U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

29–006 

" ! HOUSE OF REPRESENTATIVES 113TH CONGRESS

1st Session 

REPORT

2013

113–11 

Union Calendar No. 7 

‘‘BILLIONS OF FEDERAL TAX DOLLARS 

MISSPENT ON NEW YORK’S MEDICAID 

PROGRAM’’ 

R E P O R T 

BY THE

COMMITTEE ON OVERSIGHT AND 

GOVERNMENT REFORM 

Available via the World Wide Web: http://www.gpo.gov/congress/house 

http://www.house.gov/reform 

MARCH 5, 2013.—Committed to the Committee of the Whole House on 

the State of the Union and ordered to be printed 


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LETTER OF TRANSMITTAL 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, DC, March 5, 2013. 

Hon. JOHN BOEHNER, 

The Speaker, House of Representatives, 

Washington, DC. 

DEAR MR. SPEAKER: By direction of the Committee on Oversight 

and Government Reform, I submit herewith the Committee’s report 

to the 113th Congress. This report was adopted by the Committee 

on February 13, 2013, in a meeting that was open to the public. 

Sincerely, 

DARRELL ISSA, 

Chairman. 


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C O N T E N T S 

Page 

Executive Summary ................................................................................................. 1 

I. Introduction .................................................................................................... 3 

II. New York’s Medicaid Program is the Largest in the Country ................... 5 

III. Examples of Problems in New York’s Medicaid Program .......................... 6 

Lack of Controls and Misspending in New York’s Personal Care Services 

Medicaid program 1

Overpayments to New York Developmental Centers 

Abuses of Medicaid Eligibility Rules in New York 

Excessive Salaries Paid to Executives of Medicaid-funded Organizations 

IV. Patient Abuse Within the Developmentally Disabled System in New 

York ............................................................................................................. 13 

V. Past Health Care-related Corruption by Elected Officials ......................... 14 

VI. Allegations of Problems with State Oversight of the Medicaid Program 16 

VII. Reforms in the Last Two Years and Additional Concerns ......................... 17 

VIII. Recommendations .......................................................................................... 23 

IX. Conclusion ...................................................................................................... 25 

Appendix A ............................................................................................................... 26 

Appendix B ............................................................................................................... 26 

Appendix C ............................................................................................................... 29 

Committee Consideration; Statement of Oversight Findings and Recommendation of the Committee; Statement of General Performance Goals and 

Objectives .............................................................................................................. 32 

1For more information about Personal Care Services in New York and Dr. Feldman’s testimony before the Committee, see the Committee Staff Report entitled Uncovering Waste, Fraud, 

and Abuse in the Medicaid Program, U.S. House Committee on Oversight & Gov’t Reform 

(April 25, 2012) [hereinafter Committee Staff Report]. 


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Union Calendar No. 7 

113TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 113–11 

‘‘BILLIONS OF FEDERAL TAX DOLLARS MISSPENT ON 

NEW YORK’S MEDICAID PROGRAM’’ 

MARCH 5, 2013.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. ISSA, from the Committee on Oversight and Government 

Reform, submitted the following 

R E P O R T 

EXECUTIVE SUMMARY

New York State’s Medicaid program is the largest in the country. 

In fiscal year 2010, New York’s $2,700 per resident Medicaid 

spending exceeded per capita Medicaid spending in the rest of the 

country by more than $1,500. When problems have been identified, 

the cost associated has often been large as well. Poor program oversight by both the State and federal Government has contributed to 

these problems. 

This report discusses past findings of the Office of Inspector General (OIG) of the Department of Health and Human Services 

(HHS), investigative reporters, whistle-blowers and this Committee 

of waste, fraud, and abuse within New York’s Medicaid program. 

It also discusses positive steps taken by Governor Andrew Cuomo 

to address many of those problems, highlights continuing concerns, 

and offers several recommendations aimed at protecting future tax 

dollars from being misspent. Several of the costly problems discussed in this report include: 

• In 2010, the Poughkeepsie Journal reported that Medicaid was 

paying extremely high payment rates for residents in New York’s 

State-operated developmental centers. The high payments resulted 

from a complicated methodology that was initially approved more 

than two decades ago by the Federal Government. This methodology resulted in daily payment rates exceeding $5,000 for each institutional resident by 2011. The Committee majority estimates 

that the Federal share of total payments going to the State through 

these facilities was approximately $15 billion in excess of a reasonVerDate Mar 15 2010 01:51 Mar 09, 2013 Jkt 029006 PO 00000 Frm 00007 Fmt 6659 Sfmt 6602 E:\HR\OC\HR011.XXX HR011

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able amount. The Centers for Medicare and Medicaid Services 

(CMS) believes that the developmental center payments exceeded 

Medicaid upper payment limits established by Congress. The excessive rates have remained in place for two-and-a-half years after the 

Federal Government began asking the State for information about 

the developmental center payment rates. • Over the past decade, HHS OIG has uncovered ten instances in which New York State has improperly claimed at least $50 million in Federal Medicaid dollars. Moreover, in the past four years, 

the Federal Government has successfully sued New York for unlawful Medicaid expenditures twice, recovering more than $600 

million. • In 2009, a whistle-blower sued New York City for rampant inappropriate and fraudulent spending in Medicaid’s Personal Care 

Services (PCS) program. • The Committee has learned that Medicaid estate planning is 

a long-standing practice and significant problem across the nation 

and in New York State. The Committee has learned that relatively 

affluent people in New York artificially impoverish themselves in 

order to qualify for Medicaid and have taxpayers pick up the cost 

of their long-term care services and supports. At least in Suffolk 

County, New York, a relatively affluent part of the State, a legal 

technique called spousal refusal, which is essentially when one 

spouse abandons all financial care of a sick or disabled spouse and 

leaves him or her as a ward of the State, is widely used. • The Committee has uncovered excessive salaries paid to executives of nonprofit institutions that are nearly completely financed 

by Medicaid. The Committee found that at least 15 of these executives received yearly compensation exceeding $500,000 and at least 

100 others received yearly compensation exceeding $200,000. • Over the past decade, many powerful elected members of New 

York’s State legislature, including two recent State Senate majority 

leaders, have been convicted of fraud or corruption charges related 

to health care. 

• Reforming Medicaid in New York faces several significant challenges. For one, many powerful special interest groups in New 

York benefit from the State’s large Medicaid expenditures and 

lobby strongly against changes that would reform the State’s program. Another challenge is the long-standing New York practice of 

increasing Medicaid as a way to leverage extra Federal money into 

the State. 

At the beginning of his term, Governor Andrew Cuomo called 

New York’s Medicaid program ‘‘bloated’’ and argued that it ‘‘must 

be reformed to help [New York] [S]tate begin to make ends meet.’’ 

The Committee has also found that despite these obstacles, several 

program reforms are being orchestrated by the Cuomo Administration, including: 

• The Cuomo Administration has enacted many new policies 

through a Medicaid Redesign program, including the first-in-thenation Medicaid global cap, which places a budget constraint on the 

State’s Medicaid spending. There is also evidence that the State 

has had some initial success with reducing waste, fraud, and abuse 

within New York City’s PCS Medicaid program. 

• Finally, after two decades of overpayments, New York and 

CMS are in the midst of negotiations to develop an appropriate 


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2Kaiser Commission on Medicaid Facts, Medicaid Enrollment: June 2011 Data Snapshot, 

available at: http://www.kff.org/medicaid/upload/8050-05.pdf. 3 In 1990, national expenditures on Medicaid equaled $73.7 billion. (See National Health Expenditures, Levels and Annual Change, Table 3, Center for Medicaid and CHIP Services, availContinued 

rate and come to an appropriate amount for the Federal Government to recoup for past overpayments in excess of reasonable costs. • Early last year, Governor Cuomo issued an executive order 

which limits executive compensation at Medicaid-financed institutions to less than $199,000. 

While New York’s actions over the past few years are a step in 

the right direction, it is clear to the Committee that there is more 

that New York and the Federal Government can do to make the 

State’s Medicaid program more cost-effective. The Committee recommends six specific actions that should be taken immediately to 

reduce Medicaid waste, fraud, and abuse in New York’s program 

and potentially save both Federal and New York State taxpayers 

significant amounts of money each year: 

• CMS or a qualified government watchdog agency should conduct a complete and independent audit of New York’s Medicaid 

program, including the work of New York State’s Office of the Medicaid Inspector General; • CMS should finalize an agreement with New York on a corrected payment methodology that ends the developmental center 

overpayments as soon as possible. CMS should pursue recovery of 

an appropriate portion of previous overpayments in excess of reasonable costs for Federal taxpayers; 

• CMS’ review of New York’s Section 1115 waiver request, to 

allow the State to keep a portion of the savings its Medicaid reforms are projected to achieve should follow all applicable statutory 

requirements, particularly with respect to budget neutrality. CMS 

should also ensure that the baseline from which New York is calculating the savings does not include developmental center overpayments or other overpayments; • New York’s PCS program must only enroll individuals who 

meet the eligibility thresholds required by law; • New York’s legislature should ban ‘‘spousal refusal’’ and other 

abuses of Medicaid eligibility rules, as Governor Cuomo has proposed in each of his three budgets. New York must also aggressively pursue estate recovery against people who abuse Medicaid 

eligibility rules; and 

• New York’s legislature should codify Governor Cuomo’s executive order limiting compensation of executives at organizations receiving nearly all their money from tax revenue. New York must 

also aggressively monitor and enforce these limits. 

I. INTRODUCTION

In June 2011, nearly 53 million Americans were enrolled in Medicaid, a joint Federal-State program that finances health and longterm care services for a diverse group of individuals.2 While Federal law currently mandates certain minimum coverage standards 

for state Medicaid programs, states can—and very often do—expand eligibility criteria and benefits beyond mandated thresholds. 

Adjusted for inflation, Medicaid spending has increased over 250 

percent since 1990,3 and government experts estimate that MedVerDate Mar 15 2010 01:51 Mar 09, 2013 Jkt 029006 PO 00000 Frm 00009 Fmt 6659 Sfmt 6602 E:\HR\OC\HR011.XXX HR011

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able at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ 

NationalHealthExpendData/Downloads/tables.pdf.) Adjusted for inflation, this would equal 

about $129.5 in 2012 dollars since the average annual consumer price index was 130.7 in 1990 

and 229.594 in 2012. (See Consumer Price Index, Bureau of Labor Statistics, U.S. Dept. of 

Labor, available at ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt.) 4Spending and Enrollment Detail for CBO’s February 2013 Baseline: Medicaid. 

5Federal Financial Participation in State Assistance Expenditures; Federal Matching Shares 

for Medicaid, the Children’s Health Insurance Program, and Aid to Needy, Aged, Blind or Disabled Persons for FY 2012, 75 Fed. Reg. 69082, 69083 (Nov. 9, 2010), available at http:// 

aspe.hhs.gov/health/fmap12.shtml. 6The American Recovery and Reinvestment Act raised the average reimbursement rate for 

the U.S. States to nearly 70 percent for fiscal years 2009 through 2011. Between fiscal year 2008 

and fiscal year 2009, the average State FMAP increased from 59.7% to 70.0%. Kaiser Family 

Foundation State Health Facts, Federal Medical Assistance Percentage (FMAP) for Medicaid 

and Multiplier, available at http://www.statehealthfacts.org/comparetable.jsp?ind=184&cat=4. 7 According to the World Bank, Greece’s Gross Domestic Product was slightly under $290 billion in 2011. See Greece, The World Bank, available at http://data.worldbank.org/country/greece. 8See Committee Staff Report, supra note 1. 

icaid cost American taxpayers $440 billion in 2012.4 The Federal 

Government reimburses state Medicaid spending, typically equal to 

half of Medicaid expenditures in states with the highest per capita 

income, and about 75 percent in states with the lowest per capita 

income.5 In aggregate, the Federal Government typically reimburses about 57 percent of state Medicaid spending, and in New 

York the typical Federal reimbursement is 50 percent.6

To put the size of the program in context, annual Medicaid 

spending now exceeds Wal-Mart’s worldwide annual revenue and is 

more than 50 percent larger than Greece’s entire economy.7 The 

Committee majority believes an uncapped Federal reimbursement 

makes this the program particularly susceptible to waste, fraud 

and abuse. As explained in an April 2012 Republican staff report: 

The policy of an open-ended federal reimbursement of 

state Medicaid spending significantly reduces the incentives for states to act as wise stewards of federal tax dollars. For example, in order to return $1,000 in fraudulent 

Medicaid funding for state purposes, a state with a 60% 

federal Medicaid reimbursement rate would have to identify and recover $2,500 of waste, fraud, and abuse in its 

program. Since 60% of the total recovery would have to be 

returned to the U.S. Treasury, the state would have to refund $1,500 of the $2,500 it recovered. Moreover, due to 

the open-ended federal Medicaid reimbursement, many 

states view Medicaid as an economic growth engine and 

therefore lack much interest in where the money is going. 

States would also have to increase resources to uncover 

the waste, fraud, and abuse. For these reasons, the federal 

Medicaid reimbursement demonstrates one of the core reasons the Medicaid program suffers from rampant waste, 

fraud, and abuse.8

Each Federal dollar misspent on Medicaid is one less dollar for 

the country to use for better health care for the poor, education, infrastructure, national defense, deficit reduction, or any other priority. One concern is that some politicians and policymakers view 

Medicaid not only as a program to assist low-income and disabled 

persons access health care and long-term care services, but also as 

a way to bring Federal dollars into the State. 

The Committee discovered a decades-long problem in New York’s 

Medicaid program, which is the subject of this Committee Report. 


