  with  separate 
entities,  commonly  referred  to  as brokers. 
States  can  elect  to claim  Federal  reimbursement  for  Medicaid  non-emergency 
transportation  as either  an  optional  medical  or administrative  expense.  There  are 
three  major  distinctions  between  claiming  non-emergency  transportation  as an  optional 
medical  expense  versus  an  administrative  expense.  First,  States  that  claim  non-
emergency  transportation  services  as an  optional  medical  expense  are  required  to 
make  direct  payments  to transportation  providers.  In contrast,  States  that  claim  non-
emergency  transportation  as an  administrative  expense  may  pay  a broker  who,  in turn, 
pays  the  transportation  provider. 
Second,  States  that  claim  non-emergency  transportation  services  as an  optional 
medical  expense  are  reimbursed  for  transportation  expenses  at  a States  Federal 
financial  participation  rate  for  medical  expenses--50  to  83 percent  of their  medical 
expenses.  States  that  claim  non-emergency  transportation  services  as an  administrative 
expense  are  always  reimbursed  at the  administrative  rate  of 50 percent  of their 
administrative  expenses. 
Third,  States  that  claim  non-emergency  transportation  as an  optional  medical  expense 
must  give beneficiaries  a right  to choose  their  provider  of services.  The  right  to 
choose  a transportation  provider  is granted  by a provision  of the  Medicaid  law 
referred  to as freedom  of choice.  States  that  claim  non-emergency  transportation  as 
an  administrative  expense  do not  have  to give beneficiaries  a choice  of transportation 
providers.  Rising Costs of Non-EmergencyTransportationServices 
The  Health  Care  Financing  Administration  (HCFA)  estimates  that  non-emergency 

transportation  expenditures  total  1 percent  of all Medicaid  program  costs,  or about  $1 

billion  in  1995.  The  HCFA  also  estimated  that  nationally  non-emergency 

transportation  costs  increased  10 percent  per  year  from  1990 until  1995. 

Some  individual  States  reported  that  their  non-emergency  transportation  costs 

increased  substantially  more.  For  example,  Louisiana  costs  increased  from  $20 million 

in  1990 to  $72 million  in  1994--a 250 percent  increase  in 4 years.  Georgias 

expenditures  increased  from  $3 million  in  1993 to $10 million  in  1994--a 230 percent 

increase  in only  one  year.  Indianas  costs  increased  from  $19 million  in  1990 to $45 

million  in  1992--a  136 percent  increase  in two years. 

States  report  that  fraud  and  abuse  by providers  and  beneficiaries  contributes  to the 

increased  costs.  The  major  types  of fraud  and  abuse  reported  include  providers  billing 

Medicaid  for  more  miles  than  they  actually  provide,  providers  billing  Medicaid  for 

trips  they  did not  provide,  and  beneficiaries  using  Medicaid  transportation  when  they 

have  other  means  of transportation  to  a medical  appointment.  Other  problems  such 

as unnecessary  trips  and  use  of the  most  costly  mode  of transportation  have  also 

contributed  to the  increasing  cost  of non-emergency  transportation. 

Increasing  costs  and  allegations  of fraud  and  abuse  have  led  some  members  of the 

Congress  to  consider  eliminating  non-emergency  transportation  as a covered  Medicaid 

service. 

In addition,  HCFA  has been  concerned  about  the  increasing  non-emergency 

transportation  cost.  In November  1994, HCFA  created  a Medicaid  Transportation 

Technical  Advisory  Group  to identify  ways to more  efficiently  and  effectively  provide 

Medicaid  transportation  services.  The  technical  advisory  group  includes  Federal  and 

State  members  who  meet  regularly. 

Finally,  States  are  seeking  ways to  reduce  non-emergency  transportation  costs.  They 

have  an  ever  increasing  number  of Medicaid  beneficiaries  placing  demands  on their 

already  strained  budgets.  Therefore,  States  are  analyzing  their  programs  to identify 

more  cost  efficient  ways to provide  non-emergency  transportation.  Likewise,  States 

are  intensifying  their  scrutiny  of non-emergency  transportation  claims. 

HCFA  can only estimate the  percent increasebecause  they  do not  collect  cost data  from 
States  specifically  for non-emergency  transportation. 
2  SCOPE  AND  METHODOLOGY 

We  used  a case  study  method  to identify  and  describe  practices  for  controlling 

Medicaid  non-emergency  transportation  costs.  We  selected  programs  in Miami, 

Florida;  Philadelphia,  Pennsylvania;  Louisiana,  and  Washington  for  revied. 

