Governor Provides $168 Million Windfall to Managed Care Organizations, Failing to Demand Return of Over-payments
Looks Like Governor Lujan Grisham’s Health Team Will Allow Manage Care Organizations to Pocket Ill-gotten Gains, Paying $119 Million to the Federal Government from General Funds to Cover the Loss, While Absorbing Another $50 Million in State Overpayments.
When New Mexico Health Care Authority Secretary Kari Armijo meets with legislators on Monday, August 18, 2025, to provide an update on federal funding of Health Care Authority programs, she needs to answer questions regarding her Medicaid Division’s failure to claw back more than $168.6 million in overpayments to Managed Care Organizations (MCOs).
She also needs to explain why her agency has apparently decided for the state to absorb costs of $119.1 million that the federal government wants returned for its share of money that MCO’s received, but were not entitled to.
The Medicaid Division’s failure to collect the over-payments also allows the MCO’s to keep about $50 million in state funds they essentially over-charged.
The recommendation of the federal government was for the state to recoup the money from the MCOs and use it to repay the federal government its share and for the state to recoup the millions in state money inappropriately gotten by the MCOs..
Instead of recouping the money from the MCOs, The Candle has learned that Armijo and her boss, Governor Michelle Lujan Grisham, are trying to cover the ill-gotten overcharges of the MCOs in a budget maneuver that uses money that could be used for other human services, and that were not spent during Fiscal Year 2024 (which ended on June 30, 2024).
That type of budget money (reversion – or unspent) would normally go to the general fund of the state, and be used for future needed services – not to cover an unearned profit to four companies that overcharged the state and federal government.
May 2024 – Feds Stick by Their Guns, Saying State Overpaid MCOs $168.6 Million
In May of 2024, as reported in The Candle over a year ago, the United States government – specifically the Office of Inspector General (OIG) of the of the Department of Health and Human Services (HHS) – determined New Mexico owes the federal government $119,118,308.
The money the federal government wants returned is the U.S. Centers For Medicare and Medicaid Services (CMS) share of the $168,675,290, the state Medicaid program overpaid Managed Care Organizations.
That decision by OIG was made after conclusion of a multi-year audit, which included reviewing the State’s response to the federal government’s claims.
“After reviewing the State agency’s comments, we maintain that our findings and recommendations are still valid,” the OIG informed the state.
And it needed to “… refund almost $120 million to the Federal Government for Medicaid Nursing Facility Level-of-Care Managed Care Capitated payments.”
To offset the anticipated cost to the state’s general fund, The OIG, strongly recommended that New Mexico claw back the $168.6 million that the Managed Care Organizations were overpaid.
New Mexico state government, through general fund appropriations, was also overcharged by the Managed Care Organizations, prompting federal officials to write in the report, “…In addition to the refunding of Federal funds, implementing our first two recommendations, which are supported by the MCO contract requirements, would return almost $50 million in
overpaid State funds.“
[See Federal Report on Audit; see full federal OIG letter to New Mexico Medicaid, related information and Notice, at the end of this article.]
The Governor Inherited This Problem – Why is She, Secretary Armijo, and Medicaid Director Flannery Allowing MCOs to Walk Away While New Mexicans Pay the Price?
To be fair politically, the period of time for the audit were years that Governor Susana Martinez and Secretary Brent Earnest ( November 2014-2018) were in charge of the state’s Human Services Department – not Governor Michelle Lujan Grisham (2019 to present day) and Secretary Kari Armijo of the Human Services Department (now named the Health Care Authority) .
But, since early in the Lujan Grisham administration, the state’s Medicaid leaders have been aware of, and involved with, an audit that revealed the overpayments.
In March of 2020, the state received an audit engagement letter from the federal government, and participated in the audit along with its contracted actuary, according to an internal HCA records The Candle acquired via an Inspection of Public Records Act (IPRA) request.
Health Care Authority Secretary Armijo is a veteran of the agency, particularly at the Medicaid Division – so this process is not unfamiliar to her.
According to the Governor’s press office, she “… spent 20 years with the New Mexico Medicaid program and left as the Deputy Director of the program where she served as the Affordable Care Act Implementation Director.”
