AUGUSTA – The state mistakenly paid $10.7 million to medical providers over a two-year period for patients who were ineligible for the Medicaid services they received, Health and Human Services Commissioner Mary Mayhew said Friday.

Because of the mistake, the state will have to pay back an estimated $3.8 million to the federal government, which pays a share of the cost for MaineCare.

Mayhew said 7,730 people who should have been removed from MaineCare — the state’s Medicaid program — were not. Previous estimates ranged as high as 25,000 people, but further analysis by the DHHS, the state controller and state information technology offices produced the smaller figure.

“Our system is complex, and it’s complicated by a new claims processing system that has yet to be stabilized and relies on eligibility systems at least a decade old,” Mayhew told members of the Legislature’s Appropriations Committee. “There is much more work to be done to establish a system on which we can have significant reliability.”

Part of that work is more study of an additional $1.8 million that may have been paid out erroneously from January to March of this year, she said. That will take at least a few months.

The problem came to light in March, when Mayhew told the governor and legislators that there were significant problems with computer systems in her department. The disclosure came after the Legislature passed an initial budget to plug a shortfall in the DHHS budget for the fiscal year that ends June 30. Balancing the budget meant reducing or eliminating MaineCare benefits for thousands of Mainers.

Democrats have criticized the DHHS, and Mayhew in particular, for not disclosing the computer problem before they had to vote on the budget. Lawmakers have since directed the Office of Program Evaluation and Government Accountability, the state’s watchdog office, to investigate why the problem was not disclosed to lawmakers sooner.

Patrick Flood, R-Winthrop, House chairman of the Appropriations Committee, asked Mayhew on Friday whether the state would be able to recover any of the state money that was mistakenly paid to providers.

“No,” she replied. “These health care providers that provided services had a card. These individuals were viewed as eligible. I don’t see that as an opportunity to recover.”

The figures presented by the DHHS on Friday will help lawmakers as they begin work to balance the DHHS budget through June 30, 2013.

Accounting for the people who were removed from MaineCare and the repayment to the federal government, the net effect is a $1.5 million reduction in a budget shortfall that was projected in December to be $89 million.

Other changes that have occurred since December’s estimate will shrink the deficit further, and additional revenue that will be considered on Monday will reduce it even more.

Last month, Maine Revenue Services told lawmakers that it failed to account for $14 million in revenue earlier this year, so that money will help lower the deficit.

During Friday’s discussion, Rep. Peggy Rotundo, D-Lewiston, pressed Mayhew on the communication breakdown.

“We did not get this information in a timely way when we were putting together the budget,” she said. “We were having public discussions about figures and wanting to get accurate figures, and someone out there was not tuned in to the fact that numbers were relevant to what we were doing.”

Mayhew said that at the time, there were so many problems with the system that it was hard to determine which ones were important enough — or caused a significant fiscal effect — to warrant the attention of upper-level DHHS managers and lawmakers.

“How it gets communicated dictates how people respond to it,” she said. “To hear that it is ‘Change request number 8,456’ doesn’t mean anything if you aren’t defining it as an issue related to claims for ineligible members.”

Mayhew and others are working to ensure that such problems don’t happen in the future. Lawmakers said they hope they can now trust numbers from the department.

Rep. David Webster, D-Freeport, said, “This gives me some hope we will have more dependable numbers and more dependable communications so we can make the decisions we need to make.”

State House Writer Susan M. Cover can be contacted at 620-7015 or at:

[email protected]