In selecting  four  programs  for  case  study, we consulted  with various  experts  on  non-

emergency  transportation.  We  consulted  with  HCFA,  the  American  Public  Welfare 

Association  (APWA),  and  Ecosometrics,  Inc.  Ecosometrics  completed  a national 

study  on  non-emergency  transportation  for  HCFA  in  1994.  The  experts  recommended 

these  Medicaid  programs  for  case  study because  they  were  unique  cost  saving 

programs,  and  had  significantly  reduced  or maintained  low non-emergency 

transportation  costs  over  several  years.  We  also  consulted  with  HCFAs  Technical 

Advisory  Group  for  Medicaid  transportation  to identify  pertinent  issues  to  consider  in 

our  study. 

We  conducted  on-site  visits  to each  selected  program.  We  interviewed  program 

officials  and  staff  using  a standardized  discussion  guide.  We  also  reviewed  applicable 

program  policies,  procedures,  and  records. 

We  obtained  savings  data  directly  from  the  case  study  programs.  We  did not 

independently  verify  the  data,  and  we limited  our  discussion  to those  practices  that  the 

case  study  programs  reported  were  effective.  We  did not  collect  administrative  costs 

of the  practices  States  used.  Use  of the  case  study  method  does  not  enable  us to 

generalize  how  much  other  programs  can  save by adopting  our  study  results  or what 

their  administrative  costs would  be.  But,  the  study  results  can  provide  insight  to States 

on  effective  practices  to  develop  and  improve  their  non-emergency  transportation 

programs. 

We  conducted  this  inspection  in accordance  with  the  Quality Standards for  Inspections 

issued  by the  Presidents  Council  on  Integrity  and  Efficiency. 

The Miami metropolitan area includesMonroe and Dade  counties.  Philadelphia  includes 
Philadelphia  county. 
3  FINDINGS 

CASE STUDY  PROGRAMS  REPORTED  SIGNIFICANT  SAVINGS  THROUGH 
CONTROLLING  NON-EMERGENCY  TRANSPORTATION  COSTS 
Each  of the  four  Medicaid  programs  we inspected  reported  that  they  had  operated 

cost  effective  non-emergency  transportation  programs  in recent  years.  Two  of the  four 

reported  significant  reductions  in their  non-emergency  transportation  cost.  The 

remaining  two reported  constantly  keeping  non-emergency  transportation  cost  low. 

The  two Medicaid  programs  that  reported  significant  reductions  in non-emergency 

transportation  costs  are  Louisiana  and  Miami,  Florida. 

In  1991, non-emergency  transportation  costs  in Louisiana  were  $20 million.  By the 

end  of  1994, the  costs  had  increased  to $70 million--a  250 percent  increase  in 4 years. 

To  detect  and  prevent  fraudulent  and  abusive  practices  in non-emergency 

transportation,  Louisiana  implemented  program  controls  in  1994.  The  Louisiana 

legislature  supported  the  State  Medicaid  agencys  actions  to implement  such  controls. 

Further,  to  ensure  that  controls  were  enforced,  the  legislature  reduced  funding  for 

Medicaid  transportation  to $28 million  in Fiscal  Year  1995.  As a result,  Louisiana 

reduced  non-emergency  transportation  costs from  $72 million  in  1994 to $18 million  in 

1995.  This  was a $54 million  decrease  in  1 year. 

Miami,  Florida  substantially  reduced  its non-emergency  transportation  cost  in a similar 

manner.  In  1993, non-emergency  transportation  cost  the  Miami,  Florida  Medicaid 

program  $630 per  beneficiary  per  month.  By the  end  of  1995, non-emergency 

transportation  costs  per  beneficiary  had  decreased  to  $30 per  month.  During  the  3 

year  period,  the  Miami,  Florida  Medicaid  staff  reported  saving  over  $6 million. 

According  to  the  Miami  program  administrator,  their  Medicaid  budget  would  have 

increased  by $6 million  during  this  time  period  had  they  not  been  able  to reduce  the 

costs  of non-emergency  transportation. 

The  two Medicaid  programs  that  reported  constantly  keeping  non-emergency 

transportation  costs  low are  the  State  of Washington  and  Philadelphia,  Pennsylvania. 

Both  Washington  State,  and  Philadelphia,  Pennsylvania  Medicaid  staffs  said  they  have 

had  program  controls  in place  to prevent  fraudulent  and  abusive  practices  in non-

emergency  transportation  for  the  last  8 years. 

Washington  reported  that  in  1985 their  costs for  non-emergency  transportation  was 

about  $4 million.  In  1993, their  non-emergency  transportation  cost had  increased  to 

only  $15 million--an  $11 million  increase  in 8 years. 

