Will Lawmakers Demand Governor Try to Claw Back $168 Million in OIG Identified Medicaid Over-payments to MCOs?
Governor Lujan Grisham and Legislators to Address Federal Cuts in Vital Social Programs With Initial Projected Special Session Costs of $165 Million. What about the $168 Million State Made in Over-payments to Managed Care Organizations?
Over the weekend, the Santa Fe New Mexican’s Daniel Chacón reported that Governor Michelle Lujan Grisham and legislators were “still hammering out the financial details” for the Special Session the Governor summoned to begin this Wednesday, October 1, 2025.
The purpose of the Special Session is ostensibly to address the loss of federal funds as a result of the Republican Congressional sponsored “One Big Beautiful Bill Act.”
Chacón wrote, that as of Thursday, “the general appropriations bill the Legislature is poised to consider totaled about $165 million…”
New Mexico, like many states, will need to step in to fill the void in essential services over the next several years if Congress doesn’t reverse at least some of the provisions of the “One Big Beautiful Bill Act.”
Despite decent reserves in special funds, and state revenues expected to have some low to moderate growth, the state will need to marshal all its resources in planning for the federal cutbacks.
New Mexico Health Care Authority Secretary Kari Armijo has said her agency feels the pressure to address what many have described as draconian cuts for services to vulnerable New Mexican residents.
Will Legislators Demand More Information About Reconciliation of $168 Million in Over-payments to MCOs, as Identified by Federal Office Of Inspector General?
It is clear to most, that New Mexico state government leaders need to address federal cuts and systemic changes to the Medicaid and other programs.
However, one big state budget matter the Governor and Secretary Armijo are not talking about, unless cornered, is their failure to claw back over $165 million in what federal investigators found the state made in overpayments to Managed Care Organizations (MCOs).
The over-payments identified by the OIG relate to spending dating back to the administration of former Governor Susana Martinez. However, the current administration has failed to act on strong recommendations by the federal watchdog agency to claw back what it identified as unjustified payments to MCOs for services not provided.
House Speaker Javier Martinez and Senate Majority Leader Peter Wirth could use the Special Session this week to add language to any budget bill that includes a directive to the executive to take whatever action necessary to try and recoup the over-payments.
Armijo’s agency seems to be rolling over to the MCOs, as it has set aside $120 million to return to the federal government for what the federal budget watchdog has identified in overpayments to the MCOs, and that Armijo has yet to demand back from the MCOs that received those overpayments.
That means that the Governor is already setting aside general fund revenues to cover the largess provided by the Martinez administration to those MCOs – at the potential expense of having that $120 million unavailable for offsetting other cuts.
Add to the $120 million New Mexico may have to pay back to the federal government, another almost $50 million already paid in state general funds for what the OIG identified as the state’s share in over-payments to the MCOs.
The $168 million in overpayments made to MCOs, was identified in the Office of Inspector General (OIG) final report in May 2024, that New Mexico Should Refund almost $120 Million to the Federal Government for the federal government’s share of what the state should have forced the MCOs to repay.
(A copy of the US OIG Report on the $168 Million in Over-payments is at the end of this reporting.)
On August 18, 2025, in response to a series of questions regarding the $168 million in MCO overpayments Armijo, told members of the Legislative Health and Human Services Committee:
““We’ve been working with the LFC.
“It’s been pretty transparent in terms of our budgets and our projection.
“Um, because it is a risk to the budget.
“But I think we are trying to figure out.
“There’s usually sort of a run out on financial liabilities, and so we’re really kind of researching that.
“But, you’re not wrong, Madame Chair, that there could be some liabilities for old [sic], if there was an over-payment.”
(A transcript of the full exchange between Secretary Armijo and Legislators regarding the OIG Report can be found at the end of this reporting.)
When Legislators meet in Session on Wednesday, they need to demand a public explanation as to why the administration appears to be letting the MCO’s keep the $168 million in OIG identified over-payments.
