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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

December 2013: 

Medicaid: 

CMS Should Ensure That States Clearly Report Overpayments: 

GAO-14-25: 

GAO Highlights: 

Highlights of GAO-14-25, a report to congressional requesters. 

Why GAO Did This Study: 

While states and certain federal entities have had long-standing roles 
identifying Medicaid improper payments, the Deficit Reduction Act of 
2005 expanded CMS’s role in identifying improper payments. As a 
result, CMS created a national audit program, which uses federal 
contractors to audit state Medicaid claims and identify overpayments—
payments that should not have been made or were higher than allowed—to 
providers. States are responsible for recovering any identified 
overpayments and reporting the return of the federal share of those 
overpayments to CMS. 

GAO was asked to examine states’ efforts to recover and report 
overpayments identified by federal audits, and examine CMS’s review of 
state reporting. This report assesses the extent to which: (1) states 
recovered Medicaid overpayments identified by federal audits and 
reported the return of the federal share, and (2) CMS reviewed states’ 
reporting of Medicaid overpayments related to these federal audits. 
GAO obtained overpayment and recovery data from all states with an 
identified overpayment and compared this with CMS data; reviewed 
relevant laws, regulations, and CMS guidance; and interviewed CMS and 
state officials. 

What GAO Found: 

States recovered $9.8 million in Medicaid overpayments, but they did 
not clearly report the overpayments and the return of the federal 
share to the Centers for Medicare & Medicaid Services (CMS). Federal 
audits initially identified about $20.4 million in potential Medicaid 
overpayments across the 19 states with identified overpayments from 
June 2007 through February 2012. Of the $13.3 million in net 
overpayments shown below, states recovered $9.8 million and were in 
the process of recovering the remaining $3.5 million. States should 
have reported the return of the federal share for $13.3 million on the 
line designated for overpayments identified by national audit program 
contractors on the CMS-64—-the form that states fill out quarterly to obtain federal reimbursement for Medicaid services. However, states made multiple reporting errors. Specifically: 

* instead of reporting $13.3 million, states reported the return of 
the federal share for $12.4 million and did not report the return of 
the federal share for the remaining $855,000; and; 

* within the $12.4 million that was reported by states, $6.6 million 
was correctly reported on the CMS-64, while the remaining $5.8 million 
was reported in the CMS-64, but not in the correct line. 

Figure: Overview of Potential Medicaid Overpayments, Reductions, and 
Recoveries: 

[Refer to PDF for image: illustration] 

Federal audits initially identified $20.4 million in potential 
overpayments: 
* Reductions, primarily due to successful provider appeals and 
settlements, amounted to $7.1 million; 
* After reductions, $13.3 million in net overpayments remained: 
- States recovered $9.8 million; 
- States were in the process of recovering the remaining $3.5 million. 

Source: GAO review of The Centers for Medicare and Medicaid Services 
(CMS) documents. 

[End of figure] 

CMS generally reviewed states’ reporting of overpayments but was not 
always aware of incomplete reporting. All 7 of the CMS regional 
offices GAO spoke with indicated that reviewing states’ reporting of 
the return of the federal share of overpayments was a routine part of 
their quarterly review of the CMS-64 and helped ensure the timely 
return of the federal share of overpayments in 59 of the 89 audits GAO 
reviewed. In some cases, though, regional offices were not always 
aware that states’ reporting was incomplete. CMS’s Medicaid Integrity 
Group may review data from these audits on the designated line of the 
CMS-64, which can be an important gauge for measuring the 
effectiveness of CMS’s efforts to reduce improper payments. However, 
reviewing these data would not yield a clear picture of the return of 
the federal share of overpayments given the errors GAO identified in 
state reporting. 

What GAO Recommends: 

GAO recommends that the CMS Administrator increase efforts to ensure 
that states are clearly reporting overpayments identified by federal 
audits in the designated location of the CMS-64 form. HHS concurred 
with this recommendation. 

View [hyperlink, http://www.gao.gov/products/GAO-14-25]. For more 
information, contact Carolyn L. Yocom at (202) 512-7114 or 
yocomc@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

States Recovered $9.8 Million in Medicaid Overpayments, but Did Not 
Clearly Report the Overpayments and the Return of the Federal Share to 
CMS: 

CMS Generally Reviewed States' Reporting of Overpayments, but Was Not 
Always Aware of Incomplete Reporting: 

Conclusions: 

Recommendations: 

Agency Comment: 

Appendix I: Medicaid Overpayments Identified by Federal Audits 
Conducted June 2007 through February 2012: 

Appendix II: Comments from the Department of Health and Human Services: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Figures: 

Figure 1: CMS and State Roles in Identifying, Recovering, and 
Reporting Medicaid Overpayments: 

Figure 2: Overview of Potential Medicaid Overpayments, Reductions, and 
Recoveries from Federal Audits Conducted June 2007 through February 
2012: 

Figure 3: States' Reporting of the Return of the Federal Share from 
Audits Conducted June 2007 through February 2012: 

Abbreviations: 

CMS: Centers for Medicare & Medicaid Services: 