Similarly,  Philadelphia,  Pennsylvania  reported  non-emergency  transportation  cost  of 

about  $10 million  in Fiscal  Year  1986.  In Fiscal  Year  1994, the  cost had  increased  to 

$14 million--a  $4 million  increase  in 8 years. 

4  CASE STUDY  PROGRAMS  FOCUSED  CONTROL  EFFORTS  ON THE  KINDS 
OF FRAUD  AND  ABUSE  WHICH  WERE  MOST  LIKELY  TO OCCUR 
People  who  Have  OtherM&zns  of ll-aetion 
According  to  HCFA  regulations,  persons  who  have  other  means  of transportation  are 
not  eligible  for  Medicaid  transportation.  States  should  use all available  sources  of free 
transportation  services,  such  as relatives  and  friends,  before  authorizing  non-
emergency  transportation  payments. 
The  four  Medicaid  programs  we inspected  each  had  controls  to verify  that  Medicaid 
beneficiaries  had  no  other  means  of transportation.  For  example,  each  of the  four 
programs  used  transportation  brokers  to manage  non-emergency  transportation  for 
Medicaid  beneficiaries.  When  a beneficiary  contacts  a broker  for  non-emergency 
transportation,  the  broker  makes  several  tests  before  authorizing  non-emergency 
transportation.  The  broker  checks  computerized  beneficiary  records  to verify  that  they 
are  eligible  for  Medicaid  services. 
When  a beneficiary  calls for  transportation,  the  broker  asks  a series  of questions 
designed  to  ascertain  whether  or not  beneficiaries  have  access  to  other  transportation. 
Computerized  software  programs  are  designed  to prompt  broker  personnel  on  the 
types  of questions  to  ask.  For  example,  a broker  might  ask questions  such  as the 
following.  How  do you  usually  get to the  grocery  store?  Do you  live with  other 
people,  and  do the  other  people  have  a car ?  Have  you  contacted  your  friends  and 
relatives  for  help  in getting  to your  medical  appointment?  When  such  controls 
indicate  that  a beneficiary  does  have  access  to  other  transportation,  non-emergency 
transportation  is denied.  The  beneficiary  is advised  to use  those  sources. 
Three  of the  four  Medicaid  programs  we inspected  screen  for  such  information  each 
time  a beneficiary  asks for  help  with  transportation.  The  other  program  screens  for 
such  information  during  a beneficiarys  initial  request  for  transportation.  Thereafter, 
the  broker  assumes  that  a beneficiarys  status  has  not  changed  unless  the  beneficiary 
presents  new  information. 
The  four  programs  we inspected  had  implemented  controls  to prevent  payment  of 
claims  for  unnecessary  trips  and  excessive  claims.  Three  of the  four  programs  used 
trip  sheets  to  match  against  authorized  trips.  One  program  used  an  authorization 
control  number  to match  against  authorized  trips. 
Use Of Trip Sheets: The  Miami,  Florida,  Philadelphia,  Pennsylvania  and  Washington 
State  Medicaid  programs  used  trip  sheets  to help  prevent  unauthorized  trips.  A trip 
sheet  is a record  that  brokers  require  providers  to keep.  It shows beneficiary  name 
and  address,  destination  address,  beginning  and  ending  odometer  reading,  and  pick-up 
5 
 and  drop-off  times.  The  trip  sheet  is either  submitted  with  a claim,  or serves  as the 

actual  claim  for  payment. 

The  Medicaid  programs  we inspected  used  trip  sheets  to identify  providers  who  bill 

Medicaid  for  unauthorized  trips.  When  a Medicaid  beneficiary  calls  to  obtain  non-

emergency  transportation,  a broker  either  authorizes  or denies  the  trip.  If the  trip  is 

authorized,  it is added  to  a computerized  list of authorized  trips.  When  a provider 

submits  the  trip  sheet  and  claim  for  payment,  the  broker  matches  it to the  list of 

authorized  trips.  If it does  not  match,  payment  is denied. 

Trip  sheets  are  also  used  to  detect  providers  who  bill for  more  miles  than  they  actually 

provide.  Before  paying  a claim,  brokers  examine  odometer  readings  on the  trip  sheets 

to  assure  that  providers  do not  bill for  excessive  mileage. 

The  Medicaid  programs  admitted  that  it is difficult  to precisely  verify  mileage  from 

one  destination  to  another.  However,  their  brokers  told  us that  the  trip  sheets  are 

reviewed  by staff who  know  the  geographic  area.  Further,  by repeatedly  reviewing  trip 

sheets,  the  staff  become  familiar  with  the  distance  from  one  destination  to  another.  In 

instances  where  the  distance  appears  excessive,  the  provider  is questioned  and  the 

payment  may be  adjusted.  One  broker  in Washington  State  is experimenting  with  a 

computer  program  that  actually  calculates  the  mileage  from  one  destination  to 

another.  Then  they  can  compare  the  mileage  on  provider  claims  to  that  calculated  by 

the  computer. 