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9DSH spending is intended to benefit hospitals that treat a large number of uninsured patients and patients with Medicaid. See Congressional Research Service, Medicaid Disproportionate Share Hospital Payments, December 18, 2012, available at http://www.fas.org/sgp/crs/ 

misc/R42865.pdf. 

II. NEW YORK’S MEDICAID PROGRAM IS THE LARGEST IN THE COUNTRY

New York’s spending on Medicaid is the highest in the country 

by a considerable amount. Table 1 shows Medicaid per resident 

spending in Fiscal Year (FY) 2010 on the program’s three main 

spending categories—acute care, long-term care, and disproportionate share hospitals (DSH) 9—for California, New York, Pennsylvania, and the entire country. The numbers in parentheses show 

how many dollars New York spends per resident on Medicaid 

spending for every dollar spent per capita in each of the other three 

regions. As Table 1 shows, New York’s per resident Medicaid 

spending is nearly double that of Pennsylvania and more than double that of California and the entire country. Appendix A contains 

a table that shows the Federal share of state Medicaid spending for 

FY 2010 on a per capita basis for all 50 States. Federal taxpayers 

contributed $1,657 toward New York’s Medicaid program per State 

resident in FY 2010, an amount nearly 20 percent greater than 

that of Vermont, the State with the second highest per resident 

Federal Medicaid contribution, and more than 60 percent greater 

than the median per resident Federal Medicaid contribution. 

TABLE 1—PER RESIDENT MEDICAID SPENDING (FY 2010), BY SERVICE 

Geographic area Acute care Long-term 

care DSH Total 

New York ........................................................................................ $1,404 $1,122 $161 $2,687 

California ....................................................................................... $728 $343 $58 $1,129 

(1.93) (3.28) (2.78) (2.38) 

Pennsylvania .................................................................................. $873 $536 $66 $1,476 

(1.61) (2.09) (2.42) (1.82) 

USA ................................................................................................. $805 $396 $57 $1,258 

(1.74) (2.83) (2.82) (2.14) 

The Committee chose the states of California and Pennsylvania to compare to New York because California is the largest state and has the second largest Medicaid program, and Pennsylvania borders New York and also has a large population. USA represents national figures 

for the U.S. states plus the District of Columbia. 

Source: Data is from the Kaiser Family Foundation. 

Table 2 shows how much certain states spend on Medicaid divided by the number of individuals in the state who have income 

below the poverty line. The numbers in parentheses show how 

many dollars New York spends on Medicaid for every dollar spent 

by the three other regions, divided by the number of people in poverty. Although a significant amount of Medicaid spending is for individuals above the poverty line, Table 2 provides perspective about 

State Medicaid spending relative to the number of individuals at 

or below the poverty line. Table 2 shows that New York’s Medicaid 

expenditures exceed $18,000 for each person in poverty, well over 

double the corresponding figure for both California and the entire 

country, and 62 percent more than the corresponding figure for 

Pennsylvania. The disparity is especially pronounced for spending 

on long-term care services, on which New York spends more than 

three times what California spends and nearly three times what 

the country spends. 


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10 Joyce Purnick, ‘Medicaid’ as a Verb, Then a Crutch, New York Times (July 18, 2005), available at: http://www.nytimes.com/2003/02/24/nyregion/metro-matters-medicaid-as-a-verb-then-acrutch.html 11 Id. 12Paul J. Castellani, is also the author of From Snake Pits to Cash Cows, which was published in 2005 and details the continued operation of developmental centers in the State and 

its implications on Medicaid policymaking. 13 Nina Bernstein, Cuomo’s Medicaid Changes Are at Washington’s Mercy, New York Times 

(October 23, 2012), available at: http://www.nytimes.com/2012/10/24/nyregion/new-yorksmedicaid-program-is-at-the-mercy-of-washington.html?pagewanted=all&_r=0. 

TABLE 2—MEDICAID SPENDING PER PERSON IN POVERTY (FY 2010), BY SERVICE 

Geographic area Acute care Long-term 

care DSH Total 

New York ........................................................................................ $9,653 $7,716 $1,105 $18,473 

California ....................................................................................... $4,701 $2,213 $373 $7,287 

(2.05) (3.49) (2.96) (2.54) 

Pennsylvania .................................................................................. $6,737 $4,137 $512 $11,386 

(1.43) (1.87) (2.16) (1.62) 

Rest of USA .................................................................................... $5,385 $2,654 $380 $8,419 

(1.79) (2.91) (2.91) (2.19) 

USA represents national figures for the U.S. states plus the District of Columbia. 

Source: Data is from the Kaiser Family Foundation. 

Table 3 offers another comparison that demonstrates how New 

York spends significantly more through Medicaid, and particularly 

on elderly and disabled enrollees, compared to other States. 

TABLE 3—MEDICAID SPENDING PER ENROLLEE (FY 2009) 

Geographic area Aged Disabled Adults Children Overall 

New York ............................................................... $22,494 $29,881 $4,277 $2,505 $8,960 

California ............................................................... 10,528 16,269 1,073 1,567 3,527 

(2.14) (1.84) (3.99) (1.60) (2.54) 

Pennsylvania ......................................................... 21,268 12,883 3,692 2,748 7,397 

(1.06) (2.32) (1.16) (0.91) (1.21) 

USA ........................................................................ 13,149 2,900 15,840 2,305 5,527 

(1.71) (1.89) (1.47) (1.09) (1.62) 

USA represents national figures for the U.S. states plus the District of Columbia. 

Source: Data is from the Kaiser Family Foundation. 

III. EXAMPLES OF PROBLEMS IN NEW YORK’S MEDICAID PROGRAM

State and Federal entities and media organizations have all 

found problems in the past regarding wasteful spending in New 

York’s Medicaid program. In 2003, then-president of the United 

Hospital Fund, a health care policy and research organization, commented that ‘‘Medicaid became a verb—to Medicaid.’’ 10 According 

to the New York Times, up to and including Governor Pataki, New 

York governors treated Medicaid like a political tool to get additional money from Washington.11 Last year, the New York Times 

quoted Paul Castellani, former Director with New York’s Office of 

Mental Retardation and Developmental Disabilities and now a public service professor at Rockefeller College in Albany,12 that since 

1966, New York took an aggressive approach, typified by the budget division’s mantra: ‘‘[i]f it moves, Medicaid it; if it doesn’t, depreciate it.’’ 13 This historical State-approach to Medicaid financing 

may be a reason for the State misspending tens of billions of Federal tax dollars over the past few decades. 

During the administration of Governor George E. Pataki, James 

Mehmet, a former chief Medicaid investigator in New York City, 

estimated that at least ten percent of New York City’s Medicaid 


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14 Clifford J. Levy and Michael Luo, New York Medicaid Fraud May Reach Into Billions, New 

York Times (July 18, 2005), available at: http://www.nytimes.com/2005/07/18/nyregion/ 

18medicaid.html?pagewanted=all&_r=0. 15 Id. 16 Id. 17 Id. 18 Brian McGuire, Pataki Appoints Inspector General to Oversee Medicaid Program Reform, 

New York Sun (July 20, 2005) available at: http://www.nysun.com/new-york/pataki-appointsinspector-general-to-oversee/17291/. 19Paul Davies, Gov. Spitzer Snags Top Health-Care Fraud Buster, Law Blog, Wall Street 

Journal (April 6, 2007), available at: http://blogs.wsj.com/law/2007/04/06/gov-spitzer-snags-tophealth-care-fraud-buster/. 20Schedule of Federal Produced Audits and Monetary Recommendations 01/01/2001–04/30/ 

2012, Office of the Inspector General at the Department of Health and Human Services. 21 Id. 22 Nicholas Confessore, City and State Agree to Repay U.S. for Improper Medicaid Claims, 

New York Times (July 21, 2009), available at: http://www.nytimes.com/2009/07/22/nyregion/ 

22whistle.html. 23 Id. 

spending was lost on fraudulent claims, while another 20 percent 

to 30 percent was misspent on unnecessary services.14 In 2005, the 

New York Times criticized New York’s Medicaid program for 

‘‘misspending billions of dollars annually because of fraud, waste, 

and profiteering’’ after a year-long investigation into the State’s 

program.15 According to the Times, State oversight authorities 

failed to detect egregious examples of fraud in the Medicaid program, such as a dentist who billed Medicaid for 991 procedures in 

a single day and a Buffalo school district that rubber-stamped 

4,434 special education students—nearly 60 percent of the district’s 

special education population—onto the Medicaid rolls in a single 

day.16

These problems were mainly undetected or unacted upon by the 

State prior to the Times article. Moreover, the Times investigation 

revealed that New York had virtually no oversight of its Medicaid 

program at the time.17 In 2005, largely in reaction to the Times investigation, Governor Pataki issued an executive order creating the 

Office of the Medicaid Inspector General (OMIG), and he appointed 

New York’s first Medicaid inspector general.18 In 2006, the New 

York State legislature codified the executive order. In April 2007, 

in a statement nominating James Sheehan to be Medicaid Inspector General, Governor Eliot Spitzer said, ‘‘New York State’s health 

care spending is the highest in the nation and our system requires 

dramatic reform.’’ 19

Over the past decade, the Office of the Inspector General (OIG) 

for the U.S. Department of Health and Human Services (HHS) 

found ten specific instances in which New York State received improper Federal Medicaid payments in excess of $50 million, with 

six of these instances exceeding $170 million.20 Each of these OIG 

reports pointed out problems in New York’s Medicaid program, but 

New York State, under both Republican and Democratic governors, 

disagreed with the OIG’s findings in all ten reports.21 In 2009, New 

York reached a settlement with the Federal Government over false 

reimbursement claims for speech therapy services delivered in New 

York schools, which was the subject of one of the OIG reports.22

New York agreed to pay the Federal Government $540 million to 

settle the lawsuit, which was filed under the Federal False Claims 

Act.23 Although the $540 million amount is the largest Medicaid 

recovery in history, the State believed that the settlement was apVerDate Mar 15 2010 01:51 Mar 09, 2013 Jkt 029006 PO 00000 Frm 00013 Fmt 6659 Sfmt 6602 E:\HR\OC\HR011.XXX HR011

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24 Id. 25For more information about Personal Care Services in New York and Dr. Feldman’s testimony before the Committee, See Committee Staff Report supra note 1. 26First Amended Complaint-In-Intervention of Plaintiff-Intervenor United States of America, 

United States of America ex. rel. Dr. Gabriel Feldman v. The City of New York, 09 Civ. 8381 

(JSR) (S.D.N.Y. 2011). 27Daniel R. Levinson, HHS OIG Review of Personal Services Claims Made by Providers in 

New York (A–02–07–01054), Office of the Inspector General, U.S. Department of Health and 

Human Services (June 3, 2009), available at: http://www.oig.hhs.gov/oas/reports/region2/ 

20701054.pdf. 28 Id. 29First Amended Complaint-in-Intervention, Expert Report of Timothy Wyant, Ph.D, supra 

note 26 at 4. 30 Anemona Hartocollis, City to Pay $70 Million in Medicaid Suit, N.Y. Times, Oct. 31, 2011. 31Medicaid Rates for NY State-Operated Developmental Centers May Be Excessive (A–02–11– 

01029), Office of the Inspector General, U.S. Department of Health and Human Services (2012), 

available at: http://oig.hhs.gov/oas/reports/region2/21101029.pdf [hereinafter OIG Report]. 32 According to the OIG Report, New York claimed Medicaid reimbursement totaling $2,266,625,233 in SFY 2009 and the State’s actual costs for the developmental centers that year 

totaled $577,684,725. See id. 33Staff Report, The Federal Government’s Failure to Prevent and End Medicaid Overpayments, U.S. House Committee on Oversight & Gov’t Reform (September 20, 2012). 

proximately $1 billion less than what the State would have potentially had to pay if the matter had gone to litigation.24

The following examples highlight a sampling of waste, fraud, 

abuse, and mismanagement in New York State’s Medicaid program 

that have been highlighted or uncovered by the Committee: 

1. Lack of controls and misspending in New York City’s Personal 

Care Services Medicaid program 25

In 2009, Dr. Gabriel Feldman, a local medical director employed 

by the New York County Health Services Review Organization, 

filed a Federal lawsuit against the City of New York under the 

False Claims Act alleging fraud, abuse, and misspending within 

the Personal Care Services (PCS) program.26 The PCS program, which cost up to $150,000 per enrollee per year, was designed to 

provide qualifying Medicaid beneficiaries services such as cleaning, 

shopping, grooming and basic aid.27 The United States Attorney for 

the Southern District of New York joined Dr. Feldman’s lawsuit, alleging that ‘‘the City improperly authorized and reauthorized 24- 

hour care for a substantial percentage of the thousands of Medicaid 

beneficiaries enrolled in the PCS program’’ by disregarding the requirements for enrollment.28 According to Timothy Wyant, the expert hired by the U.S. Attorney’s Office to calculate the measure 

of fraud, the total damages caused by the City’s conduct ranged 

from $990 million to $2.581 billion using conservative assumptions.29 The City of New York eventually settled this lawsuit with the Federal Government for $70 million.30

2. Overpayments to New York developmental centers 

In May 2012, the OIG released a report 31 that found develop- mental centers in the State received nearly $1.7 billion in Medicaid 

payments beyond the facilities’ reported costs in state fiscal year 

(SFY) 2009 alone.32 In September 2012, the Committee released a 

majority staff report motivated by the OIG report showing an estimate that New York State received roughly $15 billion in excess 

of reasonable costs over the past two decades from large Federal 

Medicaid over-payments received by certain State-operated institutions that treat and house patients with developmental disabilities.33 (This estimate calculates the difference between what Medicaid paid and the Committee’s estimate of what Medicare would 


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34Kaiser Family Foundation, Distribution of Medicaid Spending by Service, FY 2010, available at: http://www.statehealthfacts.org/comparetable.jsp?typ=4&ind=178&cat=4&sub=47. 35See OIG Report, supra note 31. 36Mary Beth Pfeiffer, State won’t release Wassaic resident data, Poughkeepsie Journal (Oct. 