DRA: Deficit Reduction Act of 2005: 

FAR: Final Audit Report: 

HHS: Department of Health and Human Services: 

MIG: Medicaid Integrity Group: 

NMAP: National Medicaid Audit Program: 

[End of section] 

GAO:
United States Government Accountability Office: 
441 G St. N.W. 
Washington, DC 20548: 

December 6, 2013: 

The Honorable Thomas R. Carper: 
Chairman: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Darrell Issa: 
Chairman: 
Committee on Oversight and Government Reform: 
House of Representatives: 

The Centers for Medicare & Medicaid Services (CMS), the federal agency 
within the Department of Health and Human Services (HHS) that oversees 
Medicaid, estimated that $19.2 billion of Medicaid's federal 
expenditures in fiscal year 2012 involved improper payments.[Footnote 
1] Improper payments include overpayments, which are any payments that 
should not have been made or were more than allowed. While states and 
certain federal entities have had long-standing roles in program 
integrity activities, such as identifying improper payments and 
recovering overpayments,[Footnote 2] the Deficit Reduction Act of 2005 
(DRA) expanded CMS's role.[Footnote 3] CMS subsequently established 
the National Medicaid Audit Program (NMAP), which uses contractors to 
audit state Medicaid claims. From June 2007, when these audits began, 
through February 2012, NMAP contractors conducted over 1,500 audits 
and identified potential overpayments to health care providers of 
about $20.4 million in their audit reports. 

States are responsible for recovering overpayments identified by 
audits. Because the federal government matches states' expenditures 
for most Medicaid services, a portion of the overpayments are federal 
dollars that states must return to CMS. States return the federal 
share by reporting the overpayment amount on the CMS-64--a form that 
states fill out quarterly to obtain federal reimbursement for services 
provided under the Medicaid program.[Footnote 4] 

Our recent work identified limitations in the effectiveness of NMAP 
audits and instances where states may have under-reported the recovery 
of overpayments.[Footnote 5] To follow-up on our recent work, you 
asked us to examine states' efforts to recover and report overpayments 
identified by NMAP contractors--which we refer to as federal audits--
and CMS's review of state reporting. This report focuses on the extent 
to which: 

1. states recovered Medicaid overpayments identified by federal audits 
and reported the return of the federal share, and: 

2. CMS reviewed states' reporting of Medicaid overpayments related to 
these federal audits. 

To address both reporting objectives, we collected data on state 
recoveries and conducted structured interviews with all 19 states that 
had one or more overpayments identified by federal audits conducted 
from June 2007 through February 2012. We chose this end date because 
states should have reported the return of the federal share for their 
overpayments to CMS by March 2013 when we began our data collection. 
[Footnote 6] We compared the data we collected from states on 
recoveries to the overpayments identified by the federal audits and to 
the overpayments reported by the states on the CMS-64. We also 
interviewed CMS headquarters staff, including the Medicaid Integrity 
Group (MIG), the main entity responsible for establishing policies for 
the NMAP and, through the contractors, conducting the federal audits; 
the Financial Management Group, which is responsible for reviewing the 
CMS-64; and the 7 CMS regional offices responsible for overseeing the 
reporting of overpayments for the 19 states that had an identified 
overpayment. In addition, we reviewed relevant Medicaid Integrity 
Program laws and regulations. We also reviewed CMS guidance issued to 
states on reporting of overpayments from federal audits, including the 
CMS financial review guide on the CMS-64.[Footnote 7] 

We reviewed the state data we collected for reasonableness and 
verified whether the provider identification, overpayment amount, and 
audit report's issuance date was consistent with overpayment data from 
the federal audits. In four instances, we found differences in the 
overpayment amount identified by the state and by the federal audits. 
For these instances, we discussed the differences with the states and 
CMS and resolved the discrepancies. Based on these checks, we 
determined that these data were sufficiently reliable for our 
purposes. We also performed checks of the CMS-64 data, and discussed 
these data and their internal controls with knowledgeable CMS 
officials. Because state reporting of overpayments on the CMS-64 was 
incomplete, we discuss the CMS-64's data limitations in this report, 
but did not use these data to report states' return of the federal 
share of overpayments.[Footnote 8] 

We conducted this performance audit from January 2013 to December 2013 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

When a contractor conducts a federal audit of claims data and 
identifies an overpayment, the contractor drafts an audit report and 
obtains comments from CMS, the provider, and the state before 
submitting the completed report to CMS. Within CMS, the MIG reviews 
the audit contractor's submission and, when finalized, sends a final 
audit report (FAR) to the state, as well as the appropriate CMS 
regional office that oversees the state. The FAR identifies the total 
overpayment amount paid to the provider and specifies the amount of 
the federal share of that overpayment the state must return.[Footnote 
9] 

To initiate recovery of the overpayment, the state sends a demand 
letter to the provider indicating the amount due as identified in the 
FAR. Providers may opt to appeal the findings in the FAR, thus 
initiating an appeals process that is determined by each state and is 
subject to the state's Medicaid program requirements.[Footnote 10] 
When the state's appeals process is complete, that decision determines 
the final amount owed by the provider. This final amount may be the 
full overpayment, a reduced amount of the overpayment, or nothing. 