Use  Of Prior AuthorizationNumbers:  Louisiana  prevents  payment  for  unauthorized 

trips  by assigning  a unique  prior  authorization  number  to  each  authorized  trip.  When 

a trip  is authorized,  the  broker  gives a transportation  provider  a prior  authorization 

number.  The  broker  then  sends  all prior  authorization  numbers  to the  claims  payment 

center.  When  a provider  submits  a claim  for  payment,  the  claim  must  show the  prior 

authorization  number.  The  payment  center  matches  the  prior  authorization  number 

on  the  claim  to the  prior  authorization  number  assigned  by the  broker.  If the  prior 

authorization  numbers  do not  match,  the  claim  will not  be  paid. 

lXps  Not l+wided 
All  of the  Medicaid  programs  we inspected  have  established  controls  to  identify 
unethical  providers  who  bill for  trips  not  provided.  The  Medicaid  programs  required 
brokers  to routinely  call  a random  sample  of medical  providers  to verify  that  patients 
received  medical  care  on the  same  day that  trips  were  authorized. 
To  illustrate,  one  broker  in Washington  State  verified  15 percent  of the  trips  each  day 
by calling  medical  providers.  In instances  where  the  appropriate  medical  providers  did 
not  have  a record  of a beneficiary  receiving  a medical  service,  the  broker  was required 
to  deny  payment,  or in instances  where  payment  had  already  been  made,  initiate 
action  to recover  it.  Usually,  this  involved  sending  a letter  to  the  non-emergency 
transportation  provider  demanding  reimbursement  of the  payment. 
6  The  brokers  for  the  Miami,  Florida  program  operate  a similar  control.  The  broker 
had  a listing  of health  providers  that  they  call regularly  to verify  that  beneficiaries  had 
and  kept  medical  appointments.  The  health  providers  they  called  were  family  health 
centers,  mental  health  agencies,  and  AIDS  programs. 
CASE STUDY  PROGRAMS  ALSO  REDUCED  NON-EMERGENCY 
TRANSPORTATION  COSTS BY USING  LEAST  ColFTLY TRANSPORTATION 
According  to  HCFA  regulations,  States  must  use  the  least  costly  means  of 

transportation  when  multiple  methods  exist.  All of the  programs  we inspected 

adhered  to the  policy.  Each  program  had  established  criteria  for  determining  the  least 

costly  mode  of non-emergency  transportation.  The  criteria,  in priority  order,  was to 

authorize  non-emergency  transportation  from  (1) family  and  friends  who  are  willing  to 

provide  non-emergency  transportation  for  reimbursement,  (2)  available  public 

transportation,  (3) available  non-profit  providers,  and  (4) available  for-profit  providers. 

Non-profit  and  for-profit  providers  are  typically  vans  and  taxis.  Vans  equipped  to 

provide  rides  to wheelchair  bound  beneficiaries  are  usually  reimbursed  at a higher 

rate. 

Typically,  when  a beneficiary  calls a broker  for  transportation,  the  broker  will ask the 

beneficiary  if they  have  family  or friends  that  can  provide  the  transportation  or if they 

live on  a bus  line.  If not,  the  broker  will ask them  to  choose  between  available  non-

profit  providers.  For-profit  providers  will only be  used  when  non-profit  providers  are 

not  available. 

The  following  two examples  illustrate  the  need  for  using  the  least  costly  transportation. 

Prior  to  1994, Louisiana  largely  used  the  more  costly  modes  of transportation.  In 

1994, an  audit  of Louisianas  program  showed  that  for-profit  providers  received  99.6 

percent  of all non-emergency  transportation  reimbursements  in  1993.  This  is the 

highest  cost  type  of provider.  The  audit  further  stated  that  most  unnecessary  non-

emergency  transportation  cost  resulted  from  using  the  most  costly  sources  of non-

emergency  transportation.  Following  the  audit,  Louisiana  started  determining  the  least 

costly  mode  of transportation  before  authorizing  non-emergency  transportation.  As a 

result  of this  and  other  program  changes,  non-emergency  transportation  costs 

decreased  from  $72 million  in  1994 to $18 million  in  1995--a $54 million  decrease  in 

one  year. 

Likewise,  in  1993 the  Miami,  Florida  program  reduced  its non-emergency 

transportation  costs by using  the  least  costly  method  of transportation.  Miami,  Florida 

began  a program,  referred  to  as the  Metropass  program.  Under  Metropass,  public 

transportation  bus passes  are  issued  by the  State  to Medicaid  beneficiaries  for  non-

emergency  transportation. 