29, 2010), available at: http://www.poughkeepsiejournal.com/article/20101029/NEWS01/ 

106070006/State-won-t-release-Wassaic-resident-data. 37Mary Beth Pfeiffer, At $4,556 A Day, N.Y. Disabled Care No. 1 in Nation, Poughkeepsie 

Journal (June 20, 2010), available at: http://www.poughkeepsiejournal.com/article/20100620/ 

NEWS01/6200374/At-4-556-day-N-Y-disabled-care-No-1-nation. 38 Id. 39 Id. 40See supra note 13. 41 Examining the Administration’s Failure to Prevent and End Medicaid Overpayments: Hearing Before the H. Comm. on Oversight & Gov’t Reform, 112th Cong. (2012) (testimony of Penny 

Thompson, Deputy Director, Center for Medicaid and CHIP Services). 42See OIG Report supra note 31. 43See supra note 33. 44 ‘‘[T]he Upper Payment Limit is the maximum a given State Medicaid program may pay a 

type of provider in the aggregate, Statewide in Medicaid fee-for-service. State Medicaid programs cannot claim Federal matching dollars for provider payments in excess of the applicable 

Continued 

have paid for these patients, which is the legal allowable limit. The 

calculation is explained in Appendix C). The minority, while not 

independently verifying the methodology, agrees the figure is in the 

billions of dollars. 

Although these facilities housed roughly 1,700 patients in 2009, 

total Medicaid payments to New York’s developmental centers were 

nearly equal to the total payments Indiana’s Medicaid program 

made for long-term care services during that year and were greater 

than the total Medicaid long-term care expenditures of 36 states.34

In SFY 2011, these State-operated developmental centers in New 

York charged the Medicaid program $5,118 per patient per day, or 

the equivalent of $1.9 million per year, for a single patient.35 One 

former New York State official dubbed developmental center residents ‘‘cash cows’’ because of the excessive payments received by 

the State on behalf of the residents.36

In 1991, Elin Howe, the then-Commissioner of the New York 

State Office of Mental Retardation and Developmental Disabilities, 

and New York Governor Mario Cuomo called for the closure of New 

York State developmental centers by 2000.37 According to Howe, 

‘‘[i]ndependent fiscal analyses of closure demonstrate that it is the 

most cost-effective course to take.’’ 38 Former New York State Senator Nicholas A. Spano, then-Chairman of the Committee on Mental Hygiene, concurred, recommending that ‘‘all developmental centers in the State of New York be permanently closed by the year 

2000.’’ 39 However, Governor Pataki scrapped the plan to close the 

developmental centers by 2000, in large part because the centers 

generated so much revenue for the State.40

The payment rates ratcheted up so high because of a formula 

New York first negotiated with the Centers for Medicare and Medicaid Services (CMS), formerly the Health Care Financing Administration, in 1984 and then amended several times since.41 The payment rate formula includes a factor that allows the developmental 

centers to maintain nearly two-thirds of the payment for a patient 

after the patient leaves the facility.42 Since most of the individuals 

moving out of the developmental centers transition into another 

setting financed by Medicaid, taxpayers are effectively paying twice 

for individuals who leave the developmental centers.43 In addition, 

CMS believes that the developmental center payments exceeded 

Medicaid upper payment limits established by Congress.44


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UPL. . . . To create an upper bound to Medicaid spending on fee-for-service hospital rates, Congress imposed an Upper Payment Limit based on what Medicare would have paid facilities for 

the same services.’’ (See Kip Piper, Medicaid Upper Payment Limits: Understanding Federal 

Limits on Medicaid Fee-for-Service Reimbursement of Hospitals and Nursing Homes, The Piper 

Report (April 25, 2012), available at: http://www.piperreport.com/blog/2012/04/25/medicaidupper-payment-limits-understanding-federal-limits-medicaid-fee-for-service-reimbursementhospitals-nursing-homes/.) 45See OIG Report, supra note 31. 46See supra note 41. 47See Committee Staff Report, supra note 1. 48See e.g., Stephen A. Moses, Medi-Cal Long-Term Care: Safety Net or Hammock?, Pacific 

Research Institute (January 2011) available at: http://www.centerltc.com/pubs/Medi-Cal-LTCSafetyNet_or_Hammock.pdf. 49David J. Armor and Sonia Sousa, Restoring a True Safety Net, National Affairs (Fall 2012), 

available at: http://www.nationalaffairs.com/publications/detail/restoring-a-true-safety-net. 

CMS shares a large share of the blame for permitting the overpayments to rise. According to OIG: 

CMS did not adequately consider the impact of State 

plan amendments on the developmental centers’ Medicaid 

daily rate. Specifically, CMS approved more than 35 State 

Plan Amendments related to the . . . rates, including 

some that pertained only to developmental centers. CMS 

reviewed the proposed amendments and, in some cases, 

asked the State for additional information to address concerns CMS had about the rate-setting methodology. However, CMS’s efforts did not prevent the rate from increasing to its current level.45

At a 2012 Committee hearing on these overpayments, CMS 

agreed that the payment rates were ‘‘excessive and unacceptable’’ 

and committed to reducing the payment rates to ‘‘about one-fifth of 

its current level.’’ 46 While CMS’s admission was a positive sign, it 

only occurred after the media and the Committee shed light on decades of Federal overpayments in excess of reasonable costs and argued strongly that these rates should be immediately corrected.47

3. Abuses of Medicaid eligibility rules in New York 

While Medicaid is commonly considered a program for the poor, 

middle-class and upper-class individuals often qualify for Medicaid 

long-term care benefits.48 Although not specific to New York, David 

Armor and Sonia Sousa of George Mason University have found 

that nearly 80 percent of the non-disabled elderly population on 

Medicaid is above the poverty line, and about half of this population is over 200 percent of the poverty line.49

A legal industry, dubbed ‘‘Medicaid estate planning,’’ helps Medicaid applicants and their children shelter savings and future inheritances by creatively arranging applicants’ finances to meet 

Medicaid eligibility rules. Medicaid estate planning, a nationwide 

phenomenon, has been prevalent in New York State for some time, 

as Ned Regan, the former State Comptroller in New York, explained in a 1996 article in City Journal: 

At an unknown cost, middle- and even upper-income 

families often take advantage of these Medicaid services to 

avoid the major costs of caring for their elders. To qualify 

for Medicaid, middle-income people often feign poverty by 

placing money in a trust, by transferring assets to children 

or a spouse, and by preserving in their own name only assets not counted in eligibility tests—houses and cars. 


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50 Ned Regan, Medicaid’s Fatal Attraction, City Journal (Winter 1996), available at: http:// 

www.city-journal.org/html/6_1_medicaids_fatal.html. 51For example, prior to the Deficit Reduction Act, Congress passed the Omnibus Budget Reconciliation Act (OBRA) in 1993. One of the key provisions of OBRA, which had a few provisions 

to address the problem of Medicaid estate planning, was to require States to recover Medicaid 

spending on behalf of beneficiaries from their estates after death. 52 Centers for Medicare and Medicaid Services, Important Facts for State Policymakers: Deficit Reduction Act (January 8, 2008), available at: http://www.cms.gov/Regulations-andGuidance/Legislation/DeficitReductionAct/downloads/TOAbackgrounder.pdf. 53 Id. 54 Examining Abuses of Medicaid Eligibility Rules: Hearing Before the H. Comm. on Oversight 

& Gov’t Reform, 112th Cong. (2011). 55 Between 2007 and 2011, median household income was $87,187 in Suffolk County compared to a median household income of $56,951 in the State. Between 2007 and 2011, 5.7% of persons 

in Suffolk County were below the poverty level compared to 14.5% of people in the State. See 

United States Census Bureau, U.S. Dep’t. of Commerce, State and County Quick Facts, Suffolk 

County New York, available at: http://quickfacts.census.gov/qfd/states/36/36103.html (last visited 

February 2013). 

These middle-class Medicaid recipients are yet another addition to Medicaid’s powerful political base.50

Congress has attempted to reduce the problem of improper Medicaid estate planning several times over the past few decades.51

Most recently, as part of the Deficit Reduction Act (DRA) in 2005, 

Congress addressed areas related to transfers of assets for less 

than fair market value.52 One of the key provisions of the DRA imposed a longer look-back period, which is a period of time that 

states are supposed to use to review whether an individual transferred assets to another person or party for less than fair market 

value in order to obtain Medicaid eligibility. The DRA lengthened 

the look-back period from 36 months to 60 months.53

During a hearing on September 21, 2011, the Committee’s Subcommittee on Health Care, District of Columbia, Census, and National Archives examined abuses of Medicaid eligibility rules.54 Although the DRA has been in place for many years, Janice Eulau, 

assistant administrator of the Medicaid Services Division at the 

Suffolk County Department of Social Services, testified about the 

ease with which relatively wealthy New York residents, can protect 

their assets by enrolling in Medicaid and how roughly 60 percent 

of Medicaid applicants in Suffolk County 55 engage in estate planning to gain program eligibility: 

As a long-time employee of the local Medicaid office, I 

have had the opportunity to witness the diversion of applicants’ significant resources in order to obtain Medicaid coverage. It is not at all unusual to encounter individuals and 

couples with resources [beyond exempt resources] exceeding $500,000, some with over $1 million. There is no attempt to hide that this money exists; there is no need. 

There are various legal means to prevent those funds from 

being used to pay for the applicant’s nursing home care. 

Wealthy applicants for Medicaid’s nursing home coverage 

consider that benefit to be their right, regardless of their 

ability to pay themselves. . . . [I]ndividuals with resources 

above and beyond the level prescribed by law should not 

be allowed to fund their children’s inheritance while the 

taxpayers fund their nursing home care. I strongly believe 

that this is not a partisan issue. I also believe in the merits of the Medicaid program, but feel just as deeply that 


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56 Examining Abuses of Medicaid Eligibility Rules: Hearing Before the H. Comm. on Oversight 

& Gov’t Reform, 112th Cong. (2011) (testimony of Janice Eulau, Assistant Administrator for 

Medicaid, Suffolk County, New York Department of Social Services). 57 Id. 58 Allan Rubin and Harold Rubin, Spousal Refusal to Pay for Nursing Home Costs, 

therubins.com (Feb. 7, 2009), available at: http://www.therubins.com/legal/refusal.htm. 59 Anemona Hartocollis, Full Wallets, but Using Health Program for Poor, New York Times 

(December 10, 2010), available at: http://www.nytimes.com/2010/12/12/nyregion/12 

medicaid.html?pagewanted=all. 60 Id. 61 Id. 62See supra note 56. 63 New York State 2013–2014 Executive Budget Matrix, (viewed February 12, 2013), available 

at: http://www.health.ny.gov/health_care/medicaid/redesign/docs/2013-14_exec_budget_matrix.xls 64 Russ Beuttner, Reaping Millions in Nonprofit Care for Disabled, New York Times (August 

2, 2011), available at: http://www.nytimes.com/2011/08/02/nyregion/for-executives-at-grouphomes-generous-pay-and-little-oversight.html?pagewanted=all. 

these issues regarding resource diversion need to be addressed.56

Eulau also testified about a technique called ‘‘spousal refusal,’’ a 

provision of the Medicare Catastrophic Coverage Act of 1988 that 

is being misused in New York.57 Under spousal refusal, a couple 

shifts assets from a sick or disabled spouse to a healthy spouse in 

order to ‘‘artificially impoverish’’ the sick or disabled spouse and 

qualify him or her for Medicaid. The healthy spouse then invokes 

spousal refusal and declines to provide financial support for the 

spouse who is on Medicaid.58 Moreover, under spousal refusal, income earned by the healthy spouse is exempt from being considered available to the impoverished spouse. 

According to the New York Times, ‘‘[w]hile many state and local 

governments do not openly acknowledge the spousal refusal option, 

New York City actually provides a form letter for it.’’ 59 In 2009, 

more than 1,200 people in New York City invoked spousal refusal, 

a significant increase from prior years.60 The Times article also indicated that the City reviewed spousal refusal applications to recover money, but only $3.7 million was recovered in 2009, or less 

than $3,000 on average for each individual invoking spousal refusal.61 Eulau testified that most married people in Suffolk County, 

New York, who apply for Medicaid use spousal refusal, and she 

confirmed to Committee staff that the use of this technique has 

grown over time.62 Governor Cuomo’s recently introduced 2013– 

2014 executive budget proposes the elimination of spousal refusal 

with an estimated annual State savings of $137 million.63

4. Excessive salaries paid to executives of Medicaid-funded organizations 

The Committee has found that Federal taxpayers have subsidized lavish lifestyles for many executives in organizations that 

receive almost all of their funding through Medicaid. The Committee’s oversight work in this area was informed by an August 2011 

New York Times article that exposed how top executives at the 

Young Adult Institute (YAI)—a nonprofit that runs group homes 

for the developmentally disabled—used Medicaid funds to lease 

luxury cars, to pay tuition bills and living expenses for their children, and to reward themselves with generous compensation packages.64 In fact, four executives at the YAI (Phillip Levy, Joel Levy, 

Tom Dern, and Stephen Freeman) each received compensation in 


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65This information obtained from publicly available 990 forms. 66See Appendix B for Committee’s data on salaries for executives at nonprofits funded by 

Medicaid in New York State. 67See Abused and Used, New York Times, available at http://www.nytimes.com/interactive/ 

nyregion/abused-and-used-series-page.html. 68Danny Hakim, A Disabled Boy’s Death, and a System in Disarray, New York Times (June 

5, 2011), available at: http://www.nytimes.com/2011/06/06/nyregion/boys-death-highlights-crisisin-homes-for-disabled.html?pagewanted=all&_r=0. 69 Id. 70 Id. 71See supra note 67. 

excess of $1 million in 2008, with money derived almost entirely 

from Medicaid.65

While YAI may be the worst offender, a number of Medicaid-financed organizations in New York paid exceptionally high executive salaries funded with tax revenue. A review conducted by the 

Committee of a sample of Medicaid-financed organizations found 

that at least 15 executives received yearly compensation exceeding 

$500,000 and more than 100 other executives received yearly compensation exceeding $200,000 per year.66 The Committee’s study 

was not a comprehensive or exhaustive search of compensation 

packages received by top employees at Medicaid-funded organizations, but rather a simple search of publicly available IRS 990 

Forms for 2008 and 2011. 

