State Auditor Brian Sonntag says he cannot properly account for any of Medicaid's $6.1 billion annual budget in Washington because the program's employees deliberately obstructed...

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State Auditor Brian Sonntag says he cannot properly account for any of Medicaid’s $6.1 billion annual budget in Washington because the program’s employees deliberately obstructed an official audit.

Sonntag plans to “disclaim” the entire state Medicaid system in a highly critical audit his office expects to release within two weeks. A disclaimed audit means the auditor did not get enough information to reach an opinion, because the information was either withheld or non-existent.

The state agency that oversees Medicaid disputes the findings, saying the audit “falls short” of professional standards.

Among the concerns state auditors investigated, Sonntag said, were improper payments for dead clients and undocumented immigrants, and possible reimbursements to nursing homes that failed inspections.

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Many of those problems came to light in March in a separate audit of the Department of Social and Health Services (DSHS), which manages the federal-state health program for the poor. That helped prompt the deeper look at Medicaid.

DSHS Secretary Dennis Braddock criticizes process.

Under federal rules, the Medicaid program must be audited once a year.

The new audit has triggered a flurry of sometimes-angry e-mails and letters between the Auditor’s Office and DSHS.

In an interview yesterday, DSHS Secretary Dennis Braddock said he is concerned about the findings and how they will appear to the federal government, which provides about half the Medicaid funding. “No one knows the ramifications at this point,” he said.

“We view with great concern any adverse outcomes,” said Rod Haynes, a spokesman for the federal Centers of Medicare and Medicaid Services in Seattle. He added, though, that he couldn’t say how the federal government would respond to the audit until its release.

Sonntag said he believes DSHS staff resisted the audit because of ongoing problems with payments to ineligible recipients, an antiquated computer system and a general resistance to the auditing process.

“We want to be able to report that the money is going to the right place, to the right folks and for the right reasons,” he said. “In this case, we are not getting to that.”

Braddock blamed the dispute on the poor computer system, miscommunication and “personality conflicts” between the two agencies.

Sonntag warned of the audit’s findings in a Nov. 19 letter to Braddock. He said the disclaim status is “the result of deliberate action taken by some department management and staff to prevent the performance of our audit.”

He also said his staffers were subjected to unjustified attacks on their integrity, independence, competence and knowledge.

Braddock responded in a Dec. 2 letter that said: “I am shocked by your allegations that DSHS employees would deliberately interfere with a state audit. Neither I nor my executive team has been presented with evidence supporting such a statement.” He added that the audit “falls short of professional audit standards.”

Sonntag said his 300 staffers regularly audit 2,700 units of government, ranging from tiny local boards to large state agencies. Never before have they encountered such resistance or attacks, he said. He added that he and Braddock are personal friends embroiled in a professional disagreement.

Auditors were routinely denied interviews with key staff and access to documents over a period of months, Sonntag said. Some data was changed midway through the audit, undermining its integrity, he added.

Braddock said the data changed because it is constantly updated and cannot be frozen, due to the outdated computer system, which DSHS is working to replace.

The deteriorating relationship between the Auditor’s Office and DSHS can be seen in heated correspondence.

In one e-mail to Sonntag’s office, Heidi Robbins Brown, a Medicaid deputy assistant secretary, said lead auditor Silvana Golda misrepresented information, tricked a staffer and generally took an “accusatory position.”

Sonntag said Golda and other auditors picked for the probe are among the agency’s top staff. “I’m really proud of the people who have done this work; they have been great,” he said.

The new audit aimed to explore problems unearthed by the March DSHS review. Among them:

• Eight providers collected money for services given to clients after their deaths.

• DSHS spent $1.3 million for inappropriate services to 148 undocumented immigrants — including adult day care, massages, dental fillings, eye exams and breast pumps.

• The auditor couldn’t verify any of the $1.5 billion spent on prescription drugs, due to unreliable data.

• Nearly two-thirds of DSHS offices reviewed by auditors did not verify Social Security numbers when clients applied for benefits. DSHS staff ignored federal alerts for fraudulent Social Security numbers and often did not use a verification system because they weren’t adequately trained.

• A review of 10 families enrolled in Medicaid’s Basic Health Plus, a health-care program for children, found that eight either did not meet income requirements or could not provide documentation to show they qualified.

• There were insufficient controls to ensure that Medicaid payments didn’t go to nursing homes that failed to meet required standards.

Braddock said yesterday there may be legitimate reasons for apparent payments to dead people. For example, a woman who doesn’t have a Social Security number could be registered in Medicaid’s system under her deceased husband’s number, he said.

And exactly what services undocumented immigrants are allowed is in dispute, Braddock said. They do qualify for emergency services under Medicaid.

“We’ve been sued for not giving services, and the auditor gives us a citation for giving too many services,” he said. “It’s difficult … We find the rules on this are pretty ambiguous.”

Sonntag said he hopes the audit will help prompt improvements within the Medicaid system.

Nick Perry: 206-515-5639 or nperry@seattletimes.com;

Jonathan Martin: 206-464-2605 or jmartin@seattletimes.com