The  Metropass  program  targets  beneficiaries  who  have  three  or more  medical 

appointments  a month.  Three  appointments  would  normally  cost  the  program  $90 

whereas,  a monthly  bus pass  only  costs  $30.  In instances  where  such transportation 

7  was not  readily  available  or accessible  for beneficiaries,  other  forms  of transportation 
was authorized. 
Freedom of Choice l+rwisbn  does not have to hit  Statesabilityto use leastco&y 
bzlrlsetion 
The  freedom  of choice  provision  of the  Medicaid  law states  that  beneficiaries  have  a 
right  to chose  their  provider  of services  when  Federal  reimbursement  for  Medicaid 
services  are  claimed  as a medical  expense.  Therefore,  States  that  claim  non-
emergency  transportation  as an  optional  medical  expense  must  adhere  to the  freedom 
of choice  provision. 
Two  of our  selected  Medicaid  programs,  Miami,  Florida,  and  Louisiana,  claim  Federal 
reimbursement  for  non-emergency  transportation  as an  optional  medical  expense. 
Both  programs  demonstrated  that  adhering  to the  freedom  of choice  provision  does 
not  limit  their  ability  to use low cost transportation. 
Freedom  of choice  does  not  require  a State  to provide  transportation  at unusual  or 
exceptional  costs  to meet  a recipients  personal  choice  of provider.  Louisiana  and 
Miami,  Florida  used  this  exception  to the  freedom  of choice  provision  to  use low cost 
transportation  and  reduce  their  non-emergency  transportation  costs.  To  illustrate, 
Louisiana  offers  beneficiaries  a choice,  however,  the  choice  is among  the  lowest  cost 
providers.  A beneficiary  in Louisiana  would  have  to  choose  among  a non-profit 
provider  before  choosing  among  a for-profit  provider. 
In Miami,  Florida,  a beneficiary  must  use public  transportation  if it is most  cost 
effective  for  the  Medicaid  program.  They  cannot  use  a for-profit  or non-profit 
provider  if public  transportation  is available  in their  area.  Again,  the  Medicaid 
beneficiary  has  a choice,  but  they  still must  use the  lowest  cost  transportation 
available. 
Statescan limiijkedom  of choice by ckning  Federal rebnb rmsementfor iwn-ernegyncy 
trmqmtation  as an adininktrative  erperse 
Two  of our  selected  Medicaid  programs,  Philadelphia,  Pennsylvania  and  Washington, 
chose  to claim  Federal  reimbursement  for  non-emergency  transportation  as an 
administrative  expense.  Both  programs  do not  have  to  adhere  to the  freedom  of 
choice  provision.  They  can  reduce  costs by contracting  with  only  low cost  providers. 
They  can  choose  the  type  of transportation  and  the  transportation  providers  who will 
provide  the  services. 
However,  the  extent  of potential  savings from  claiming  non-emergency  transportation, 
as an  administrative  expense  may  or may  not  offset  future  losses  in Federal  revenue. 
For  example,  Louisiana  chose  to treat  non-emergency  transportation  as an  optional 
medical  expense  because  they  receive  a Federal  matching  rate  of 75 percent  for 
medical  services.  If they  changed  the  way they  treat  non-emergency  transportation  to 
8  an  administrative  expense,  they  would  only  receive  a Federal  matching  rate  of 50 
percent.  Therefore,  Louisiana  may  or may  not  realize  significant  savings  by claiming 
non-emergency  transportation  as an  administrative  expense. 
In contrast,  Philadelphia,  Pennsylvania  and  Washington  States  Federal  matching  rates 
for  Medicaid  medical  services  are  56 percent  and  54 percent,  respectively.  By 
choosing  to  treat  non-emergency  transportation  as an  administrative  expense,  they 
receive  a 50 percent  Federal  matching  rate  which  is only  slightly  lower  than  their 
Federal  matching  rate  for  medical  services.  These  Medicaid  programs  believe  the  loss 
in Federal  matching  funds  is offset  by savings  in programs  costs. 
States can obtain  a waiver of the freti  of choice pnnkim  to have greaterwiliiy  in 
usingleart  cxmly tnlrLY~tio?l 
States  that  claim  Federal  reimbursement  for  non-emergency  transportation  as an 
optional  medical  expense  can  also  reduce  costs by obtaining  a waiver  of the  freedom 
of choice  provision.  By obtaining  a freedom  of choice  waiver,  States  are  not  required 
to give beneficiaries  a right  to  choose  their  provider  of transportation  services.  Such 
programs  can  choose  what  types  of transportation  they  will provide  and  who  will 
provide  transportation  service  to Medicaid  beneficiaries.  A freedom  of choice  waiver 
allows  Medicaid  programs  to  control  costs by having  more  flexibility  to  contract  with 
low-cost  non-emergency  transportation  providers,  while  maintaining  their  higher 