IV. PATIENT ABUSE WITHIN THE DEVELOPMENTALLY DISABLED SYSTEM

IN NEW YORK

In 2011 and 2012, the New York Times ran a series titled— 

‘Abused and Used’ chronicling how the large expenditures New 

York’s Medicaid program do not necessarily translate into quality 

care received by the developmentally disabled.67 For example, despite the large payments received by the State for the residents of 

developmental centers, the Times reported that patient care is 

often substandard: 

[T]he institutions are hardly a model: Those who run 

them have tolerated physical and psychological abuse, 

knowingly hired unqualified workers, ignored complaints 

by whistle-blowers and failed to credibly investigate cases 

of abuse and neglect, according to a review by The New 

York Times of thousands of state records and court documents, along with interviews of current and former employees. Since 2005, seven of the institutions have failed 

inspections by the State Health Department, which oversees the safety and living conditions of the residents.68

According to the New York Times, New York State consistently 

failed to take complaints from employees of the developmental centers or family members of residents seriously.69 According to the 

Times, employees who reported problems experienced retaliation by 

other employees, and the length of time it took to settle complaints 

disincentivized employees from filing complaints in the first 

place.70 According to the Times, a number of residents suffered significant verbal, emotional, and physical abuse at the developmental 

centers.71 Several residents at New York’s developmental centers, 

and at numerous Medicaid-financed group homes across the State, 

have died directly because of employee incompetence or negligence, 


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72 Id. 73Mary Beth Pfeiffer, Caregivers of Mentally Disabled Keep Jobs, even in cases of abuse, neglect, Poughkeepsie Journal (September 17, 2011), available at: http://www. 

poughkeepsiejournal.com/article/20110918/PROMO/109180384/Journal-investigation-Caregiversmentally-disabled-keep-jobs-even-cases-abuse-neglect. 74 Id. 75Danny Hakim, At State-Run Homes, Abuse and Impunity, New York Times (March 12, 

2011), available at: http://www.nytimes.com/2011/03/13/nyregion/13homes.html?pagewanted=all. 76 Id. 77 Id. 78 Id. 79 Honest services fraud is Federal crime defined in Skilling v. United States as ‘‘fraudulent 

schemes to deprive another of honest services through bribes or kickbacks supplied by a third 

party who has not been deceived.’’ (Skilling v. United States 130 S. Ct. 2896, (2010)) 80 Espada is expected to face a retrial on four other counts of theft, fraud and conspiracy on 

which the jury failed to agree after his six-week trial. See Mosi Secret, Ex-State Senator Guilty 

and in some cases even from manslaughter at the hands of their 

caretakers.72

The Poughkeepsie Journal reported that a large part of the problem of poor resident care appears to be the difficulty of firing incompetent or neglectful employees: 

Since 2007, the state has tried to fire employees of a 

dozen local facilities for the developmentally disabled 20 

times. It has failed 18 times. Quite simply, it’s nearly impossible to get fired from state-run facilities that care for 

people with autism, Down Syndrome and other mental disabilities, according to a Poughkeepsie Journal review of 

1,900 pages of disciplinary documents involving 98 group 

homes and six institutions statewide. Just 2 percent of 

cases resulted in termination, with workers keeping jobs 

even in cases of serious alleged abuse and neglect.73

The Poughkeepsie Journal found that workers who left disabled 

people alone in a running vehicle or outside in the rain kept their 

jobs. Additionally, workers who stole State property, brought drug 

paraphernalia to work, or harassed disabled residents almost always kept their jobs.74 An article in the New York Times suggests 

that the Civil Service Employees Association (CSEA) is partially to 

blame for this problem.75 According to the New York Times, ‘‘the 

union’s approach—contesting just about every charge leveled at a 

worker—contributed to a system in which firings of even the most 

abusive employees are rare.’’ 76 Office of People with Developmental 

Disabilities (OPWDD) former spokesman Herm Hill said OPWDD’s 

hands were often tied in cases against abusive workers because of 

the disciplinary and arbitration rules involving the workers’ 

union.77 The union’s representation of repeat offenders made it possible for employees to rack up serious offenses before losing their 

jobs.78

V. PAST HEALTH CARE-RELATED CORRUPTION BY ELECTED OFFICIALS

In the last decade, at least half a dozen elected State representatives, including two State Senate Majority leaders, have been convicted of theft, bribery, or honest services fraud,79 related to health 

care: • On May 14, 2012, former New York State Senate Majority 

Leader Pedro Espada was convicted in Federal court on four counts 

of theft for stealing over $500,000 from Soundview, the nonprofit 

health care network he founded in the Bronx which received Federal funding in excess of $1 million per year.80 Federal Medicaid 


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of Theft from Nonprofit, New York Times (May 14, 2012), available at: http://www.nytimes.com/ 

2012/05/15/nyregion/ex-senator-espada-guilty-of-embezzling-from-soundview-health-network. 

html?pagewanted=all. 81 Id. 82 Julia Marsh and Dan Mangan, Pedro’s board stiffs were his puppets, New York Post (March 

21, 2012), available at: http://www.nypost.com/p/news/local/bronx/pedro_ 

board_stiffs_EjyOnu7lWNZZyXtXqtzpBM. 83 Joseph L. Bruno, Times Topics, New York Times (updated May 4, 2012) available at http:// 

topics.nytimes.com/top/reference/timestopics/people/b/joseph_l_bruno/index.html?inline=nyt-per 

(‘‘The indictment, unsealed in Federal District Court in Albany, came nearly six months after 

a Federal appeals court vacated Mr. Bruno’s previous conviction because of a ruling in a separate case by the United States Supreme Court that undermined the government’s legal claims 

against Mr. Bruno, a Republican from Rensselaer County. But the appeals court said Mr. Bruno 

could be retried on different charges.’’) 84See supra note 79. 85 Benjamin Weiser, Former State Senator Is Sentenced to 7 Years in Vast Bribery Case, New 

York Times (April 26, 2012), available at: http://www.nytimes.com/2012/04/27/nyregion/carlkruger-sentenced-to-seven-years-in-corruption-case.html. 86 Id. 87Liz Krueger, Former Senator Guy Velella: Convicted Felon, $80,000-A-Year Public Pensioner, Gotham Gazette (October 25, 2004), available at: http://www.gothamgazette.com/article/ 

fea/20041025/202/1156. 88 Id. 89 Clifford J. Levy and Christopher Drew, In Albany, Ally of Insurers Profits From Them, New 

York Times (February 4, 2011), available at: http://www.nytimes.com/2001/02/04/nyregion/inalbany-ally-of-insurers-profits-from-them.html. 90David M. Halbfinger and William Rashbaum, Ex-Assemblyman From Queens Dies In Federal Prison, New York Times (January 7, 2011), available at: http://query.nytimes.com/gst/ 

fullpage.html?res=9D02EFD7143AF934A35752C0A9679D8B63. 

money that was intended to be used for health care for the city’s 

poorest residents instead paid for private family parties, school tuition, luxury car payments and $100,000 in lobster, sushi and other 

meals.81 Additionally, Espada packed the Soundview board and 

staff with members of his own family and close personal friends.82

• In May of 2012, former New York Senate Majority Leader Joseph Bruno was charged with two counts of fraud for accepting 

$440,000 from a businessman who managed the assets of a health 

and welfare fund and sought the then-Senator’s influence in legislative matters.83

• Former New York State Senator Carl Kruger was sentenced to 

seven years in prison after pleading guilty to two counts of conspiracy to commit honest services fraud 84 and two counts of conspiracy to commit bribery.85 Mr. Kruger accepted bribes from two 

hospital executives, a prominent lobbyist and a healthcare consultant in exchange for taking official action on behalf of those parties, 

including sponsoring and supporting legislation, favorably directing 

state grants, and writing to State officials in his capacity as State 

legislator.86

• In 2005, former New York State Senator Guy Velella pled 

guilty to one count of bribery and was sentenced to one year in 

prison for the felony conviction.87 He was charged with a 25-count 

indictment alleging the solicitation of $250,000 in bribes for steering public works contracts to those who paid the bribes.88 During 

the 1990s, his law firm was given hundreds of thousands of dollars 

in legal work by large insurance companies while he headed the 

State Senate Committee that oversaw legislation affecting them.89

• In 2004, New York State Assemblyman Anthony Seminerio 

pled guilty to a single fraud count for influence peddling and was 

sentenced to six years in prison.90 Seminerio admitted to promoting 

the interests of Jamaica Hospital Medical Center, from which he 

received over $300,000 for obtaining State financing and lobbying 


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91 Id. 92Fredric U. Dicker, It Pays (4.4 million) to Hire Bruno’s Son, New York Post (April 25, 2005), 

available at: http://www.nypost.com/p/news/item_Usy1VfKTPyNavkRCN2mb4K. 93 Id. 94 Id. 95Fredric U. Dicker, Pol Son Burned—Right & Left Agree: Bruno Kin’s Deal Is Wrong, New 

York Post (April 26, 2005), available at: http://www.nypost.com/p/news/item_ 

IwRwuubUpAd1M23lYXtDCK. 96Paul Stavis, NY too weak on Medicaid fraud, Newsday (April 1, 2011), available at: 

http://www.newsday.com/opinion/oped/stavis-ny-too-weak-on-medicaid-fraud-1.2795786. 97See id. Stavis states that New York State law contains a loophole that prevents the State 

from prosecuting certain types of Medicaid fraud, which then necessitates the Federal Government’s intervention when such misappropriation crimes are committed. Stavis characterized the 

inability of New York State to prosecute and the resulting need for Federal involvement as an 

‘‘embarrassment.’’ Although Stavis drafted legislation to close the loophole during his tenure as 

counsel for the State, Stavis writes that the New York State legislature refused to pass this 

legislation. 98 Id. In addition to outright fraudulent activities, New York State historically has had numerous cases of fiscal abuse regarding Medicaid. In an outstanding example of fiscal abuse, Stavis 

cites instances where providers diverted Medicaid funds to make donations to charities in foreign countries, give nearly $2 million per year to a house of worship, fund religious schools, and 

pay excessively high salaries to executives at nonprofit corporations. 99 Jacob Gershman, State Ignored Call to Probe Espada Clinics, Wall Street Journal (December 17, 2010), available at: http://online.wsj.com/article/SB100014240527 

48703395204576023843352497746.html. 

legislators on behalf of the hospital’s efforts to take over other hospitals.91

Outright corruption and favoritism has occurred in New York. 

For example, Kenneth Bruno, son of former New York State Senate 

Majority Leader Joseph Bruno, was hired as a lobbyist for the New 

York Ambulette Coalition on the same day that the State Legislature eliminated $4.4 million in Medicaid transportation funding 

that would have gone to the Coalition’s members.92 Within ten 

days, the funding was restored ‘‘at the insistence of the Senate,’’ according to a senior State official.93 Bruno reportedly called his father’s top aides personally to ask them to restore the funds.94

Leaders throughout New York State voiced their disapproval about 

Bruno’s lobbying deal. Conservative Party Leader Michael Long 

said the deal ‘‘shows the system is broken,’’ and Rachel Leon, executive director of Common Cause, called the action by Bruno’s son 

‘‘an instant symbol of what’s wrong in Albany.’’ 95

VI. ALLEGATIONS OF PROBLEMS WITH STATE OVERSIGHT OF THE

MEDICAID PROGRAM

Several whistle-blowers within the New York State health care 

system have brought to light serious failures indicating that the 

State bureaucracy historically failed to adequately police Medicaid 

waste, fraud and abuse. Paul F. Stavis, counsel to three different 

New York State health agencies during his 28-year career, alleged 

that ‘‘anti-fraud efforts in New York have not been taken seriously 

by the State’s executive agencies.’’ 96 In an April 2011 article in 

Newsday, Stavis cited multiple examples of Medicaid-related fiscal 

abuse 97 and how both the State’s Department of Health (DOH) and 

the State’s Office of the Medicaid Inspector General (OMIG) looked 

the other way when faced with evidence of Medicaid fraud.98

According to Stavis, New York State continued to pay providers 

who were suspected of abusing the Medicaid system. For instance, 

the DOH gave a $1 million grant to Pedro Espada’s nonprofit, 

Soundview, even after seeing evidence of ongoing fraud.99 In fact, 

Stavis brought evidence of Espada’s illegal activities to the attention of the DOH in 2005 and OMIG in 2007, years before the 


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100 Id. 101See Stavis, supra note 96. 102 Is Government Adequately Protecting Taxpayers from Medicaid Fraud?: Hearing Before 

the H. Comm. on Oversight & Gov’t Reform, 112th Cong. (2012) (testimony of Gabriel Feldman, 

Local Medical Director, New York Personal Care Services Program). 103 Id. 104First Amended Complaint-In-Intervention of Plaintiff-Intervenor United States of America, 

United States of America ex. rel. Dr. Gabriel Feldman v. The City of New York, 09 Civ. 8381 

