AUGUSTA – The state Department of Health and Human Services has failed to correct problems the federal government asked it to fix nearly two years ago, according to a U.S. inspector general’s report.

The inspector general of the federal Department of Health and Human Services released a report earlier this month reviewing the financial accountability systems of the 49 states that participate in the Medicaid drug rebate program, which refunds billions to the states and federal government from drug manufacturers.

The nationwide audit turned up weaknesses “in accountability and internal controls” over drug rebate programs in all but four states, according to the inspector general’s report.

The report does not address how quickly the states must correct the problems, but implies some federal funding could be withheld if they aren’t corrected.

Maine was found wanting in three categories during a similar audit in September 2003 and told to improve its financial oversight.

Maine DHHS Commissioner Jack Nicholas said the state has rectified one of the three areas in which it was found lacking.

“We have not addressed them all – but we will,” he said this week.

He said the state is not yet facing sanctions for failure to address all the federal concerns.

The category that has been addressed involves resolving disputes in a timely manner within federal guidelines, Nicholas said.

He was at a loss, however, to explain why the state has not yet developed proper procedures for providing accurate pending rebate amounts to the federal Centers for Medicare and Medicaid Services, or CMS, which oversees the Medicaid program known as MaineCare in Maine.

“For some reason the Office of MaineCare services has not acted on this,” he said. “I have made it clear that this is a high priority and needs to be done.”

The second area of concern cited in the 2003 report that has yet to be fixed involves how the state accounts for disputed or unpaid rebate amounts and any late payments. Nicholas said resolution of that item depends on the new management computer system that is not yet working properly.

“This problem will be resolved in phase two of the computer system, but we have to finish implementing phase one first,” he said. “I think it is going well, but we do not have a time nailed down when this phase will be implemented.”

DHHS’ new $22 million computer system that went online in January has been fraught with software and hardware problems, causing numerous delays and inaccuracies in payments to many of the department’s 7,000 service providers. MaineCare spends about $2.6 billion a year in federal and state funds on health care services for more than 300,000 low-income Mainers.

Members of the Legislature’s Health and Human Services Committee have been getting complaints about the billing errors generated by the new computer system since it was turned on.

“I think that everybody now realizes that changes need to be made and I think we are in the process of doing that,” said committee member Sen. Arthur Mayo, D-Bath. “This is just one of the areas that need to be fixed.”

Sen. Richard Rosen, R-Bucksport, the ranking GOP member on the panel, is upset the Inspector General’s 2003 report has gone unaddressed for nearly two years.

“It’s an embarrassment to the state,” he said. “This is a major program designed to benefit the citizens and taxpayers and this was pointed out in 2003.”

He said the committee should become involved in finding out why the problems pointed out by the Inspector General in the earlier report and reiterated in this latest report are still not resolved. He said it is the responsibility of the Legislature to oversee the operation and implementation of programs, and it is not doing its job.

“We are supposed to serve as the eyes and ears of the citizens of the state of Maine,” he said. “It is our responsibility to insist that any problems like these be fixed.”

Rep. Hannah Pingree, D-North Haven, the House co-chair of the committee, said the Inspector General’s report will be on the panel’s agenda when it meets next month.

“I agree with Senator Rosen that we need to take a more aggressive oversight role, but this is just part of the overall problem of financial management at the department that we have been dealing with,” she said. “We need some answers on when things will be fixed, not just assurances that they are being addressed.”