National Auditor says MiCare has been troubled by management issues but new team optimistic

By Bill Jaynes

The Kaselehlie Press


December 20, 2018

FSM—The Office of the National Public Auditor conducted an audit of MiCare operations specifically covering the years 2015-2017.  It shows that in 2015, MiCare had a positive net position of $367,805 but that over the next two years the position declined. By 2016 Micare had a deficit of $449,795 and by the end of 2017, the deficit was $1,143,942.

In 2017, MiCare hired a new Executive Director The auditor says that the new leadership team is optimistic, yet much work needs to be done.

OPA found that there had been inadequate corporate governance.  It found that management had inadequate annual budget that failed to implement the Strategic Plan of the organization in order to achieve its goals and objectives.  It found that there was a lack of a risk management policy and framework.  There was a lack of performance evaluations for the Administrator and Senior Management.  There was an absence of effective information and communication technology controls resulting in the breakdown of MiCare’s operations and loss of critical data.  It found that there was an absence of performance results and measures to implement monitoring and reporting controls.  Management had not developed adequate internal policies to provide necessary direction and guidance in managing their day-to-day operations.  There was no code of ethics and independence declaration for Senior Management and members of the Board of Directors which could and likely did result in conflict-of-interest decisions, though the audit did not specifically accuse MiCare of that.  The Board and Management failed to provide effective oversight and guidance on management of the Plan’s accounts receivable.

Auditors made many recommendations for improvement under nine general headings: Corporate Governance, Annual Operation Plan and Budget, Risk Management, Performance Evaluation, Information Technology, Performance Monitoring and Reporting, Internal Policies and Procedures, Code of Ethics, and Collection of Accounts Receivable.

One of the items discussed was the difference between premiums collected and claims paid out in any given year.  Of particular difficulty was the Chronic Refill Option Program.  Under that option, the plan covers a 30 day supply of as many prescriptions as necessary, per month, per year.  To access that option, the covered person must pay an annual deductible of $200 to the Plan.  In 2016 there were 162 covered people who took advantage of that option for a total of $32,400 in deductibles paid to MiCare.  However, MiCare paid out $346,062.27 in claims under that option, $313,662.27 more than it had collected in deductibles.  It was just one example of problems that Management and the Board will need to resolve for the solvency of the program.

Another difficulty is collections on the Promissory Notes Program.  That plan was established to assist referral patients who encounter difficulties in advancing 50 percent of prosthesis costs.  The period for repayment for referral patients under the plan is six months. In 2013 60 percent of the promissory notes were still outstanding at the end of the year for a total of $94,906 not paid off of the $157,178 advanced to referral patients.  The amounts steadily increased so that by 2017, 95 percent of promissory notes for that year were unpaid for a total of $434,454.89 unpaid of the $455,873.08 advanced that year.

On the whole, the management response to the audit agreed with the findings.  It also pointed out that MiCare is a non-profit entity.  “MiCare has an investment,” it said, “but charging unreasonable premiums to members for purpose of profit may decrease enrollment, thus great contribut(ing) to financial woes.”

In the past, the National Government has had to subsidize MiCare for its solvency.

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