(JSR) (S.D.N.Y. 2011). 105 Id. 106See supra note 102. 107 Id. 108Letter from Gabriel Feldman to H. Comm. on Oversight & Gov’t Reform, Response to 

Questions for the Record (May 10, 2012) (on file with Committee). 109 Id. 110 Id. 

former State Senate Majority leader was convicted of Medicaid 

fraud. No action was taken by either State office.100 The illegal 

payments continued until 2011, when the Federal Government ordered the payments stopped and commenced criminal proceedings 

against Espada.101

Earlier, this report highlighted the suit Dr. Gabriel Feldman 

brought against the City of New York in 2009.102 As a medical director, Feldman determined which individuals met the qualifications for Medicaid-funded home health care services. Despite firm 

criteria outlining program eligibility, Feldman encountered ‘‘tremendous pressure’’ from advocacy groups, politicians, and family 

members of clients to approve service requests for individuals who 

did not meet the qualifications.103 When he refused to grant such 

requests, Feldman found that his decisions were ‘‘knowingly, intentionally and routinely being overridden without legal basis’’ 104 in 

order ‘‘to admit as many clients as possible who apply for the PCS 

Program regardless of his or her condition, fitness or qualification 

for the program.’’ 105 In testimony before the Committee, Feldman 

stated that pre-2011 ‘‘a pervasive culture of non-accountability and 

non-compliance to PCS State regulations made it simply far too 

easy for local social service offices in New York City to spend billions in taxpayer money without regard to common sense oversight, 

regulations of the State, or patient safety concerns.’’ 106

During the Committee’s hearing, Feldman used the term ‘‘Medicaid industrial complex’’ 107 to refer ‘‘to the New York State Government, the healthcare providers and the unions essentially operating as one unified entity and making any enforcement and recovery actions largely unsuccessful.’’ 108 Feldman further explained 

that the pre-2011 ‘‘system of quality assurance, oversight, and rate 

setting was completely dysfunctional’’ and there were and still are 

‘‘insufficient resources and staff in the [Medicaid] Inspector General’s Office and in New York City’s Human Resource Administration, devoted to enforcing fiscal discipline and fraud oversight in 

the system.’’ 109 Like Stavis, Feldman also indicts the DOH for having ‘‘utterly failed in their oversight functions.’’ 110

VII. REFORMS IN THE LAST TWO YEARS AND ADDITIONAL CONCERNS

During his first month as New York’s Governor, Andrew Cuomo 

called for Medicaid reform, stating, ‘‘New York’s bloated Medicaid 

program, which spends at a rate more than twice the national average, must be reformed to help our state begin to make ends 


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111Governor Andrew M. Cuomo, Press Release, Governor Cuomo Issues Executive Order Creating Medicaid Redesign Team (January 5, 2011) available at http://www.governor.ny.gov/press/ 

01052011medicaid. 112 Id. 113Governor Andrew M. Cuomo, Press Release, Governor Cuomo Announces that New York 

Submits Federal Waiver to Invest $10 Billion in Medicaid Redesign Team Savings to Transform 

the State’s Health Care System (August 6, 2012), available at: http://www.governor.ny.gov/press/ 

08062012-federal-waiver-health-care. 114 New York 2013–2014 Executive Budget, NY Rising, (January 22, 2013), available at: 

http://publications.budget.ny.gov/eBudget1314/fy1314littlebook/BriefingBook.pdf. 115See supra note 108. 116Laura Nahmias, Budget Hole Seen After Loss of Aid, Wall Street Journal (January 24, 

2013), available at: http://online.wsj.com/article/SB100014241278873245393 

04578262311978071202.html. 117 Id. 118Governor Andrew M. Cuomo, State of New York, Executive Order 38 (Jan. 18, 2012), available at: www.governor.ny.gov/executiveorder/38. 

meet.’’ 111 The administration of Governor Cuomo has taken positive steps to reform some of the problems discussed in Section III 

and Section IV of this report. These efforts have been dubbed by 

the New York Post as ‘‘a break with past efforts’’ because of the 

support he obtained from the Service Employees International 

Union and the hospital association.112

New York State implemented the first-in-the-nation statutory 

‘‘global’’ spending cap. This State spending cap imposes an annual 

limit on the growth of State Medicaid expenditures, not to exceed 

the medical Consumer Price Index. The cap remains in effect, even 

if the number of eligible Medicaid beneficiaries rises. In FY 2012– 

2013, New York experienced a 4 percent increase in Medicaid 

spending from the previous year, one of the nation’s lowest rates 

of increase. New York State projects that their newly-implemented 

Medicaid reforms will save the Federal Government $17 billion 

over five years.113

In the first year of the Cuomo administration, the State started 

a phase-out of fee-for-service home care, an action which may ensure greater integrity in the PCS program. This effort began in 

New York City, where the State converted the City’s fee-for-service 

PCS program to the State’s Medicaid Managed Long Term Care 

program.114 According to Dr. Feldman, there have been some additional measures ‘‘taken by New York City and New York State to 

ensure proper compliance with Federal and State regulations’’ for 

the PCS program.115

New York and CMS have entered negotiations about reducing 

the developmental center payment rate through the Medicaid State 

Plan Amendment process.116 According to the Wall Street Journal, 

‘‘New York has agreed to give up about $800 million in payments 

to the developmental centers.’’ 117 CMS is currently reviewing a 

State Plan Amendment submitted by New York that would reduce 

the payments received by New York through the State-operated developmental centers. 

On January 18, 2012, Governor Cuomo issued an executive order 

to address the problem of outrageous executive compensation packages at taxpayer-financed organization.118 The order recognized 

that ‘‘New York has an ongoing obligation to ensure that taxpayers’ 

dollars are used properly, efficiently and effectively to improve the 

lives of New Yorkers and our communities,’’ and that ‘‘in certain 

instances providers of services that receive State funds or State-authorized payments have used such funds to pay for excessive administrative costs and outsized compensation for their senior exVerDate Mar 15 2010 01:51 Mar 09, 2013 Jkt 029006 PO 00000 Frm 00024 Fmt 6659 Sfmt 6602 E:\HR\OC\HR011.XXX HR011

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119 Id. 120 Id. 121 Id. 122 Carl Campanile, Andy to end ‘rich’ home-care ruse, New York Post (March 7, 2011), available at: http://www.nypost.com/p/news/local/andy_to_end_rich_home_care_ 

ruse_UO5gsIz0Fcat1zrZ1XwXdP. 123Sanford Altman, Better With Age: NY seniors win as Legislature drops provision, Times 

Herald-Record (April 10, 2012), available at: http://www.recordonline.com/apps/pbcs.dll/article 

?AID=/20120410/BIZ/204100328. 124Memorandum in Support, Health and Mental Hygiene Article VII Legislation, 2013–2014 

New York State Executive Budget available at http://publications.budget.ny.gov/eBudget1314/ 

fy1314artVIIbills/HMH_ArticleVII_MS.pdf. 125Medicaid Estate Recovery Collections, U.S. Department of Health and Human Services 

(September 2005), available at: http://aspe.hhs.gov/daltcp/reports/estreccol.htm#table1. 126Michael Gormley, The Clean Up Albany Act of 2011 Proposed, Huff Post New York (June 

3, 2011), available at: http://www.huffingtonpost.com/2011/06/04/the-clean-up-albany-act-o_n_ 871329.html. 127 Jisha V. Dymond, Governor Cuomo Signs Ethics Bill, Corporate Political Activity Law Blog 

(August 16, 2011), available at: http://www.corporatepoliticalactivitylaw.com/index.php/2011/08/ 

governor-cuomo-signs-ethics-bill/. 

ecutives.’’ 119 The Governor’s order directed that payments to ‘‘providers of services that receive reimbursements directly or indirectly’’ from State agencies ‘‘shall not be provided for compensation 

paid or given to any executive by such provider in an amount 

greater than $199,000.’’ 120 The Governor’s order also stated: ‘‘A 

provider’s failure to comply with such regulations established by 

the applicable State agency shall, in the commissioner’s sole discretion, form the basis for termination or non-renewal of the agency’s 

contract with or continued support of the provider.’’ 121

Governor Cuomo proposed eliminating spousal refusal in New 

York in his first and second budget.122 However, powerful interest 

groups, especially the elder law bar, lobbied strongly to prevent the 

change. The interest groups’ opposition proved successful, and New 

York did not enact legislation to end the abuse of spousal refusal.123 In his 2013–2014 budget proposal, Governor Cuomo has 

again proposed changes that would reduce the ability of individuals 

in New York to abuse the spousal refusal technique by passing inappropriate private costs onto taxpayers.124

Through a series of recommendations by Cuomo’s Medicaid Redesign Team and implemented by the State, New York has expanded 

the definition of an estate for the purpose of estate recovery. The 

State also centralized responsibility for Medicaid estate recovery 

process in OMIG. Like most States, New York has not historically 

been aggressive recovering from estates of individuals who utilize 

Medicaid to pay for their long-term care services. In 2004, only 0.8 

percent of Medicaid expenditures on nursing homes was recovered 

nationally, and only 0.5 percent of Medicaid expenditures on nursing homes was recovered by New York.125 The hope is that these 

reforms will make it easier for New York to recover from the estates of individuals who have inappropriately used Medicaid to pay 

for long-term care services and supports. 

In 2011, after what was dubbed ‘‘an unprecedented string of corruption cases’’ by the Huffington Post New York,126 the State legislature passed the Public Integrity Reform Act of 2011.127 The new 

law requires members of the State legislature to accurately disclose 

any outside income, as well as the names of clients. It also created 

a new Joint Commission on Public Ethics, with the power to investigation lawmakers, their staff and members of the executive 


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128 Id. 129Danny Hakim and Thomas Kaplan, As Ethics Measure Emerges, So Do Questions About 

Its Teeth, New York Times (June 7, 2011), available at: http://www.nytimes.com/2011/06/08/ 

nyregion/ny-ethics-bill-may-lack-some-teeth.html. 130Id. 131 Andrew Cuomo’s worthy attempt to fix shameful, dangerous state programs for the disabled, New York Daily News (May 8, 2012), available at: www.nydailynews.com/opinion/andrewcuomo-worthy-attempt-fix-shameful-dangerous-state-programs-disabled-article-1.1074021. 132Sundram is a national expert on institutions and programs for the mentally disabled. 133Memorandum for Program Bill #35, New York Governor’s Program Bill 2012, available at: 

www.governor.ny.gov/assets/documents/GPB35-PEOPLE-WITH-SPECIAL-NEEDS-MEMO.pdf. 134Danny Hakim, State Faults Care for the Disabled, New York Times (Mar. 22, 2012), available at: www.nytimes.com/2012/03/22/nyregion/new-york-state-draft-report-finds-needless-riskin-care-for-the-disabled.html?pagewanted=all&_r=0). 135 New York State Office of the Medicaid Inspector General, Restricted, Terminated or Excluded Individuals or Entities, available at: www.omig.state.ny.us/data/content/view/72/52/). 136 New York Office for People With Developmental Disabilities, Commissioner’s Page, available at: www.opwdd.ny.gov/opwdd_about/commissioners_page/accomplishments). 137 New York State Office for People with Developmental Disabilities, Joint Agreement Announced Between OPWDD and State Police to Reform Abuse Reporting System (Aug 18, 2011), 

available at: www.opwdd.ny.gov/news_and_publications/opwdd_news/joint_agreement state_ police_abuse_reporting_system. 138 Justice Center For the Protection of People with Special Needs, available at: 

www.governor.ny.gov/Justice4SpecialNeeds/home. 

branch for legal and ethical violations.128 According to the New 

York Times, there are ‘‘questions whether the reforms would be 

weaker than expected.’’ 129 For instance, the Times points out that 

a 12–2 vote of the new Commission in favor of an investigation 

could still lose.130

New York State is taking steps to improve the protection and 

safety of disabled children and adults in the State’s care.131 In 

2011, Governor Cuomo appointed a special advisor, Clarence 

Sundram,132 to identify gaps in care that create a potentially 

harmful environment for disabled persons.133 The resulting analysis became the basis for the reforms. The Cuomo reform efforts 

forced the resignations of top officials in the Office for People with 

Developmental Disabilities (OPWDD) and the Commission on 

Quality of Care and Advocacy for Persons with Disabilities.134

New initiatives include enhanced training and recruitment and 

higher employment standards. Strict policies regarding abuse and 

neglect were adopted, with immediate suspensions of employees in 

substantiated cases of physical and sexual abuse. New hires now 

face drug testing, comprehensive background checks, and employment screening through an Excluded Provider Registry.135

The hope is that the reorganizing of management will better integrate services with law enforcement and separate operations 

from investigations.136 All OPWDD investigators receive law enforcement investigative training, and, starting in 2012, new State 

police cadets receive training to support OPWDD standards.137

Although long overdue, New York State’s current policy is to pursue termination of employees found to have committed egregious 

abuse and neglect of patients. OPWDD pushed for and obtained 

CSEA’s agreement to negotiate a standardized table of penalties to 

remove arbitrator discretion when an employee is found to have 

committed a serious act of abuse or neglect. New State mandates 

require providers report abuse and neglect cases to law enforcement and the State, and to verify backgrounds of job applicants 

against a database the State will maintain. 

The Cuomo administration and the New York legislature also established the Justice Center for the Protection of People with Special Needs.138 When it is in place, the Justice Center will maintain 


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139 New York Governor Andrew Cuomo Press Office, Governor Cuomo and Legislative Leaders 

Announce Agreement on Legislation to Protect People with Special Needs and Disabilities (June 

17, 2012), available at: www.governor.ny.gov/press/061712justice4specialneedsagreement. 140Id. 141 New York Governor Andrew Cuomo Press Office, Governor Cuomo Announces New Leadership for State Agencies that Serve disabled New Yorkers (Mar. 7, 2011), available at: 

www.governor.ny.gov/press/leadership. 142 New York Office for People with Developmental Disabilities, Commissioner’s Page, available at: www.opwdd.ny.gov/opwdd_about/commissioners_page. 143Letter from Sue Kelly, Associate Regional Administrator, Division of Medicaid and Children’s Health, CMS to Donna Frescatore, Deputy Commissioner, NY State Department of 

Health, (July 13, 2010) (on file with Committee). 144Letter from Darrell Issa, Chairman of House Committee on Oversight and Government Reform, and Trey Gowdy, Chairman of House Committee on Oversight and Government Reform 

Subcommittee on Health Care, District of Columbia, Census and National Archives. 145 Email from New York Counsel to Committee on Oversight and Government Reform staff 

(September 4, 2012) (on file with Committee). 146Office of the New York State Medicaid Inspector General, Mission Statement, available at 

http://www.omig.ny.gov/data/content/blogcategory/20/192/ 

a 24-hour hotline to route calls regarding allegations of abuse and 

neglect. An in-house special prosecutor and inspector general at the 

Justice Center will be primarily responsible for the investigation of 

serious allegations of a criminal nature.139 The Center incorporates 

many of the responsibilities of the defunct Commission on Quality 

of Care and Advocacy for Persons with Disabilities.140

The Committee minority is greatly encouraged by the systemic 

overhaul of New York State’s care for the developmentally disabled 

led by the OPWDD. The Cuomo administration engaged new leadership to address the mismanagement plaguing the system.141 The 

new OPWDD appears to be focused on real improvements with the 

Commissioner providing reports detailing areas of progress at the 

six-month, one-year and eighteen-month intervals.142

While those and other reforms are significant steps forward, the 

Committee has some ongoing concerns. 

CMS first inquired about the excessive payment rates in 2010, 

over two-and-a-half years ago.143 CMS and New York have finally 

agreed to an audit, scheduled to begin this month, to uncover the 

magnitude of the excessive developmental center payments. Correcting overpayments of this magnitude should not be a multi-year 

process. 

The Committee is concerned by the lack of State cooperation with 

the Committee’s oversight in this area. On July 19, 2012, Chairman Issa and Congressman Gowdy sent a letter to Nirav Shah, the 

Commissioner of New York’s Department of Health requesting information related to the developmental center overpayments.144

The Committee received indication throughout the next few weeks 

that the State was going to provide the requested information. 

However, the State ultimately decided not to cooperate with the 

Committee’s request by citing that providing the information would 

not be in the State’s best interests.145 To date, the State of New 

York has not supplied any of the requested information to the Committee. 

The Committee is also concerned by recent allegations relating to 

the State’s OMIG, the agency tasked with ‘‘preventing and detecting fraudulent, abusive, and wasteful practices within the Medicaid 

program and recovering improperly expended Medicaid funds.’’ 146

In November 2012, the Albany Times Union ran a story based 

largely on the reporter’s interviews with ten current and former 


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147 James M. Odato, Fraud agency called adrift: Office of Medicaid Inspector General is ineffective and mismanaged, critics say, Times Union (November 19, 2012), available at http:// 

www.timesunion.com/local/article/Fraud-agency-called-adrift-4047131.php 148 Id. 149 Id. 150 Id. 151See Nina Bernstein, Under Pressure, New York Moves to Soften Tough Medicaid Audits, 

New York Times, (March 18, 2012), available at: http://www.nytimes.com/2012/03/19/nyregion/ 

new-medicaid-inspector-general-supports-less-adversarial-audits.html?pagewanted=all and supra 

note 148. 152See Nina Bernstein, Under Pressure, New York Moves to Soften Tough Medicaid Audits, 

New York Times, (March 18, 2012), available at http://www.nytimes.com/2012/03/19/nyregion/ 

new-medicaid-inspector-general-supports-less-adversarial-audits.html?pagewanted=all. 153 Id. 154 Jacob Gershman, Medicaid Fraud Unit Falls Short, Wall Street Journal (January 27, 

2011), available at: http://online.wsj.com/article/SB200014240527487032932045761062601 

59071844.html 155 See supra note 153. 155See supra note 153. 156 Id. 157 Id. 

OMIG employees.147 According to these current and former employees, New York’s OMIG suffers from misdirection and its investigations lack a sense of urgency.148 Former employees allege that 

OMIG has recently backed off audits and investigations of organizations suspected of Medicaid fraud and abuse for politically-motivated reasons.149 According to the Times Union article, ‘‘One veteran employee said when factoring for the recoveries made by outside contractors, particularly one cracking down on third-party 

claims, the sums recovered by OMIG staff are pretty dismal.’ Data 

from the reports [shared with the reporter] back up the contention.’’ 150

Articles in the Times Union and the New York Times suggest 

that problems began at OMIG when Governor Cuomo replaced 

James Sheehan, who took an aggressive approach to combating 

problems in the State’s Medicaid program and was largely credited 

with recouping $1.5 billion in Medicaid overpayments in a fouryear period, with James Cox, a former Regional Inspector General 

of the HHS OIG as Medicaid Inspector in July 2011.151 Sheehan 

believes that he was removed as the Inspector General of OMIG because he represented a challenge to a powerful Medicaid industry 

in New York that is a large employment engine.152 According to 

Sheehan, ‘‘Medicaid is to New York what corn is to Iowa. It’s a 

heavy lift.’’ 153 It should be noted that Paul Stavis, who also worked 

for Sheehan in addition to his other positions, was also critical of 

OMIG during Jim Sheehan’s tenure stating ‘‘Fraud litigation is 

very difficult and expensive and OMIG has not equipped itself to 

cope with such cases. [OMIG doesn’t] look for fraud as a matter of 

practice.’’ 154

Eight months before the Times Union article, a New York Times 

article reported that audits released by the State show that Cox’s 

findings of overpayments fell steeply after September 30, 2011, the 

deadline for the State to meet a $1.5 billion Federal target imposed 

when the New York OMIG was created in 2006.155 According to the 

New York Times, New York was on target to avoid $1.1 billion in 

the previous year.156 Cost avoidance is an estimate of public money 

not spent because of education and discussions with providers. 

However, the Times article also pointed out that most of the important audits responsible for the avoided cost were started under 

Sheehan.157


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158 Id. 159Governor Cuomo, Statement of Disapproval for Senate Bill Number 3,184–A (September 

23, 2011), available at: http://blog.nysarc.org/wp-content/uploads/2011/09/Veto-Message.jpg. 160Gale Scott, Calling Dr. Fraud, Crain’s New York Business (March 21, 2010), available at: 

http://www.crainsnewyork.com/article/20100321/SUB/303219992. 161See supra note 153. 162See supra note 160. 163 Comparison of Recoveries to date, NYS Global Cap report November 2012 compared to 

NYS Global Cap report November 2011, available at: http://www.health.ny.gov/health_care/medicaid/regulations/global_cap/monthly/docs/november_2012_report.pdf and http://www.health. 

ny.gov/health_care/medicaid/regulations/global_cap/monthly/docs/november_2011_report.pdf. 164 Id. 

Sheehan’s aggressive approach was not without controversy. According to the New York Times, the health care industry lobbied 

for James Sheehan’s removal as New York’s Medicaid Inspector 

General 158 and also for legislation that would limit ‘‘what are perceived to be overzealous and unfair tactics employed by OMIG in 

audits.’’ 159 At a New York State legislature hearing in 2010, a lawyer for the health care industry accused Sheehan’s auditors of 

‘‘gangster-style tactics.’’ 160 This legislation, which cut the government’s time to reclaim overpayments in half and let providers submit corrected bills rather than repay, overwhelmingly passed the 

New York State legislature.161 To Governor Cuomo’s credit, he vetoed the legislation stating that ‘‘the bill seeks to make changes to 

the law that are too far-reaching and would potentially allow fraudulent and abuse activity to go undetected and unprosecuted.’’ 162

The Committee minority believes that the allegations contained 

in the New York Times and Albany Times Union articles are inconsistent with some of the evidence. The minority is aware that the 

number of OMIG investigations has remained consistent and in 

some cases exceeded the performance of the agency under Sheehan 

since the Cuomo administration’s appointment of Cox. According to 

information in reports published by OMIG, OMIG’s cost savings activities, which include avoided costs as well as recovered improper 

payments, rose significantly—by 34 percent in 2011, and recoveries, which totaled about $700 million in 2011, also continue to 

grow.163

The Committee minority believes that while it is too soon to tell 

how OMIG’s recovery performance will turn out for 2012, a partial 

year analysis of New York Medicaid Global Cap Reports suggests 

that OMIG is on course to surpass that mark.164 Using these 

trends, the minority believes there is not evidence in the data to 

substantiate the claims that OMIG is suffering under Cox’s leadership. 

The Committee majority staff believes it is impossible to use annual figures to characterize a trend since James Sheehan was Inspector General at OMIG for more than half of 2011 and many audits begun under Sheehan’s guidance would not have resulted in 

recoveries until later in the year or in subsequent years. 

VIII. RECOMMENDATIONS

New York’s State Medicaid Plan, like almost all State Medicaid 

Plans, consists of thousands of pages of dense rules and reimbursement methodologies. According to Paul Stavis, who served as counsel to three different New York State health agencies during his 


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165The complaints Mr. Stavis brought against New York’s Medicaid program are discussed in 

Section III of this Report. 166Mary Beth Pfeiffer, Feds audit N.Y.’s Medicaid rates, Poughkeepsie Journal (May 14, 

2011). 167See Achieving the Triple Aim, New York State Medicaid Redesign Team Waiver Amendment, New York State Department of Health, http://www.health.ny.gov/health_care/medicaid/redesign/docs/2012-08-06_waiver_amendment_request.pdf; See also It’s Going to be a 1915 b/c 

Waiver, New York State Office for Persons With Developmental Disabilities, People First Waiver (June 6, 2012) available at http://www.opwdd.ny.gov/opwdd_services_supports/people_first_waiver/1915_b_c_waiver (‘‘During discussions with CMS in May, OPWDD determined 

that a combination of a 1915 b and 1915 c waiver will provide the flexibility needed to redesign 

the delivery system to provide person-centered, need-focused supports and services as outlined 

under the People First Waiver. Therefore, OPWDD will pursue a combination of these two types 

of waivers rather than an 1115 Research and Demonstration Waiver.’’). 168 New York State Medicaid Redesign Team (MRT) Waiver Amendment, available at: http:// 

www.health.ny.gov/health_care/medicaid/redesign/docs/2012-08- 

06_waiver_amendment_request.pdf. 169See supra note 102. 

28-year health care career,165 New York has made its Medicaid 

program ‘‘so utterly complicated that nobody completely understands it. It allows New York [S]tate to pull the wool over the feds’ 

eyes.’’ 166

The Federal Government, particularly CMS, has been culpable in 

New York’s historical Medicaid program integrity problems. No example better illustrates this failure better than CMS’s approval of 

35 modifications related to the excessive developmental center payment rate over the past 25 years. These modifications have collectively caused the State to receive an estimated $15 billion beyond 

a reasonable amount for just one, relatively small, part of the 

State’s Medicaid program. 

New York State has submitted several waiver applications to 

CMS that relate to the financing of its Medicaid program.167 The 

Medicaid Redesign Team (MRT) Waiver Amendment asks CMS to 

allow New York to keep $10 billion of the anticipated Federal savings from the waiver. According to the State, it will use that money 

to increase primary care capacity, invest in new patient-centered 

models of care, strengthen safety-net programs and institutions, invest in the health care workforce, and improve management of 

chronic disease.168

Before considering the merits of these waivers, CMS and the 

State must come to an agreement to reduce the State’s developmental centers to a rate of about one-fifth of their current levels, 

as CMS indicated was its intention at the September 20, 2012 

hearing before the Subcommittee on Health Care, District of Columbia, Census and National Archives. 

According to Dr. Feldman, ‘‘[w]hile Governor Cuomo has taken 

bold steps to redesign Medicaid in New York State, the Medicaid 

industrial complex is thriving, especially in New York City.’’ 169 The 

Committee recommends six specific actions that should be taken 

immediately to reduce Medicaid waste, fraud, and abuse in New 

York’s program and potentially save both Federal and New York 

State taxpayers significant amounts of money each year: 

• CMS or a qualified government watchdog agency should conduct a complete and independent audit of New York’s Medicaid 

program, including the work of New York State’s Office of the Medicaid Inspector General; 

• CMS should finalize an agreement with New York on a corrected payment methodology that ends the developmental center 

overpayments as soon as possible. CMS should pursue recovery of 


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170See Medicaid Waste, Fraud and Abuse, Threatening the Healthcare Safety Net: Hearing 

Before the Senate Comm. on Finance, 109th Cong. (2005) (written statement of Kathryn G. 

Allen, Health Care Director, Government Accountability Office), available at http://www.gao.gov/ 

new.items/d05836t.pdf. 171See supra note 1. 172 U.S. Gov’t Accountability Office (GAO): CMS Needs More Information on the Billions of 

Dollars Spent on Supplemental Payments (2008), available at: http://www.gao.gov/new.items/ 

d08614.pdf. 

an appropriate portion of previous overpayments in excess of reasonable costs for Federal taxpayers; 

• CMS’ review of New York’s Section 1115 waiver request to 

allow the State to keep a portion of the savings its Medicaid reforms are projected to achieve, should follow all applicable statutory requirements, particularly with respect to budget neutrality. 

