State Audit Flags Hundreds Of Millions In Questionable Medicaid Payments

ANNAPOLIS, Md. — A state audit found that Maryland’s Medicaid managed care program did not adequately prevent hundreds of millions of dollars in potentially improper payments, including duplicate claims, payments for incarcerated individuals and unsupported newborn delivery charges, according to a report released in January 2026 by the Office of Legislative Audits.

The audit examined fiscal activities of the Maryland Department of Health’s Medical Care Programs Administration, which oversees the HealthChoice managed care program, from April 1, 2022, through May 15, 2025. During that period, the state paid billions of dollars annually to private managed care organizations, or MCOs, to provide services to Medicaid recipients.

Auditors reported that the administration did not have sufficient procedures to ensure that ineligible costs reported by MCOs were excluded from the expenditure data used to set capitation rates — the fixed monthly payments the state makes per enrollee. As a result, auditors said, capitation rates may have been set higher than warranted.

The audit found that more than 124,500 duplicate claims totaling $287 million were not excluded from the data used in the rate-setting process. In addition, auditors identified approximately 807,000 denied claims totaling $430.7 million that were reported by MCOs as paid between 2022 and 2024, without adequate follow-up by the state to determine whether the costs were eligible.

In a separate finding, auditors determined the state failed to adequately prevent capitation payments for incarcerated individuals, whose medical care is generally covered by the Department of Public Safety and Correctional Services rather than Medicaid managed care. A data match identified 2,452 incarcerated individuals who remained enrolled in HealthChoice, resulting in $7.8 million in improper payments. Auditors noted that similar deficiencies had been identified in prior audits but were not fully corrected.

The report also cited shortcomings in oversight of supplemental payments for newborn deliveries. Auditors found that as of September 2025, the state had not investigated 768 potentially unsupported newborn delivery payments totaling $13.8 million made in 2022 and 2023. When the administration reviewed a limited sample of those claims at the auditors’ request, five were determined to have been improperly paid.

Additionally, the audit identified weaknesses in oversight of an interagency agreement with a public university used to assist in setting capitation rates. Payments totaling $18.7 million were made under the agreement, but auditors said the administration lacked adequate documentation to verify staffing costs, subcontractor expenses and whether the work performed complied with the terms of the agreement.

The Office of Legislative Audits said several of the findings were repeats from previous reports, including a 2023 fiscal compliance audit and a 2020 performance audit focused on improper Medicaid payments.

In a written response included in the report, the Maryland Department of Health agreed with the findings and recommendations and outlined corrective actions, including enhanced data matching, expanded reviews of denied claims and efforts to recover improper payments. The department said some corrective measures are underway, with full implementation expected over the next two years.

Auditors said they will continue to monitor the agency’s progress.

Read the full audit report below:

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