As Previously Reported by The Candle, the HCA Appears to be Letting the MCOs Keep the $168 Million in Over-payments
From The Candle on August 17, 2025:
At the May 2025, meeting of the New Mexico 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.
Copy of United States Health and Human Services Office of Inspector General Report in Brief:
Transcript of Questions and Comments From Representative Joanne Ferrary and LHHS Chairwoman Liz Thomson, and Responses from HCA Secretary Kari Armijo
Monday, August 18, 2025 – Legislative Health & Human Services Committee Meeting
Representative Joanne J. Ferrary asks:
“Thank you, Madam Chair and thank you Madam Secretary.
“It’s been in the news lately, about the $168 million in overpayments to managed care. And I was wondering why we’re, um, forgiving them, and the $119 million that the Feds want back, and then the $50 million that was overcharged.
“Couldn’t we use that money to help pay, and for, you know, what we’re losing, especially for SNAP, and also to shore up you know BeWell, members?”
Secretary Kari Armijo responds:
“Madam Chair, Representative, I don’t believe that was in the news, I think it was in a blog.
“And it isn’t accurate, so I just want to really kind of be super clear.
“There … there is a … there was an Office of Inspector General audit of the agency’s capitation payments and reconciliations, that goes back to about 2014, and I think that’s what is being referred to.
“Uh, there, under that, the Federal Office of Inspector General calculated that we owed about $119 million, I believe.
“Um, however we’re very much still in negotiations about that with the federal government. And the federal CMS, which makes the final decision, has not made a final decision.
“So, that is very much in flux.”
“And of course, I don’t think it’s an over-payment.
“Our position is that we owe zero, and that it’s really an incorrect finding.
“And it’s a very complicated financial issue, so I’d be happy to kind of talk offline.
“It’s, probably would put half of you all to sleep.
“But it is really about reconciliations and, um, recoupments, uh, related to our Community Benefit program, and it goes back more than a decade, so it’s kind of a complicated finding.
“I just … I don’t really think it’s an apples to oranges kind of comparison, and I think the information was a little bit inaccurate, um, yeah.
Representative Joanne J. Ferrary states:
“Okay, well thank you, Madam Chair and Madam Secretary, for that explanation.
“Because I’m sure if there were funds that we could recoup, that we would put them to better use than just letting the MCOs have them.”
Secretary Kari Armijo responds:
“Madame Chair, Representative, of course, I think a big part of that financial burden actually would be general fund, and so I don’t think it’s fair to say that it’s overpayments.
“And like I said, our position is that there’s zero.
“Um, and many of those MCOs, some of them don’t even, aren’t even in the New Mexico market.
“We’ve, we don’t have relationships with them now, so it’s, how you get money back from an exited MCO, it’s kind of a complicated scenario.
“So, we’ll work through it.
“I’m happy to provide you all with updates and information, but, um, you know, our position really is to try and protect the state against $119 million, uh, finding or hit.
“Um, so that’s really what we’re coming from, and we don’t think that it’s an accurate finding, so.
Representative Joanne J. Ferrary states:
“Thank you for that explanation. Thank you, Madam Chair.”
Chairwoman Liz Thomson states:
“So, just on that, on that issue, um if it turns out that it is an over-payment, can’t we take companies that we don’t have a relationship with to Court, or the ones we do, for that matter?
“I mean, it’s not really a lost cause, is it?”
Secretary Kari Armijo responds:
“Madam Chair, Uh, maybe not.
“I think, uh we have actually been looking at the contract, and I, I mean, to be, to be fair, we are preparing in case we have to pay this back.
“I mean, we are, we do have a plan.
“We’ve been working with the LFC.
“It’s been pretty transparent in terms of our budgets and our projection.
“Um, because it is a risk to the budget.
“But I think we are trying to figure out.
“There’s usually sort of a run out on financial liabilities, and so we’re really kind of researching that.
“But, you’re not wrong, Madame Chair, that there could be some liabilities for old [sic], if there was an over-payment.”
Chairwoman Liz Thomson states:
“Okay, thank you.”