CMS should also ensure that the baseline from which New York is 

calculating the savings does not include developmental center overpayments or other overpayments; 

• New York’s Personal Care Services program must only enroll 

individuals who meet the eligibility thresholds required by law; 

• New York’s legislature should ban ‘‘spousal refusal’’ and other 

abuses of Medicaid eligibility rules, as Governor Cuomo has proposed in each of his three budgets. New York must also aggressively pursue estate recovery against people who abuse Medicaid 

eligibility rules; and 

• New York’s legislature should codify Governor Cuomo’s executive order that limiting compensation of executives at organizations 

receiving nearly all their money from tax revenue. New York must 

also aggressively monitor and enforce these limits. 

IX. CONCLUSION

In 2003, the Government Accountability Office (GAO) added 

Medicaid to its list of high-risk programs.170 This report highlighted significant problems in New York State’s Medicaid program, and the previous section of this report outlined six specific 

steps that CMS and New York can take to protect taxpayer dollars 

from being misspent through New York’s Medicaid program. Many 

of the recommendations discussed in the report, such as limiting 

Medicaid eligibility to individuals who meet the program’s criteria, 

limiting executive compensation at organizations that receive the 

vast majority of their money through Medicaid, and strong state estate recovery programs should be implemented across the country. 

It is also important to note that CMS has struggled historically 

in protecting Federal tax dollars from being misspent through Medicaid. CMS has been hampered by poor data quality, but the agency has historically failed to often adequately detect and address 

major problems in state Medicaid programs. A Committee majority 

staff report from April 2012 detailed several examples of how CMS 

has failed to protect taxpayer dollars spent through the Medicaid 

program.171 Moreover, as GAO has widely reported, states have resorted to creative techniques such as provider taxes and large supplemental payments to draw down additional Federal dollars into 

their states through the Medicaid program without net State contributions.172 These techniques undermine the nature of joint Federal-state financial responsibility for the Medicaid program by significantly increasing the Federal share of Medicaid expenditures 


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173Kaiser Family Foundation, Total Medicaid Spending, FY 2010, available at http:// 

www.statehealthfacts.org/comparemaptable.jsp?ind=177&cat=4 (last visited January 3, 2012). 

and further undermining State incentives to run efficient Medicaid 

programs. The national debt of the United States now exceeds $16.4 trillion, 

with more than $6 trillion added to the national debt in just the 

last four years. Congress faces critical and difficult choices about 

how to put the Federal budget on a sustainable path. The ideas in 

this report, which should receive bipartisan support, would alleviate some of the most egregious problems in the program and would 

begin to put the Medicaid program on a sustainable path. 

APPENDIX A: PER CAPITA FEDERAL MEDICAID DOLLARS, BY STATE (FY2010) 

State Federal 

spending State Federal spending 

New York .......................................................... $1,655 Alabama ........................................................... $769 

Vermont ............................................................ 1,398 Texas ................................................................ 764 

New Mexico ....................................................... 1,341 Oregon .............................................................. 761 

Maine ................................................................ 1,295 Maryland .......................................................... 754 

Louisiana .......................................................... 1,248 Iowa ................................................................. 742 

Mississippi ....................................................... 1,184 Illinois .............................................................. 739 

Rhode Island .................................................... 1,170 Montana ........................................................... 737 

West Virginia .................................................... 1,143 New Jersey ....................................................... 716 

Arizona .............................................................. 1,111 North Dakota .................................................... 713 

Massachusetts ................................................. 1,107 Hawaii .............................................................. 705 

Arkansas ........................................................... 1,095 Idaho ................................................................ 695 

Alaska ............................................................... 1,056 California ......................................................... 695 

Kentucky ........................................................... 1,033 Indiana ............................................................. 690 

Tennessee ......................................................... 1,010 South Dakota ................................................... 680 

Missouri ............................................................ 1,008 Washington ...................................................... 659 

Connecticut ...................................................... 990 Nebraska .......................................................... 650 

Pennsylvania .................................................... 972 Florida .............................................................. 624 

Ohio .................................................................. 972 New Hampshire ................................................ 623 

South Carolina ................................................. 888 Georgia ............................................................. 601 

Delaware ........................................................... 885 Kansas ............................................................. 594 

Minnesota ......................................................... 880 Wyoming ........................................................... 586 

Michigan ........................................................... 865 Utah ................................................................. 499 

North Carolina .................................................. 855 Virginia ............................................................ 496 

Oklahoma ......................................................... 841 Colorado ........................................................... 494 

Wisconsin ......................................................... 809 Nevada ............................................................. 357 

Medicaid expenditures by state as well as FMAP rates are from 

the Kaiser Family Foundation’s state health care facts.173 Population figures were obtained from the Census Bureau. 

APPENDIX B: EXECUTIVE COMPENSATION AT NON-PROFITS FINANCED LARGELY BY MEDICAID 

Organization Position 2008 Compensation 

2010 Compensation 

County 

median 

household 

income 

A.C.L.D (Nassau Co.) ................................... Executive Director ...................... $525,704 $552,761 $95,823 

CFAO .......................................... 302,883 333,466 

Assistant Executive Director ...... 178,026 196,673 

Assistant Executive Director ...... 186,836 201,530 

Block Institute Inc. (Brooklyn) ..................... Executive Director/C.E.O ............ 201,586 225,114 49,490 

The Center for Discovery (Sullivan Co.) ...... C.E.O. ......................................... 939,280 649,977 48,303 

Former C.F.O .............................. 480,832 N/A 

C.F.O .......................................... 254,595 238,293 

Chief of Program ....................... 262,393 257,200 

Chief of Admission .................... 226,224 228,140 

Chief of Health Services ............ 248,725 223,398 


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APPENDIX B: EXECUTIVE COMPENSATION AT NON-PROFITS FINANCED LARGELY BY MEDICAID— 

Continued 

Organization Position 2008 Compensation 

2010 Compensation 

County 

median 

household 

income 

Chief of Development and 

Fundraising.

N/A 223,658 

Center for Disability Services Inc. (Albany 

Co.).

President/C.E.O .......................... 247,394 274,818 57,715 

Community Services for the Developmentally Disabled (Buffalo).President & C.E.O ...................... * 214,735 256,816 30,230 

Developmental Disabilities Institute, Inc. 

(Suffolk Co.).

Executive Director ...................... 294,576 N/A 87,187 

Associate Executive Director ...... 225,589 280,356 

Epilepsy Foundation of Long Island (Nassau Co.).Executive Director ...................... * 271,509 282,718 95,823 

C.F.O .......................................... 175,174 214,502 95,823 

Family Residences and Essential Enterprises Inc (Nassau Co.).

C.E.O .......................................... 354,308 422,951 95,823 

C.F.O .......................................... 218,146 285,323 

Chief Compliance Office ............ 234,193 251,422 

Associate Director ...................... 175,271 201,718 

Former C.E.O .............................. 858,587 N/A 

C.O.O .......................................... N/A 261,327 

Associate Director ...................... N/A 215,714 

Federation Employment and Guidance 

Services (NYC).

C.E.O .......................................... 533,323 582,513 51,270 

Executive Vice President ............ 421,275 403,736 

C.O.O .......................................... 460,158 373,300 

C.F.O .......................................... N/A 316,476 

General Counsel ......................... 222,935 283,784 

Chief Development Officer ......... N/A 267,569 

Sr. Vice President ...................... 271,870 292,378 

Sr. Vice President ...................... 256,144 277,437 

Sr. Vice President ...................... 204,587 227,979 

Sr. Vice President ...................... 260,302 276,405 

Sr. Vice President ...................... 206,998 221,836 

HASC Center Inc. (Brooklyn) ........................ Executive Director ...................... * 231,303 267,715 49,490 

Clinical Director ......................... * 244,929 259,641 

Head Injury Association Inc. (Suffolk Co.) .. C.E.O .......................................... 250,349 370,996 87,187 

HeartShare Human Services of New York 

(Suffolk Co.).

President and C.E.O. ................. 479,775 536,796 49,490 

Executive Vice President ............ 317,449 318,481 

Executive Director ...................... 231,284 247,020 

Human Care Services for Families & Children Inc. (Brooklyn).Executive Director ...................... 182,488 372,367 49,490 

C.F.O .......................................... 132,603 234,894 

Independence Residences Inc. (Queens Co.) Executive Director ...................... 232,213 267,190 56,406 

Associate Executive Director ...... 177,627 206,171 

Institute for Community Living, Inc. (NYC) C.E.O .......................................... 752,330 3,048,520 51,270 

C.F.O .......................................... 244,434 268,968 

C.O.O .......................................... 266,752 399,431 

Sr. Executive Vice President ...... 222,110 229,904 

C.A.O .......................................... 198,266 209,545 

A.C.F.O ....................................... 202,156 128,106 

Jawonio Inc. (Rockland Co.) ........................ C.E.O .......................................... 545,783 278,049 84,661 

Asst. Exec. Director .................... 185,799 301,497 

Kelberman Center Inc. (Oneida Co.) ........... Treasurer/Secretary .................... * 323,673 * 334,139 48,382 

Life’s Worc Inc. (Nassau Co.) ..................... Executive Director ...................... 378,502 395,828 95,823 

Assistant Executive Director of 

Operations.

182,092 209,280 95,823 

LifeSpire Inc. (NYC) ..................................... Unspecified ................................ 426,843 409,614 51,270 

Unspecified ................................ 209,651 222,119 

Maryhaven Center of Hope (Suffolk Co.) .... C.E.O. ......................................... 923,878 643,484 87,187 

Exec. V.P. ................................... 778,990 1,003,980 

C.F.O .......................................... 344,459 429,328 

V.P Finance ................................ 231,698 244,565 


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APPENDIX B: EXECUTIVE COMPENSATION AT NON-PROFITS FINANCED LARGELY BY MEDICAID— 

Continued 

Organization Position 2008 Compensation 

2010 Compensation 

County 

median 

household 

income 

NARCO Freedom Inc. (Bronx) ....................... C.E.O .......................................... 382,690 386,018 41,057 

NYSARC (Albany Co.) ................................... Executive Director ...................... 199,284 287,944 57,715 

NYSARC (Chautauqua Co.) .......................... Executive Director/C.E.O ............ 325,040 356,988 41,432 

NYSARC (Madison/Cortland Co.) ................. Executive Director ...................... * 214,635 237,848 53,473 

NYSARC (Monroe Co.) .................................. C.E.O. ......................................... 205,151 N/A 52,260 

NYSARC (Montgomery Co.) .......................... C.E.O. ......................................... * 1,630,083 512,420 43,254 

NYSARC (Nassau Co.) ................................. C.E.O .......................................... * 455,431 458,388 95,823 

Unspecified ................................ * 272,455 308,756 

Unspecified ................................ * 285,394 348,077 

Unspecified ................................ * 199,708 269,151 

NYSARC (NYC) ............................................. Assoc. Executive Director ........... 369,195 149,061 51,270 

Assoc. Executive Director ........... 327,896 422,456 

Budget Director .......................... 300,300 371,766 

Chief Compliance Officer .......... 263,995 372,667 

Senior Policy Advisor ................. 243,661 666,444 

Director of Employees ................ 211,853 351,703 

NYSARC (Putnam Co.) ................................. Executive Director ...................... * 234,195 254,251 92,711 

NYSARC (Suffolk Co.) .................................. C.E.O. ......................................... 349,775 373,220 87,187 

Deputy Executive Director .......... 197,470 215,494 

Deputy Executive Director .......... 198,699 224,673 

NYSARC (Sullivan Co.) ................................ C.E.O. ......................................... 174,059 211,092 48,303 

NYSARC (Westchester Co.) .......................... Executive Director ...................... 226,741 244,885 80,725 

Associate Executive Director ...... 200,793 211,860 

Occupations Inc. (Orange Co.) .................... President/C.E.O .......................... 272,147 432,958 70,294 

Exec. Vice President/ C.O.O ....... 239,499 308,483 

Vice President ............................ 119,875 304,884 

Ohel Childrens Home and Family Services 

(Brooklyn).

C.E.O .......................................... 302,488 392,365 49,490 

C.F.O .......................................... 227,906 248,510 

Program Director ........................ 185,104 198,473 

C.O.O .......................................... 233,447 263,968 

C.O.O .......................................... 245,055 271,481 

Chief Development Officer ......... 297,179 319,405 

People Inc. (Erie Co.) .................................. President/C.E.O .......................... * 424,640 472,419 48,805 

Vice President ............................ * 208,548 205,231 

Springbrook NY Inc. (Ostego Co.) ............... Executive Director ...................... 205,937 217,706 45,334 

Staten Island Mental Health Society Inc. 

(Staten Island).

Unspecified ................................ 547,585 498,311 84,308 

Unspecified ................................ 190,249 209,342 

Unspecified ................................ 233,740 208,732 

Unspecified ................................ 209,513 223,753 

Westchester Institute for Human Development (Westchester Co.).President/C.E.O .......................... * 249,868 274,793 80,725 

C.O.O .......................................... * 204,317 205,910 

Westchester School for Special Children 

(Westchester Co.).

Executive Director ...................... 271,430 143,378 80,725 

Young Adult institute (NYC) ........................ President .................................... 2,106,905 954,912 51,270 

C.E.O. ......................................... 1,991,753 1,089,518 

Co-C.O.O. ................................... 1,070,614 563,307 

Co-C.O.O. ................................... 1,191,809 605,039 

CFO ............................................ 404,220 432,339 

Unspecified ................................ 242,973 N/A 

Unspecified ................................ 292,927 319,309 

Unspecified ................................ 221,903 264,948 

Unspecified ................................ 257,510 276,322 

Unspecified ................................ 238,650 288,440 

Unspecified ................................ N/A 330,755 

Notes: Compensation amounts were found using publicly available IRS Form 990s accessed through guidestar. 

Denotes compensation for the year 2009 since 2008 data was not available through guidestar. Median household income was obtained 

from Census Bureau County Quick Facts and is annual median household income for the period from 2007–2011. Median household income 

for Brooklyn, Staten Island, and the Bronx is from 2009 and was found at www.city-data.com. 