The state generally has one year from the date of the FAR to recover 
the overpayment from the provider before reporting the return of the 
federal share to CMS.[Footnote 11] Federal law requires the state to 
return the federal share of the overpayment regardless of whether the 
state was able to recover it, unless the provider has been determined 
to be bankrupt or out of business.[Footnote 12] If the overpayment is 
reduced through an appeals process, the state is only required to 
return the federal share for the net overpayment amount. 

CMS has had a long-standing requirement that states report 
overpayments and the return of the federal share on the CMS-64. 
Beginning in fiscal year 2010, CMS initiated a more detailed reporting 
requirement to better track overpayments and the return of the federal 
share from different types of audits. As a result, CMS required states 
to report overpayments from federal audits, as well as other sources--
such as state audit results, Medicaid Fraud Control Units, and others--
on each of the six line items specified for each type of audit. 
[Footnote 13] The reported overpayments are subtracted from the 
states' Medicaid expenditures, which forms the basis for computing the 
federal share of program costs. 

CMS's regional offices are responsible for overseeing states' 
reporting of overpayments identified in the FARs and receive a copy of 
the FAR when it is sent to a state in its region.[Footnote 14] The FAR 
alerts the regional office of its responsibility for ensuring that the 
state reports the overpayment identified and returns the federal share 
at the applicable federal match within one year from the date of the 
FAR. If the state does not return the federal share of an overpayment 
within one year, the state will be liable for interest on the federal 
share of overpayments not recovered and not returned.[Footnote 15] 
(See figure 1.) 

Figure 1: CMS and State Roles in Identifying, Recovering, and 
Reporting Medicaid Overpayments: 

[Refer to PDF for image: process illustration] 

CMS Contractor: 
Conducts audits to identify potential overpayments; 
Drafts audit reports and obtains comments from CMS, the provider, and 
state before submitting the completed report to CMS. 

CMS: 
Reviews the completed report and sends a final audit report (FAR) to 
the state. 

State: 
Notifies provider of the overpayment and initiates the recovery; 
* Recovers the full overpayment: 
- Reports the overpayment and the return of the federal share to CMS; 
* Recovers the net overpayment after provider appeals: 
- Reports the overpayment and the return of the federal share to CMS; 
* Recovers no overpayment: 
- Provides documentation to CMS that explains why the overpayment is 
unrecoverable. 

Source: GAO review of The Centers for Medicare and Medicaid Services 
(CMS) documents. 

[End of figure] 

States Recovered $9.8 Million in Medicaid Overpayments, but Did Not 
Clearly Report the Overpayments and the Return of the Federal Share to 
CMS: 

Federal audits conducted from June 2007 through February 2012 
initially identified $20.4 million in potential Medicaid overpayments 
across 19 states, an amount that was reduced by $7.1 million, 
primarily due to successful provider appeals and settlements. Of the 
remaining $13.3 million in net overpayments, states recovered $9.8 
million in overpayments as of March 2013, and state officials told us 
that they are in the process of recovering the remaining $3.5 million. 
(See figure 2.) (Appendix I summarizes the potential Medicaid 
overpayments identified by federal audits, net overpayments, and state 
recoveries.) 

Figure 2: Overview of Potential Medicaid Overpayments, Reductions, and 
Recoveries from Federal Audits Conducted June 2007 through February 
2012: 

[Refer to PDF for image: illustration] 

Federal audits initially identified $20.4 million in potential 
overpayments: 
* Reductions, primarily due to successful provider appeals and 
settlements, amounted to $7.1 million; 
* After reductions, $13.3 million in net overpayments remained: 
- States recovered $9.8 million; 
- States were in the process of recovering the remaining $3.5 million. 

Source: GAO review of The Centers for Medicare and Medicaid Services 
(CMS) documents. 

[End of figure] 

Of the $7.1 million in overpayment reductions, state officials told us 
that successful provider appeals and settlements accounted for $6.9 
million of that total; the remaining overpayment reductions--
approximately $186,000--represented overpayments that states had 
already identified and recovered or were overpayments that could not 
be recovered due to the provider filing for bankruptcy. State 
officials told us that appeals may be successful for a number of 
reasons. For example, in one state, providers successfully 
demonstrated that state law did not preclude them from receiving 
payments for services provided to Medicaid patients, even though they 
were not approved Medicaid providers. In another state, providers 
successfully appealed an audit's finding that services were not 
medically necessary. 

The $9.8 million in recovered overpayments represented full recoveries 
in 15 of the 19 states we reviewed. Officials in the remaining 4 
states told us they were in the process of recovering $3.5 million in 
overpayments, accounting for the remainder of the $13.3 million in net 
overpayments. Medicaid overpayments may be recovered by offsetting a 
provider's subsequent Medicaid reimbursements against the balance due 
to the state, and officials in 3 states told us that, as a result, 
certain providers had not yet paid the full amounts owed. In the 
fourth state, officials told us that the overpayments had not been 
fully recovered for several reasons, including that (1) some providers 
had not provided full payment, (2) there were pending appeals, and (3) 
in one case, state officials were unable to confirm the receipt of the 
FAR from CMS. As a result, the state had not initiated the recovery 
process. 

