updated 7/20/2007 1:25:47 PM ET 2007-07-20T17:25:47

The District of Columbia risks losing federal funds because it has overpaid contractors almost $100 million for medical services, an audit found.

The D.C. Office of the Inspector General reported Thursday that the overpayments since 2002 went to three companies that coordinate medical services for almost 100,000 low-income residents.

William J. DiVello, assistant inspector general, said the auditors aren’t saying that companies did anything illegal, but that the “district just didn’t do a good job monitoring them.”

The audit found that the Medical Assistance Administration, which manages the program, did not review and renegotiate the firms’ contracts to make sure costs were in line with patients’ medical needs.

It also found fault with the agency’s “one size fits all” way of paying. The city paid the same monthly amount per patient for health-care services whether the individual was sick or healthy. If the contractors didn’t have to pay a doctor for a patient’s treatment, it could keep the funds.

The report said Amerigroup Maryland had received $74 million more than necessary for patient care since 2002, D.C. Chartered Health Plan was overpaid $17.5 million, and Health Right received an extra $5.1 million.

Only 64 cents of every D.C. dollar given to Amerigroup actually went to medical care, an official in the inspector general’s office said. The rate typically is more than 80 cents per dollar for other managed care organizations in Maryland and Virginia, the report said.

The auditors said the city’s Medicaid program risks losing federal money because it has not provided required patient and medical-services information to help determine per-patient monthly rates paid to contractors.

Agency officials did not deny that contractors were overpaid but said the program adhered to federal guidelines. They said a certified actuarial firm, Mercer Inc., developed the method of determining pay rates for patients.

Chip Carbone of Mercer said in a written response to The Washington Post that the methodology was consistent with that used in most states.

The city’s health director, Gregg A. Pane, said in a written response that the inspector general’s office did not credit the agency for improvements in the Medicaid program in recent years — including major reforms and aggressive management changes in the program’s oversight.

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