Federal  matching  rate. 
According  to  HCFA,  only  three  States  currently  have  a freedom  of choice  waiver. 
The  freedom  of choice  waiver  is contingent  upon  Federal  approval.  Medicaid 
programs  must  demonstrate  that  their  transportation  methods  do not  limit  beneficiary 
accessibility  to  Medicaid  services. 
USING  BROKERS  MAY  HELP  CONTROL  CGSIS 
The  four  Medicaid  programs  we ins  ected  used  brokers  to help  manage  their  non-
P 
emergency  transportation  programs  .  Brokers  are  contractors  who  may  be  private  or 
public  organizations.  The  Medicaid  programs  we inspected  contracted  with  one  or 
several  brokers  who  managed  non-emergency  transportation  on  a regional  or county 
basis.  Medicaid  staffs  in the  four  programs  we inspected  told  us brokers  can  help 
control  costs.  The  brokers,  they  said,  have  a contractual  obligation  to  keep  costs  at a 
specified  level--an  incentive  to control  cost. 
Washington  State,  for  example,  reported  significant  cost  savings  from  using  brokers. 
In  1990, Washington  Medicaid  staff  compared  non-emergency  transportation  costs 
against  what  it would  have  cost  under  a pre-broker  system  in  1988.  The  comparison 
31n Louisiana,  the brokers  are referred  to as dispatch  offices. 
9  showed  that  given  the  same  number  of trips,  non-emergency  transportation  would 
have  cost  $3.7 million  more  under  the  pre-broker  system  in  1988. 
Major Advantages  of Using Brokers 
Staff  of the  four  programs  we inspected  cited  several  advantages  to using  brokers  to 
manage  non-emergency  transportation.  First,  brokers  are  intermediaries  to  assure  that 
transportation  is necessary.  The  four  Medicaid  programs  we inspected  used  brokers 
to  schedule  appointments  for  trips.  They  require  Medicaid  beneficiaries  to  schedule 
non-emergency  transportation  through  a broker  rather  than  a transportation  provider. 
By scheduling  trip  appointments  through  brokers,  they  assure  that  trips  requested  by 
beneficiaries  are  necessary  before  giving approval  and  scheduling  the  trip  with  a 
provider.  In contrast,  when  a beneficiary  asks a provider  directly  for  non-emergency 
transportation,  unethical  providers  have  an  opportunity  to provide  the  transportation 
whether  or not  it is needed.  Further,  unethical  providers  may  solicit  transportation 
business  from  beneficiaries  who  do not  need  it. 
Second,  brokers  who  manage  non-emergency  transportation  at local  levels  typically 
know  the  transportation  resources,  conditions,  and  beneficiary  needs. 
Third,  brokers  usually  have  expertise  in providing  transportation  services.  They  can 
use  their  experience  to  determine  the  most  cost-effective  mode  of transportation. 
Many  brokers  are  social  service  agencies  that  have  experience  in arranging  trips.  For 
example,  the  Philadelphia  broker  existed  many  years  as a volunteer  transportation 
organization. 
Fourth,  brokers  have  flexibility  to develop  cost-saving  ways of providing  transportation. 
For  example,  a broker  in Washington  State  is developing  a system  by which  they  give 
beneficiaries  gas vouchers,  and  gas stations  bill the  broker. 
Major Diwdvwge  of Using Brdxm 
Staff  at the  four  programs  we inspected  cited  one  potential  disadvantage  of using 
brokers  to  manage  non-emergency  transportation.  They  noted  that  some  brokers  may 
also  be  in the  transportation  business,  or have  relatives  and  close  friends  in the 
business.  In such  instances,  an  unethical  broker  has  an  opportunity  to  assign  non-
emergency  transportation  business  to their  own company,  or that  of a friend  or 
relative.  If so, the  non-emergency  transportation  provider  may  not  be  the  least  costly 
provider.  Only  one  non-emergency  Medicaid  transportation  program  we inspected 
said  they  had  experienced  this  problem  to  a great  extent.  In this  instance,  the 
Medicaid  program  staff  said  they  resolved  the  problem  by immediately  discontinuing 
use  of the  abusive  brokers  involved.  The  other  three  Medicaid  programs  we inspected 
said  they  had  not  experienced  this  problem  to any great  extent. 
10 
 RECOMM.ENDATIONS 
We  recommend  that  HCFA  advise  States  of opportunities  to  reduce  expenditures  for 
non-emergency  transportation.  Specifically,  to 
focus  efforts  and  establish  controls  on the  kinds  of fraud 
and  abuse  which  are  most  likely  to  occur, 
use least  costly  transportation,  and 
use brokers  where  appropriate  to help  manage  non-
emergency  transportation. 
We  also  recommend  that  HCFA  advise  States  of their  options  for  using  less costly 