States should have reported the return of the federal share for $13.3 
million on line 5 of the CMS-64, the line designated for overpayments 
identified by federal audits.[Footnote 16] Based on data we collected 
from the states, we found that states made multiple errors reporting 
the return of the federal share for overpayments identified by federal 
audits, as detailed below. 

* Instead of reporting $13.3 million, states reported the return of 
the federal share for $12.4 million, and did not report the return of 
the federal share for the remaining $855,000. 

* Within the $12.4 million that was reported by states, $6.6 million 
was correctly reported on line 5 of the CMS-64, while the remaining 
$5.8 million was reported in the CMS-64, but not on line 5. (See 
figure 3.) 

Figure 3: States' Reporting of the Return of the Federal Share from 
Audits Conducted June 2007 through February 2012: 

Figure 3: States' Reporting of the Return of the Federal Share from 
Audits Conducted June 2007 through February 2012: 

[Refer to PDF for image: illustration] 

States should have reported the return of the federal share for $13.3 
million on line 5 of the CMS-64[A]: 
* States reported the return of the federal share for $12.4 million: 
- States correctly reported $6.6 million on line 5 of the CMS-64; 
- States reported $5.8 million on the CMS-64, but not on line 5; 
* States did not report the return of the federal share for the 
remaining $855,000. 

Source: GAO review of The Centers for Medicare and Medicaid Services 
(CMS) documents. 

[A] CMS requires states to report overpayments from federal audits on 
line 5 of the CMS 64.9C1, a sub-form within the CMS-64. 

[End of figure] 

In addition to incomplete and inconsistent reporting of the return of 
the federal share, we identified errors in states' reporting. In 
particular, states included $20.2 million in overpayments on line 5 of 
CMS-64 that were not related to federal audits. This $20.2 million 
represented errors by 4 states,[Footnote 17] one of which was a $20 
million error made by 1 state. 

Officials provided several reasons for states' errors in reporting 
overpayments, including not understanding CMS's reporting 
requirements, frequent state staff turnover, and not being able to 
identify and, therefore, correctly report overpayments that resulted 
from federal audits.[Footnote 18] State officials told us that about 
$568,000 of the unreported overpayments would be reported by June 2013. 

CMS Generally Reviewed States' Reporting of Overpayments, but Was Not 
Always Aware of Incomplete Reporting: 

All 7 of the CMS regional offices we spoke with indicated that 
reviewing state reporting of the return of the federal share of 
overpayments was a routine part of their quarterly review of the CMS-
64. Regional office officials noted that they review state 
documentation for the amounts entered on the form and check them 
against the FAR to make sure that states accurately report the return 
of the federal share. This review is also specifically noted as a 
required step in the CMS Financial Review Guide, which regional office 
financial analysts must follow when verifying state entries on the CMS-
64.[Footnote 19] Regional office officials also said that they work 
with states to improve reporting of overpayments on line 5 on the CMS-
64, but there was some variability in how the regional offices 
required states to correct errors in their reporting. For example, 
some regional offices verified the overpayment reported on lines other 
than line 5 of the CMS-64 and encouraged states to report 
appropriately in the future, while other regional offices required 
states to make a correction for the quarter in which the error 
appeared. 

As part of their reviews, regional office officials noted that when 
they receive a FAR for one of the states in their region they follow-
up with the state to make sure the state is aware of the FAR and the 
timeframes for returning the federal share. As a result of these 
efforts, CMS's regional offices helped ensure the timely return of the 
federal share for most overpayments. For 59 of the 89 audits we 
reviewed, states reported the return of the federal share of the 
overpayment within 1 year as required by federal law. This on-time 
reporting of the return of the federal share represented $9.8 million 
out of $13.3 million in net overpayments related to federal audits. 
For the remaining 30 audits that states did not report the return of 
federal share within 1 year, $2.7 million was reported late and 
$855,000 was not reported at all.[Footnote 20] 

However, in some cases, regional offices were not always aware that 
states' reporting was incomplete. 

* In one regional office, the CMS analyst charged with reviewing a 
particular state's CMS-64 was unaware that the state did not report 
returning the federal share from several FARs.[Footnote 21] 

* In another regional office, it was unclear if the office had 
received copies of the numerous FARs that a particular state in its 
region had received in 2011 and 2012. Thus, the regional office was 
not aware of the need to look for these overpayments and the return of 
the federal share on the CMS-64. 