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APPENDIX C: COMMITTEE’S METHODOLOGY FOR CALCULATING

MEDICAID OVERPAYMENTS

On July 19, 2012, the Committee sent a letter to Dr. Nirav Shah, 

Commissioner of the New York State Department of Health, asking 

for detailed information regarding overpayments received by New 

York State-operated developmental centers. Despite initial assurances from State officials that New York would respond to the 

Committee’s request for information, the State decided not to comply. Because the State refused to comply with its request, the Committee compiled as much available information as possible from reliable sources in order to estimate the amount of overpayments received by New York State’s developmental centers since 1990. 

The Office of Inspector General (OIG) at the U.S. Department of 

Health and Human Services (HHS) supplied the Committee with 

a significant amount of information on these overpayments. Chiefly, OIG provided the actual payments received by New York developmental centers for state fiscal year (SFY) 2007 ($1.828 billion), 

SFY 2008 ($2.107 billion), and SFY 2009 ($2.267 billion), as well 

as the daily Medicaid payment rate per patient for New York’s developmental centers over the entire period. Using the actual payments received by New York’s developmental centers and OIG’s 

calculations for reimbursable expenses, OIG estimated Medicaid 

overpaid the State developmental centers by $1.41 billion in SFY 

2009, $1.359 billion in SFY 2008, and $1.063 billion in SFY 2007. 

The Committee requested that OIG estimate the developmental 

center overpayments over the past two decades using the same 

methodology it employed for its 2007–2009 estimates; however, 

OIG lacked the necessary information (the same information the 

State of New York has refused to provide the Committee) in order 

to perform the calculations. 

It is important to note that OIG’s calculation of overpayments relies upon the State’s reported costs, and the State’s reported costs 

were not verified or audited by either OIG or CMS. It is a complex 

formula with many supplementary and substantial add-ons that 

convert a prior year’s reported costs into a current year’s reimbursable costs. For example, New York’s total reported costs for SFY 

2008 were $581 million. After adding the various supplementary 

factors, OIG calculated the reimbursable cost for SFY 2009 was 

$858 million, about 48 percent higher than New York’s reported 

costs for the previous year. 

Therefore, there is reason to believe that the reimbursable costs 

calculated by OIG are significantly higher than are necessary to 

serve the State’s developmental center population. According to the 

OIG report, the total reimbursement cost per patient was $1,532 

per day for SFY 2009. Since OIG reported that the average rate received by similar, privately-operated Intermediate Care Facilities 

(ICFs) was $444 in SFY 2009, a $1,532 rate appears very high. 

Since OIG’s report calculates overpayments by subtracting these 

inflated ‘‘reimbursable costs’’ from the payments received by Stateoperated developmental centers, the overpayments calculated by 

OIG for SFY 2007, SFY 2008, and SFY 2009 are likely substantially too low. 

To avoid the shortcomings involved with OIG’s somewhat nebulous ‘‘reimbursable costs,’’ the Committee calculated the developVerDate Mar 15 2010 01:51 Mar 09, 2013 Jkt 029006 PO 00000 Frm 00035 Fmt 6659 Sfmt 6602 E:\HR\OC\HR011.XXX HR011

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174OMRDD reports from 1999 to 2006 contained annual counts of the total residents in the 

State’s developmental centers and OIG provided the actual reimbursements received by the 

State-operated developmental centers for 2007 through 2009. The sources for 1991, 1994, 2010, 

and 2011 are contained in the footnotes below the Table showing the estimated overpayments 

by year. For the remainder of the years (1992, 1993, 1995, 1996, 1997, and 1998), the Committee used a linear interpolation to estimate the number of developmental center residents. 

mental center overpayments as the amount received by New York 

State-operated developmental centers in excess of the Medicaid 

Upper Payment Limit (UPL). According to Federal Medicaid law, 

the UPL is the maximum a given state Medicaid program can pay 

to Medicaid providers in the aggregate. To satisfy UPL requirements, Medicaid payments must not exceed what the Medicare program would pay for the same services. The Committee therefore estimated the Medicaid UPL using the most expensive Medicare payment category (see Footnote ii in the Table). Since the Committee’s 

estimates used Medicare rates for the most costly patients in 

skilled nursing facilities (SNFs) and not all of the developmental 

center patients would fall into this category, the Committee’s Medicaid UPL is almost certainly too high. Therefore, since the Committee is estimating the overpayments in excess of Medicaid UPL 

amounts and the Committee assumed the highest possible Medicare reimbursement rates, the Committee’s estimates of the overpayments received by New York developmental centers are probably too low. 

Medicare’s reimbursement rates also vary by geographic location, 

and the State of New York has 14 geographic areas. The Committee calculated a weighted average of Medicare reimbursements 

using the geographic breakdown of the State’s developmental centers in 2010. (This was the only year the Committee found an accounting of each developmental center’s payment). Using developmental center population from that year, the Committee assigned 

Medicare payment regions the following weights: 37.19% to New 

York City, 21.10% to Binghamton, 15.81% to Rural New York 

State, 10.73% to Poughkeepsie, 8.75% to Rochester, 3.25% to Albany, and 3.18% to Buffalo. The Medicaid UPL estimates shown in 

the Table below for SFY 1999 through SFY 2011 were estimated 

using weighted average calculations. The Medicare payment information was easily obtainable only for the years after 1998. The average price change from 1999 to 2005 in Medicare’s reimbursement 

rate for the most expensive patients in SNF was $12. Therefore, for 

purposes of the Committee’s estimates, the Medicaid UPL was increased $12 each year from SFY 1991 to SFY 1998. 

In order to calculate the estimated payments received by New 

York developmental centers, the Committee multiplied daily Medicaid payment rates per patient by the estimated number of patients residing in developmental centers at one point during the 

SFY. OIG provided the daily Medicaid payment rates and the Committee relied on reports issued by New York’s Office for People 

with Developmental Disabilities (OPWDD) and its predecessor 

agency, the Office of Mental Retardation and Developmental Disabilities (OMRDD), to estimate patient numbers.174 The fifth column in the Table shows the Committee’s estimate of the amount 

Medicaid paid New York State-operated developmental centers beyond the Medicaid UPL (the amount Medicare would have otherwise paid). The second to last column is the present value of each 

year’s estimated overpayment calculated using the consumer price 


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index. Summing the overpayments from 1991 to 2011 yields a net 

estimated overpayment of nearly $28.8 billion beyond what was allowed by the Medicaid UPL. Finally, the last column shows the 

Federal share of the overpayments since the Federal Government 

reimburses at least half of New York’s Medicaid expenditures. The 

total Federal overpayment (in present value terms) between 1991 

and 2011 was approximately $15 billion. 

TABLE—ESTIMATED MEDICAID OVERPAYMENT TO NEW YORK STATE-OPERATED DEVELOPMENTAL 

CENTERS 

State fiscal year 

Estimated 

dev. center 

patients 

Daily dev. 

center pay 

ratei

Estimated 

medicaid 

UPLii

Over-payment 

Overpayment 

present value 

(2011 $) iii

Federal share of 

overpayment iv

1991 ................................. v 6,350 $389 $319 vi $162.2M $267.9M $134.0M 

1992 ................................. 5,437 442 331 220.3M 353.2M 176.6M 

1993 ................................. 4,524 552 343 345.1M 537.2M 268.6M 

1994 ................................. vii 3,611 654 355 394.1M 598.1M 299.1M 

1995 ................................. 3,294 936 367 684.2M 1,009.9M 504.9M 

1996 ................................. 2,978 1,093 379 776.0M 1,112.6M 556.3M 

1997 ................................. 2,661 1,310 391 892.7M 1,251.1M 625.5M 

1998 ................................. 2,345 1,522 403 957.6M 1,321.5M 660.8M 

1999 ................................. viii 2,028 1,729 415 972.6M 1,313.2M 656.6M 

2000 ................................. ix 2,020 1,930 426 1,108.9M 1,448.5M 724.3M 

2001 ................................. x 1,711 2,165 435 1,080.4M 1,372.3M 686.1M 

2002 ................................. xi 1,692 2,434 474 1,210.4M 1,513.7M 756.8M 

2003 ................................. xii 1,599 2,723 457 1,322.5M 1,617.1M 808.6M 

2004 ................................. xiii 1,610 2,934 483 1,440.3M 1,715.1M 882.9M 

2005 ................................. xiv 1,696 3,063 490 1,592.8M 1,834.5M 944.4M 

2006 ................................. xv 1,700 3,284 594 1,669.1M 1,862.4M 931.2M 

2007 ................................. xvi X 3,715 613 1,526.3M 1,655.9M 827.9M 

2008 ................................. xvii X 3,736 658 1,736.1M 1,813.8M 906.9M 

2009 ................................. xviii X 4,116 645 1,911.4M 2,004.1M 1,090.0M 

2010 ................................. xix 1,417 4,556 645 2,022.8M 2,086.6M 1,277.9M 

2011 ................................. xx 1,313 5,118 751 2,092.9M 2,092.9M 1,274.3M 

Total ......................... .................... .................... .................... ........................ 28,781.6M 14,993.8M 

i Development Center payment rates were according to the Office of Inspector General (OIG), Department of Health and Human Services. iiThe Committee estimated the Medicaid UPL using the Medicare case-mix group with the highest reimbursement rate. For FY 2006 to FY 2011, this group was the Rehabilitation Plus Extensive Services (RUX) group. Beneficiaries classified under RUX generally have complex needs 

and require more assistance with activities of daily living, a greater amount of physical therapy, occupational therapy, and/or

speech-language pathology services, and more complex clinical care. For FY 1999 to FY 2005, the group with the highest reimbursement group was RUC from the Rehabilitation case-mix group. Medicare’s reimbursement rates also vary by geographic location and the State of New York has 14 geographic areas. The Committee calculated a weighted average of the Medicare reimbursement using the geographic break- down of the developmental centers in 2010. The following weights were assigned: New York City 37.19%, Binghamton 21.10%, Rural New York State 15.81%, Poughkeepsie 10.73%, Rochester 8.75%, Albany 3.25%, Buffalo 3.18%. Therefore the estimates in this category from FY 1999 to FY 2011 were estimated using weighted average calculations. We used the average historical price change from 1999 to 2005 of $12 

to estimate that Medicaid UPL increased $12 each year from FY 1991 to FY 1998. iiiThis column adjusts the overpayment column for 2011 values using the Consumer Price Index. iv This calculation uses the State’s Federal Medicaid Assistance Percentage (FMAP). Generally, New York’s FMAP is 50%. In fiscal years 

2004, 2005, 2009, 2010, and 2011, the Federal Government increased the FMAP so the Federal share of the state’s Medicaid expenditures in 

those years is higher. New York’s FMAP in SFY 2004 and SFY 2005 was 51.48%. In SFY 2009, New York’s FMAP was 54.39%. In SFY 2010, 

New York’s FMAP was 61.24%. In SFY 2011, New York’s FMAP was 60.89%. v Paul J. Castellani, From Snake Pits to Cash Cows: Politics and Public Institutions in New York, State University of New York, 2005, page 

249. vi All of the figures in the table are in the millions. This particular figure is $162.2 million. 

vii Castellani, supra note v, at 259. viiiThe 1998–99 Budget for the New York State Office of Mental Retardation and Developmental Disabilities. ix A Summary of the 1999–2000 Executive Budget Recommendation. 

x 2000–01 Executive Budget Recommendation for the New York State Office of Mental Retardation and Developmental Disabilities (OMRDD). xi 2001–02 Fiscal Year Executive Budget Recommendations for OMRDD. 

xii 2002–03 Fiscal Year Executive Budget Recommendations for OMRDD. xiii 2003–04 Fiscal Year Executive Budget Recommendations for OMRDD. xiv 2004–05 Fiscal Year Executive Budget Recommendations for OMRDD. xv 2005–06 Fiscal Year Executive Budget Recommendations for OMRDD. xvi According to information provided by the OIG to the Committee, Medicaid made payments of $1,827,939,932 for State developmental

centers in SFY 2007. Therefore, the Committee did not have to know the number of developmental center residents this year. xvii According to information provided by the OIG to the Committee, Medicaid made payments of $2,107,245,318 for State developmental

centers in SFY 2007. Therefore, the Committee did not have to know the number of developmental center residents this year. xviii According to information provided by the OIG to the Committee, Medicaid made payments of $2,266,625,233 for State developmental

centers in SFY 2007. Therefore, the Committee did not have to know the number of developmental center residents this year. xixMary Beth Pfeiffer, At $4,556 A Day, N.Y. Disabled Care No. 1 in Nation, POUGHKEEPSIE JOURNAL, June 20, 2010. xx OPWDD Statewide Comprehensive Plan: 2011–2015. 


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COMMITTEE CONSIDERATION

On February 14, 2013, the Committee met in open session and 

ordered reported favorably the report, Billions of Federal Tax Dollars Misspent on New York’s Medicaid Program, as amended, by 

voice vote, a quorum being present. 

STATEMENT OF OVERSIGHT FINDINGS AND RECOMMENDATIONS OF

THE COMMITTEE

In compliance with clause 3(c)(1) of rule XIII and clause 2(b)(1) 

of rule X of the Rules of the House of Representatives, the Committee conducted oversight of the administration of Federal and 

state funds within New York’s Medicaid program. The report includes findings from the Committee’s investigation and recommendations to reduce waste, fraud, and abuse within the program. 

STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

In accordance with clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the report 

makes recommendations to stop Medicaid waste, fraud, and abuse 

in New York’s Medicaid program, and potentially save both Federal 

and New York State taxpayers significant amounts of money each 

year. 

Æ 


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