transportation  methods.  Two  of the  States  we surveyed  demonstrated  that 

opportunities  exist to  use less costly  transportation  methods  while  still adhering  to the 

freedom  of choice  provision.  States  can  avoid  constraints  of the  freedom  of choice 

provision  by electing  to claim  Federal  reimbursement  for  non-emergency 

transportation  as an  administrative  expense.  In addition,  States  can  get  a waiver  of 

the  freedom  of choice  provision. 

Most  States  could  adopt  practices  similar  to those  used  by the  case  study  programs 

described  in this  report.  We  cannot  accurately  estimate  the  precise  amount  that  could 

be  saved  because  we did not  independently  verify  the  savings  data,  we did not  collect 

administrative  cost  data  for  the  case  study  programs,  and  we do not  know  what 

progress  other  States  have  made  in controlling  costs.  However,  this  is a program  with 

over  $1 billion  in expenditures.  If all States  adopted  practices  similar  to  those  used  by 

the  case  study  programs,  we believe  substantial  savings  could  be  achieved. 

11 
 AGENCY  COMMENTS 
The  HCFA  Administrator  concurred  with  our  recommendations.  He  stated  that  the 

report  recommendations  are  consistent  with  existing  HCFA  activities.  The  HCFA 

established  a Non-Emergency  Transportation  Technical  Advisory  Group  comprised  of 

State  and  Federal  Medicaid  staff.  The  group  is currently  developing  recommendations 

for  HCFA  and  the  Executive  Committee  of  the  National  Association  of  State 

Medicaid  Directors  on  a wide  range  of  issues,  including  those  in  our  report.  He 

believes  that  their  recommendations  will  facilitate  changes  we  seek. 

In  response  to  HCFAs  technical  comments,  we  made  appropriate  revisions  to  the 

report. 

The  Principal  Deputy  Assistant  Secretary  for  Planning  and  Evaluation  (ASPE) 

conditionally  concurred  with  our  recommendations.  In  the  draft  report,  we  roughly 

estimated  that  if all  States  adopted  practices  similar  to  our  case  study  programs,  the 

Medicaid  program  could  save  $100  million  per  year.  The  ASPE  comments  challenged 

the  accuracy  of  this  estimate  and  recommended  that  it not  be  included  in  the  report. 

We  agree  that  this  was,  at  best,  a rough  estimate.  We  had  only  intended  to  illustrate 

in broad  terms  the  potential  for  savings.  We  removed  the  savings  estimate  of  $100 

million  and  substituted  general  language  indicating  the  potential  for  savings. 

The  full  text  of  HCFA  and  ASPE  comments  are  provided  in Appendix  A. 