In these two cases, MIG officials were aware of the FARs but the 
regional offices were not. Additionally, the MIG does not regularly 
follow-up with the regional offices on the status of overpayments in 
light of CMS's approach to divide responsibility related to state 
recovery and reporting of overpayments. Rather the MIG interacts with 
the offices as needed.[Footnote 22] MIG officials acknowledged that at 
the beginning of the audit program, they had more contact with the 
regional offices on state recovery efforts. But such direct follow-up 
was not continued since the MIG may review data on line 5 of the CMS-
64, enabling them to check the status of state overpayments directly, 
according to two regional office officials. However, given the errors 
we identified on the CMS-64, checking the status of state reporting of 
overpayments based on the reported CMS-64 data would not always yield 
a clear picture of states' reporting of the federal share of 
overpayments. 

Conclusions: 

CMS's audit approach for identifying Medicaid overpayments has shown 
some success in that states have returned most of the federal share of 
net overpayments--often within the one-year timeframe. However, state 
errors in reporting overpayments in the proper location of the CMS-64 
prevent CMS from having a full understanding of the extent to which 
the federal share has been returned from the audits that they conduct. 
Officials in the regional offices play a critical role in reviewing 
and assisting states in reporting, and they are well positioned to 
ensure that states correctly report overpayments and the return of the 
federal share. Additionally, a full accounting of federal audit 
recoveries is an important gauge for measuring the effectiveness of 
CMS's efforts to reduce improper payments, but states' reporting of 
overpayments and the return of the federal share are not always clear 
or complete. Gaps such as these hamper federal efforts to quantify the 
results of state and federal activities, and make it difficult to 
determine the extent to which states are returning the federal share 
of these overpayments. 

Recommendations: 

To ensure the timely return of the federal share of Medicaid 
overpayments, the CMS Administrator should increase efforts to ensure 
that states are clearly reporting overpayments identified by federal 
audits on the designated location of the CMS-64 form. 

Agency Comment: 

We provided a draft of this product to HHS for comment. In its written 
comments, reproduced in appendix II, HHS concurred with our 
recommendation and noted that CMS will increase efforts to ensure that 
states correctly report overpayments on the CMS-64 by providing 
additional training to states and regional offices on accurate 
reporting and improve internal processes to ensure timely resolution 
of incorrect reporting. HHS also provided technical comments that we 
incorporated, as appropriate. 

We are sending copies to the Secretary of Health and Human Services, 
the Acting Administrator of CMS, and the appropriate congressional 
committees. In addition, the report is available at no charge on 
the GAO website at [hyperlink, http://www.gao.gov]. 

If you or your staff has any questions about this report, please 
contact me at (202) 512-7114 or at yocomc@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made key contributions 
to this report are listed in Appendix III. 

Signed by: 

Carolyn L. Yocom: 
Director, Health Care: 

[End of section] 

Appendix I: Medicaid Overpayments Identified by Federal Audits 
Conducted June 2007 through February 2012: 

State (number of audits): Arkansas (15); 
Potential overpayments: $489,966; 
Net overpayments: $488,996; 
State recoveries: $130,862. 

State (number of audits): California (2); 
Potential overpayments: $1,196,634; 
Net overpayments: $1,196,634; 
State recoveries: $186,054. 

State (number of audits): Colorado (1); 
Potential overpayments: $2,376; 
Net overpayments: $2,376; 
State recoveries: $2,376. 

State (number of audits): District of Columbia (4); 
Potential overpayments: $1,711,520; 
Net overpayments: $1,575,476; 
State recoveries: $1,575,476. 

State (number of audits): Delaware (6); 
Potential overpayments: $4,614,912; 
Net overpayments: $4,614,912; 
State recoveries: $4,614,911. 

State (number of audits): Florida (21); 
Potential overpayments: $1,789,559; 
Net overpayments: $597,347; 
State recoveries: $597,348. 

State (number of audits): Iowa (1); 
Potential overpayments: $31,875; 
Net overpayments: $31,875; 
State recoveries: $31,875. 

State (number of audits): Kentucky (1); 
Potential overpayments: $9,445; 
Net overpayments: $9,445; 
State recoveries: $9,445. 

State (number of audits): Maryland (3); 
Potential overpayments: $2,944,875; 
Net overpayments: $484,601; 
State recoveries: $484,601. 

State (number of audits): Mississippi (10); 
Potential overpayments: $5,731,435; 
Net overpayments: $3,042,697; 
State recoveries: $1,011,869. 

State (number of audits): Nebraska (1); 
Potential overpayments: $25,165; 
Net overpayments: $25,165; 
State recoveries: $25,165. 

State (number of audits): New Mexico (1); 
Potential overpayments: $14,821; 
Net overpayments: $14,821; 
State recoveries: $14,819. 

State (number of audits): Pennsylvania (1); 
Potential overpayments: $4,856; 
Net overpayments: $4,856; 
State recoveries: $4,856. 

State (number of audits): South Carolina (5); 
Potential overpayments: $92,535; 
Net overpayments: $77,934; 
State recoveries: $77,934. 

State (number of audits): South Dakota (1); 
Potential overpayments: $90,465; 
Net overpayments: $90,465; 
State recoveries: $90,465. 

State (number of audits): Texas (5); 
Potential overpayments: $795,484; 
Net overpayments: $650,605; 
State recoveries: $567,743. 

State (number of audits): Utah (1); 
Potential overpayments: $27,521; 
Net overpayments: $27,521; 
State recoveries: $27,521. 

State (number of audits): Virginia (2); 
Potential overpayments: $40,005; 
Net overpayments: $40,005; 
State recoveries: $40,005. 

State (number of audits): Washington (8); 
Potential overpayments: $821,529; 
Net overpayments: $324,522; 
State recoveries: $324,522. 

Total: 
Potential overpayments: $20,435,009; 
Net overpayments: $13,301,254; 
State recoveries: $9,817,848. 

Source: GAO analysis of Centers for Medicare & Medicaid Services and 
state information. 

[End of table] 

[End of section] 

Appendix II: Comments from the Department of Health and Human Services: 

Department of Health & Human Services: 
Office of The Secretary
Assistant Secretary for Legislation: 
Washington, DC 20201: 

November 2, 2013: 

Carolyn L. Yocom: 
Director, Health Care: 
U.S. Government Accountability Office: 
441 G Street NW: 
Washington, DC 20548: 

Dear Ms. Yocom, 

Attached are comments on the U.S. Government Accountability Office's 
(GAO) report entitled, "Medicaid: CMS Should Ensure That States 
Clearly Report Overpayments" (GAO-14-25). 

The Department appreciates the opportunity to review this report prior 
to publication. 

Sincerely, 

Signed by: 

Jim R. Esquea: 
Assistant Secretary for Legislation: 

Attachment: 

General Comments Of The Department Of Health And Human Services (HHS) 
On The Government Accountability Office's (GAO) Draft Report Entitled, 
"Medicaid: CMS Should Ensure That States Clearly Report Overpayments" 
(GA0-14-25): 

The Department appreciates the opportunity to review and comment on 
this draft report. 

GAO Recommendation: 

GAO recommends that to ensure the timely return of the federal share 
of Medicaid overpayments, the CMS Administrator should increase 
efforts to ensure that states are clearly reporting overpayments 
identified by federal audits on the designated location of the CMS-64 
form. 

HHS Response: 

HHS concurs with this recommendation and will increase CMS efforts to 
ensure that states correctly report overpayments identified by federal 
audits on the CMS-64. In addition to its routine provision of 
technical assistance to states through the CMS-64 review process, CMS 
will provide additional training to states and regional office staff 
on the procedures required for accurate state reporting of 
overpayments. 

As part of an initiative to provide greater transparency to 
overpayment reporting on the CMS-64, CMS expanded the CMS-64 to 
include the Fraud Waste and Abuse Collection screen 64.9C 1 for 
quarterly expenditures beginning FY 2010. In conjunction with these 
new reporting requirements, CMS communicated these new requirements to 
its staff and to all states and conducted an on-site nationwide 
training for states and CMS staff at the Medicaid Integrity Institute 
in October 2011. CMS issued additional reporting guidance to states in 
April of 2012. Additionally, CMS will initiate improvements to its 
internal processes to ensure timely resolution of incorrect state 
reporting. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Carolyn L. Yocom, (202) 512-7114 or yocomc@gao.gov: 

Staff Acknowledgments: 

In addition to the named above, key contributors to this report were: 
Rashmi Agarwal, Assistant Director; Walter Ochinko, Assistant 
Director; Sarah Harvey; Drew Long; JoAnn Martinez-Shriver; and 
Jennifer Whitworth. 

[End of section] 

Related GAO Products: 

GAO, Medicaid Integrity Program: CMS Should Take Steps to Eliminate 
Duplication and Improve Efficiency, [hyperlink, 
http://www.gao.gov/products/GAO-13-50] (Washington, D.C.: Nov. 13, 
2012). 

National Medicaid Audit Program: CMS Should Improve Reporting and 
Focus on Audit Collaboration with States, [hyperlink, 
http://www.gao.gov/products/GAO-12-814T] (Washington, D.C.: June 14, 
2012). 

National Medicaid Audit Program: CMS Should Improve Reporting and 
Focus on Audit Collaboration with States, [hyperlink, 
http://www.gao.gov/products/GAO-12-627] (Washington, D.C.: June 14, 
2012). 

Program Integrity: Further Action Needed to Address Vulnerabilities in 
Medicaid and Medicare Programs, [hyperlink, 
http://www.gao.gov/products/GAO-12-803T] (Washington, D.C.: June 7, 
2012). 

Medicaid: Federal Oversight of Payments and Program Integrity Needs 
Improvement, [hyperlink, http://www.gao.gov/products/GAO-12-674T] 
(Washington, D.C.: April 25, 2012). 

Medicaid Program Integrity: Expanded Federal Role Presents Challenges 
to and Opportunities for Assisting States, [hyperlink, 
http://www.gao.gov/products/GAO-12-288T] (Washington, D.C.: Dec. 7, 
2011). 

Fraud Detection Systems: Additional Actions Needed to Support Program 
Integrity Efforts at Centers for Medicare and Medicaid Services, 
[hyperlink, http://www.gao.gov/products/GAO-11-822T] (Washington, 
D.C.: July 12, 2011). 

