Kentucky Medicaid Double-Paid $836M Over Four Years

Kentucky Medicaid is supposed to pay for Kentucky residents.▸ But a September 2025 special examination.pdf) by the state's Auditor of Public Accounts -- built on a federal-state data match with HHS's Office of Inspector General⧉ -- found the state paid managed care organizations (MCOs) $836,364,425 between 2019 and 2022 on behalf of enrollees for whom at least one other state was making the same monthly payment, in the same months. The overlap touched 103,907 unique individuals and matched against 48 other states, with Indiana alone accounting for 19,168 of them. HHS-OIG's own transmittal memo to CMS independently restates the identical totals, because OIG generated the underlying claims match itself.

The mechanism is simple.▸ Kentucky pays MCOs a fixed monthly fee -- a capitation payment -- for every enrollee on their rolls, whether or not that person uses any care that month. Enrollment is supposed to be tied to residency: once someone establishes residency elsewhere, Kentucky should stop paying for them. When two states both keep paying, the beneficiary doesn't get double the coverage -- the extra payment simply goes to the MCO.pdf), a pure loss with no offsetting benefit to any patient. A review of Kentucky's 11 MCO contracts.pdf) running from 2017 through 2024 found none require MCOs to proactively flag concurrently enrolled beneficiaries, and none give the state an explicit contractual right to claw back capitation payments already made for non-residents.

The concurrent-payment total didn't just accumulate -- it accelerated.▸ Kentucky's double-paid capitation rose from $125.4 million in 2019 to $318.6 million in 2022.pdf), a 154% increase, and its share of Kentucky's total MCO spending climbed alongside it, from 1.66% to 2.61%. Auditors traced the growth to a specific breakdown: Kentucky Medicaid employees told investigators.pdf) they were effectively told not to work concurrent-enrollment alerts during the COVID-19 pandemic, and that even outside the pandemic the alerts were treated as "low on the totem pole." CHFS's own Secretary and senior officials confirmed to auditors in June 2023 that the agency had stopped reviewing for concurrently enrolled beneficiaries altogether. The state's response -- hiring about 50 contract workers to clear the backlog -- was announced only after the audit was already underway, and took months to stand up.

Two subgroup tests inside the audit show what the failure looked like at the level of individual cases.▸ Auditors sampled 19 enrollees for whom Kentucky kept paying MCOs at least four months past their date of death.pdf): it took the state an average of 319.5 days just to record the death in the beneficiary's file, and the last capitation payment landed an average of 205 days after death -- in the worst case, 857 days, nearly two and a half years, after an enrollee who died in January 2018. Kentucky paid $237,123 on their behalf in that window alone, not counting whatever any other state paid for the same people. A second sample of 14 enrollees with 100 or more concurrent capitation payments.pdf) over the four-year window -- people simultaneously enrolled in Kentucky and, on average, 3.4 other states for 42 of the 48 months examined -- accounted for $489,552 in Kentucky capitation payments, averaging $34,968 each.

Neither sample is new money on top of the $836.4 million; both are itemized evidence pulled from inside it, testing whether the number represents a real, traceable pattern rather than a modeling artifact.▸ It was not the first time federal auditors had found this kind of leak: a December 2021 HHS-OIG report.pdf) on a different sub-population -- enrollees assigned duplicate Medicaid ID numbers -- had already put Kentucky's unnecessary capitation payments at roughly $2.7 million for 2015 through 2019.

CHFS did not accept the findings.▸ In a September 10, 2025 written response.pdf), Secretary Steven Stack wrote that "Kentucky Medicaid is in full compliance with federal requirements for Medicaid eligibility verification, including residency," and called the draft report inaccurate, reliant on "unsubstantiated assumptions," and lacking "verifiable evidence of any substantial loss of taxpayer funds." CHFS also countered that 56,440 individuals had in fact been disenrolled from Kentucky Medicaid on residency grounds during the review period, as evidence residency enforcement continued through the pandemic. Notably, CHFS's response does not dispute the $836.4 million figure itself or the underlying T-MSIS data match -- both agencies' documents state the same numbers -- and per HHS-OIG's own summary⧉, CHFS did not state concurrence or non-concurrence with any of the auditor's individual recommendations.

The auditor's formal reply.pdf) pushes back point by point.▸ On CHFS's claim that no state has the data needed to catch concurrent enrollment, the auditor writes that Kentucky already has base-level access through the federally mandated PARIS Interstate Match system -- what states lack is the faster, richer T-MSIS data that would let them catch it sooner, not the ability to catch it at all -- and argues CHFS selectively quoted the federal report it cited to make the opposite point. On the claim that the report is a mere "rehash" of a 2022 federal finding, the auditor notes the examination was one of four run in parallel at HHS-OIG's own request, alongside Ohio, Oregon, and Washington. And on the bottom line, the auditor's reply is unambiguous: the management failures it documented "contributed to over $800 million of wasted taxpayer money, not a penny of which benefited any Medicaid recipient."