12 
 APPENDIXA 

AGENCY  COMMENTS  ON THE  DRAFI  REPORT 

A-l  DEPARTMENT  OF HEALTH  & HUMAN  SERVICES  Health  Care  Financing  Administration 
The  Administrator 
Washington,  D.C.  20201 
DATE: 
FEB I3 1997 
TO: 	 June Gibbs Brown 
Inspector General 
n 
FROM: 
SUBJECT: 	 Office of Inspector  General (OIG) Draft Report: Controlling Medicaid 
Non-Emergency  Transportation  Costs, (OEI-04-95-00 140) 
We reviewed the above-referenced  report that describes effective practices for controlling 
non-emergency  transportation  costs in the Medicaid program.  The report 
recommendations  are consistent with existing Health Care Financing Administration 
(HCFA) activities  that have already been initiated in this area.  HCFA established  a Non-
Emergency  Transportation  (NET) Technical  Advisory  Group (TAG) comprised of state 
and Federal Medicaid  staff.  The TAG is currently  developing recommendations  to 
HCFA and the Executive Committee  of the National Association  of State Medicaid 
Directors that will address a wide range of issues, including those in the subject report. 
We believe the tidings  of this group will be the ideal instrument to facilitate the 
necessary  changes we all seek.  Our detailed comments are attached. 
Thank you for the opportunity  to review and comment on this report. 
Attachment 
EIG  
iii:  = 
DIG-AS 
EE  ZE 
DIG-01 
DIG-W  =  .  .
th Care Financing: 
on Office of bnector  G-1  (OIG) Draft 
>, 
on-Em,ergency SET)  Costs, 
B B s
PI  04 95 001401 
OIG Recp 
o 	 HCFA should advise states of opportunities  to reduce expenditures  for non-emergency 
transportation. 
o 	 HCFA should advise states of their options for using less costly transportation
. 
methods. 
HCFAResm 
HCFA concurs.  The report recommendations  are consistent with existing HCFA 
activities that have already been initiated in this area.  HCFA worked with the states to 
ensure the positive  developments  outlined below. 
In 1994, HCFA created the Non-Emergency  Transportation  (NET) Technical  Advisory 
Group (TAG) to find cost-effective  and efficient ways to provide transportation  services 
under Medicaid  and to address the wide range of transportation-related  issues that impact 
Medicaid.  The TAGs membership  is comprised  of 10 state members from each of the 
HCFA regions.  Currently,  the TAG is preparing  a comprehensive  report with 
recommendations  to HCFA and the Executive Committee  of the National Association  of 
State Medicaid  Directors that will address a wide range of issues, including those 
discussed in the OIG report.  We believe the findings of this group of experts will be the 
ideal instrument  to facilitate the necessary  changes we all seek.  The work is scheduled 
for completion by the end of June 1997. 
In recognition  of the need to give states flexibility  to provide access to needed medical 
care, the Federal statute permits Medicaid transportation  services to be provided  as either 
an administrative  activity  or an optional covered medical service.  In an effort to provide 
clarification  to states and others, HCFA discussed the policies associated with the 
provision  of transportation  services under Medicaid in different forums, both written  and 
verbal,  including  onsite assistance.  During several annual State Medicaid  Directors 
conferences,  HCFA sponsored a workshop for states to share the workings  of their NET 
programs with others.  Page 2 
We agree with the report recommendation  regarding the use of brokers as a means to help 
manage NET expenditures.  Additionally,  we believe it would be helpful to accompany 
the recommendation  with a reminder of the alternative approaches to be aware of when 
claiming these costs for Federal matching purposes. 
Federal Medical Assistance  Percentage  (FMAP) - On page  1 of the OIG report,  in the 
second to last paragraph,  the report refers to the FMAP rate as ranging from 50 to 
80 percent.  We suggest the report reference  section 1905(b) of the Social Security Act, 
which indicates  that the extreme limits for the FMAP range from 50 to 83 percent. 
We recommend  consistency  between paragraph  3 on page 4, and paragraph  4 on page 7; 
i.e., show the savings as either $52 million or $54 million, whichever  is correct.  .
8
:  -4I 
DEPARTMENT  OF HEALTH  & HUMAN  SERVICES  Office of the Secretary 
Washington,  D.C.  20201 
FEB  2 I  1997 
To: 	 June Gibbs Brown 
Inspector  General 
From: 	 David F. Garrison 
Principal  Deputy Assistant  Secre 
for Planning  and Evaluation 
x/ICI -
Subject:  OIG Draft Report: Controlling  Medicaid Non-Emergency 
Transportation  Costs - CONDITIONALCONCURRENCE 
&I- Q+ 9 5-&6/5/LJ 
Thank you for the opportunity  to review this draft report.  The strategies  undertaken  in the case 
study states to control  non-emergency  transportation  costs in Medicaid  are of interest  and should 
certainly  be shared with the other states. 
I concur with the IGs report with one condition.  The estimate  of potential  annual  savings  of 
$100 million  if all states reduced their costs by 10 percent is not well-grounded  and is probably 
excessive.  This reference  should be omitted  so as to avoid unrealistic  expectations  for Medicaid 
savings in this area.  My criticism  of the estimate  is based on the following  considerations: 
. 	 It is unrealistic  to expect  lo-percent  cost reductions  in every state, on an annual  basis.  It 
is more likely  that some states may be able to achieve  significant  savings  in the first year 
or years that they institute  new cost-control  measures, rather than on a continuous  basis. 
Depending  on circumstances  and state practices,  other states may not be able to achieve 
significant  savings. 
. 	 Relatedly,  the $100 million  estimate  assumes savings in the case study states as well as 
the others,  even though the case study states have probably  already  achieved  most  of the 
cost-reducing  effect of their practices. 
. 	 Although  the case study states were chosen for their exemplary  accomplishments,  other 
states may also have practices  in effect currently  to control  their Medicaid  spending  on 
non-emergency  transportation.  To the extent that this is so, the estimate  is overstated. 
. 	 The report  (page 3) offers several caveats about the savings data obtained  from the case 
study states, such as the fact that the data were not validated  independently  and do not 
reflect  administrative  costs incurred by the study states.  In light of these  limitations,  the 
savings  reported  in the study states donot provide a sturdy foundation  for the national 
annual  estimate. 
If you have/any  questions,  please contact Julia Paradise, of my staff, at 6904476  . r:   3 
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