Fraud Detection Systems: Centers for Medicare and Medicaid Services 
Needs to Ensure More Widespread Use, [hyperlink, 
http://www.gao.gov/products/GAO-11-475] (Washington, D.C.: June 30, 
2011). 

Improper Payments: Recent Efforts to Address Improper Payments and 
Remaining Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-11-575T] (Washington, D.C.: April 15, 
2011). 

Status of Fiscal Year 2010 Federal Improper Payments Reporting, 
[hyperlink, http://www.gao.gov/products/GAO-11-443R] (Washington, 
D.C.: March 25, 2011). 

Medicare and Medicaid Fraud, Waste, and Abuse: Effective 
Implementation of Recent Laws and Agency Actions Could Help Reduce 
Improper Payments, [hyperlink, 
http://www.gao.gov/products/GAO-11-409T] (Washington, D.C.: March 9, 
2011). 

Medicare: Program Remains at High Risk Because of Continuing 
Management Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-11-430T] (Washington, D.C.: March 2, 
2011). 

Opportunities to Reduce Potential Duplication in Government Programs, 
Save Tax Dollars, and Enhance Revenue, [hyperlink, 
http://www.gao.gov/products/GAO-11-318SP] (Washington, D.C.: March 1, 
2011). 

High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: February 
2011). 

Medicare Recovery Audit Contracting: Weaknesses Remain in Addressing 
Vulnerabilities to Improper Payments, Although Improvements Made to 
Contractor Oversight, [hyperlink, 
http://www.gao.gov/products/GAO-10-143]. (Washington, D.C.: March 31, 
2010). 

Medicaid: Fraud and Abuse Related to Controlled Substances Identified 
in Selected States, [hyperlink, 
http://www.gao.gov/products/GAO-09-1004T] (Washington, D.C.: Sept. 30, 
2009). 

Medicaid: Fraud and Abuse Related to Controlled Substances Identified 
in Selected States, [hyperlink, 
http://www.gao.gov/products/GAO-09-957] (Washington, D.C.: Sept. 9, 
2009). 

Improper Payments: Progress Made but Challenges Remain in Estimating 
and Reducing Improper Payments, [hyperlink, 
http://www.gao.gov/products/GAO-09-628T] (Washington, D.C.: April 22, 
2009). 

Medicaid: Thousands of Medicaid Providers Abuse the Federal Tax 
System, [hyperlink, http://www.gao.gov/products/GAO-08-239T] 
(Washington, D.C.: Nov. 14, 2007). 

Medicaid: Thousands of Medicaid Providers Abuse the Federal Tax 
System, [hyperlink, http://www.gao.gov/products/GAO-08-17] 
(Washington, D.C.: Nov. 14, 2007). 

Medicaid Financial Management: Steps Taken to Improve Federal 
Oversight but Other Actions Needed to Sustain Efforts, [hyperlink, 
http://www.gao.gov/products/GAO-06-705] (Washington, D.C.: June 22, 
2006). 

Medicaid Integrity: Implementation of New Program Provides 
Opportunities for Federal Leadership to Combat Fraud, Waste, and 
Abuse, [hyperlink, http://www.gao.gov/products/GAO-06-578T] 
(Washington, D.C.: March 28, 2006). 

Medicaid Fraud and Abuse: CMS's Commitment to Helping States Safeguard 
Program Dollars Is Limited, [hyperlink, 
http://www.gao.gov/products/GAO-05-855T] (Washington, D.C.: June 28, 
2005). 

Major Management Challenges and Program Risks: Department of Health 
and Human Services, [hyperlink, 
http://www.gao.gov/products/GAO-03-101] (Washington, D.C.: January 
2003). 

[End of section] 

Footnotes: 

[1] An improper payment is any payment that should not have been made 
or that was made in an incorrect amount (including overpayments and 
underpayments) under statutory, contractual, administrative, or other 
legally applicable requirements. This definition includes any payment 
to an ineligible recipient, any payment for an ineligible good or 
service, any duplicate payment, any payment for a good or service not 
received (except where authorized by law), and any payment that does 
not account for credit for applicable discounts. Improper Payments 
Elimination and Recovery Act of 2010, Pub. L. No. 111-204, § 2(e), 124 
Stat. 2224, 2227 (2010) (codified at 31 U.S.C. § 3321 note). 

[2] State entities include Medicaid Fraud Control Units and state 
program integrity units, while other federal entities engaged in 
Medicaid program integrity activities include HHS's Office of 
Inspector General and the Department of Justice. 

[3] See, Pub. L. No. 109-171, § 6034, 120 Stat. 4, 74-78 (2006) 
(codified at 42 U.S.C. § 1396u-6). 

[4] States report actual expenditures and overpayment amounts on the 
CMS-64. Generally speaking, the reported overpayments are subtracted 
from states' Medicaid expenditures, which forms the basis for 
computing the federal share of program costs. Throughout this report, 
we refer to this process as reporting the return of the federal share. 

[5] See GAO, National Medicaid Audit Program: CMS Should Improve 
Reporting and Focus on Audit Collaboration with States, [hyperlink, 
http://www.gao.gov/products/GAO-12-627] (Washington, D.C.: June 14, 
2012), and GAO, Medicaid Integrity Program: CMS Should Take Steps to 
Eliminate Duplication and Improve Efficiency, [hyperlink, 
http://www.gao.gov/products/GAO-13-50] (Washington, D.C.: Nov. 13, 
2012). 

[6] Generally, states have one year from the date of the final audit 
report to return the federal share, regardless of whether or not the 
state was successful in recovering the overpayment amount. See 42 
U.S.C. § 1396b(d)(2)(C); 42 C.F.R § 433.312. 

[7] See The Centers for Medicare and Medicaid Services, Financial 
Review Guide for the Quarterly Medicaid Statement of Expenditures 
(Form CMS-64 Report), February 2012. 

[8] See GAO, Medicaid Integrity Program: CMS Should Take Steps to 
Eliminate Duplication and Improve Efficiency, [hyperlink, 
http://www.gao.gov/products/GAO-13-50] (Washington, D.C.: Nov. 13, 
2012). 

[9] The amount of the federal share varies by state. The federal 
government matches states' expenditures for most Medicaid services 
using a statutory formula based on each state's per capita income. 
Under this statutory formula, the federal government's share of 
Medicaid expenditures--and thus, its share of reported overpayments--
can range from 50 to 83 percent. 

[10] States may also challenge the findings of a FAR by filing an 
appeal with the Department of Health and Human Services' Appeals Board 
Appellate Division. 

[11] 42 U.S.C. § 1396b(d)(2)(C); 42 C.F.R. § 433.312. States must 
return the federal share of the overpayment either when it is 
recovered or at the end of the one-year period following discovery of 
the overpayment, whichever is earlier. 42 C.F.R. § 433.320(a). The 
discovery date for overpayments typically begins on the date of the 
final written notice of the state's overpayment determination to the 
provider. 

[12] 42 U.S.C. § 1396b(d)(2)(D); 42 C.F.R. § 433.312(b). 

[13] Specifically, CMS included 6 lines related to overpayment 
reporting on the CMS 64.9C1, which is a sub-form within the CMS-64. 
Line 5 on this form is designated for overpayments identified by 
federal audits conducted by NMAP contractors. For the purposes of 
this report, we refer to this as line 5 of the CMS-64. 

[14] CMS must ensure that state expenditures claimed for federal 
matching on the CMS-64 are programmatically reasonable and allowable 
under federal laws, regulations, and policy guidance. To achieve this, 
CMS relies primarily on its regional offices' financial and funding 
staff to perform quarterly reviews and validate state entries on the 
CMS-64. The 10 regional offices, located throughout the country, 
validate and audit the reported expenditure data and accompanying 
detailed information each quarter in their respective states. 

[15] 42 C.F.R. § 433.320(a)(4). If the state does not return the 
federal share of an overpayment within one year, CMS issues a demand 
letter requesting the immediate return of the federal share. If the 
state still does not return the federal share, CMS then issues a 
disallowance-—which is a letter that specifies, among other things, the amountthat is not allowed and the reason for this determination—-to the state for the federal share of the overpayment. The state will be liable for interest at the Current Value of Funds Rate, which will accrue beginning on the day after the end of the one year period following discovery of the overpayment until the last day of the quarter for which the state submits a CMS-64 report returning the federal share of the overpayment. 

[16] States generally have one year from the date of the final audit 
report to report the return of the federal share. Thus, the full $13.3 
million should have been reported, regardless of pending appeals or 
states' ability to collect the overpayments from providers. 

[17] Two of the 4 states that made errors were not part of the 19 
states in our review. These 2 states reported overpayments on line 5 
of the CMS-64 even though they had not received a FAR. 

[18] In 2009 and 2011, CMS provided training to the states on how to 
correctly report overpayments from the federal audits. Additionally, 
CMS began including instructions in FARs issued in 2010 on correct 
reporting and issued additional reporting guidance to states in early 
2012. 

[19] CMS financial analysts verify that the amounts entered by the 
state were entered in accordance with required timeframes and 
correspond to the amounts specified in the FARs sent to the states. 
Centers for Medicare & Medicaid Services, Financial Review Guide for 
the Quarterly Medicaid Statement of Expenditures (Form CMS-64 Report), 
February 2012. 

[20] Among the seven states that were late in reporting their return 
of the federal share, the delay ranged from one quarter to nearly two 
years. 

[21] The CMS analyst noted significant difficulties obtaining the 
information needed to verify entries on the state's CMS-64, as well as 
the recent turnover of state staff charged with reporting duties for 
the CMS-64. State officials indicated they were waiting for the 
results of appeals before initiating their recovery efforts on some of 
the overpayments--an approach that is inconsistent with CMS's 
requirements and policy requiring that returns be reported within one 
year of the audit findings, regardless of whether appeals are pending. 

[22] Regional office officials told us that they had contacted the MIG 
when there was an issue with the state, such as an appeal, or when the 
state reported an overpayment amount that was less than the amount 
identified on the FAR. 

[End of section] 

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