Armijo’s career with New Mexico’s Medicaid program has spanned at least three gubernatorial administrations – Democratic and Republican.
Prior to her official appointment as Secretary, she was “Acting Secretary for the New Mexico Human Services Department since January 2023. Armijo was the Deputy Secretary for the department from 2020 – 2023.” – [Governor’s Press Release, October 13, 2023.]
Armijo, given her work in the Medicaid program during two previous administrations, should have been aware of the OIG audit process and the overpayment issues covered by the audit, even before receiving the audit engagement letter.
For More Than a Year, HCA and Medicaid Division Has Spoken Little (at least publicly) About the $168.6 Million in Over-payments to Managed Care Organizations
The Candle reached out on several occasions in the last two months to Marina Piña, Director of Communications for the HCA, and Alisa Walker-Moran, the Medicaid CFO at HCA, asking for what action the HCA’s Medicaid Division has taken to recoup the overpayments to MCOs, or in the alternative, was the State going to appeal the OIG findings.
Ms. Piña has refused to respond in any way.
CFO Walker Moran told us she was not allowed to comment and that she would forward our questions and contact information to Ms. Piña and HCA General Counsel.
General Counsel provided no response, even as to whether the State is considering an appeal.
Due to the refusal to answer any questions relative to the OIG audit and recommendations, The Candle filed an IPRA request to retrieve communications and other related public records.
The Candle received a partial response from the HCA to our IPRA request seeking records and communications regarding the audit for the period of time between 2017 and present day.
However, conspicuously missing are communications made since just before the OIG issued its final report (May 2024) and present day.
After numerous conversations with the HCA General Counsel’s office custodian of public records, The Candle has determined that we will file an IPRA Complaint and Writ of Mandamus asking the Courts to order the release of communications it appears the HCA is withholding.
At the May 2025, meeting of the Medicaid Advisory Committee, Medicaid Director Dana Flannery, while discussing the HCA budget process, passed the baton to the Medicaid CFO Elisa Walker-Moran, who made the following comments regarding the approximate $120 million the state might have to pay back to the federal government for the overpayments to MCOs:
- “The other thing we’ve built into the projection model is some potential audit findings that we may have to pay. I put a comment in there. $120,000,000 audit finding.
- We’ve split those between fiscal year 24 and 25.
- “It is an audit that goes back ten years. So if the finding is finalized.
- “It started with the last administration. It just was not finalized. So if it is finalized and we owe that money, then we’ve actually accounted for that in the projection model as a risk.
- “And then we also have many of, you know, we now have a two sided MCO risk. Order, which means we share in the profits and the losses for MCO. To help with some of their risk. Okay, next slide.
CFO Walker-Moran described the OIG report as “potential audit findings” despite OIG writing in May of 2024, “After reviewing the State agency’s comments, we maintain that our findings and recommendations are still valid.”
In addition, the Medicaid CFO did not mention the fact that the State also overpaid almost $50 million in general fund dollars to the MCOs – those are funds meant to care for people, not provide ill-gotten profit for the MCOs.
According to the OIG audit process, the HCA and its Medicaid Division could file an appeal with the U.S. DHHS Departmental Appeals Board (DAB).
Not providing an answer for almost a year to the question of whether or not HCA will appeal the OIG findings, combined with NM Medicaid CFO Walker Moran’s comments from the May 2025, MAC meeting, indicates the MCOs will get to keep the money.
That means, at a minimum, New Mexico state government has lost $50 million in general funds overpaid to MCOs.
And it could mean the state has to hand over another $119.1 million to the federal government, to cover the windfall the MCOs received in overpayments.
Other legislative sources have confirmed that the HCA is headed in the direction to have the State cover the costs that OIG determined New Mexico overpaid MCOs, by using FY24 reversion-type dollars.
The failure to communicate to the public and to legislators regarding the largess received by the MCOs at the public’s expense, is one problem.
But not at least trying to recoup the $198.6 million in total overpayments, is an insult to all stakeholders.
And, it’s deserving of questions from legislators – and public responses from the twenty-year Medicaid Division veteran Secretary Armijo, when she meets with them to review federal funds for the HCA.
Copy of United States Health and Human Services Office of Inspector General Report in Brief: