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Medicaid Program

This information appears as published in the 2015 High Risk Report.

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GAO designated Medicaid as a high-risk program in 2003 due to its size, growth, diversity of programs, and concerns about the adequacy of fiscal oversight.  Medicaid is one of the largest sources of funding for acute health care, long-term care, and other services for America’s most vulnerable populations. This federal-state program covered an estimated 65 million low-income people in fiscal year 2014, and enrollment is growing under the Patient Protection and Affordable Care Act (PPACA).  Medicaid is the second largest health program as measured by expenditures, second only to Medicare, and the largest as measured by enrollment. A significant pressure on federal and state budgets, estimated Medicaid outlays for fiscal year 2014 were $508 billion, of which $304 billion was financed by the federal government and $204 billion by the states.[1]

Medicaid allows significant flexibility for states to design and implement their programs, resulting in more than 50 distinct state-based programs.  However, as a comprehensive health benefit program for vulnerable populations, each state Medicaid program, by law, must cover certain categories of individuals and provide a broad array of benefits. Populations covered include children in low-income families, and low-income individuals who are elderly, disabled, or are experiencing high medical needs.  Medicaid’s extensive benefit package includes coverage for acute care services, primary care services, long-term care services, and comprehensive screening and treatment services for children. Within these broad parameters, however, states administer their own programs, including making decisions regarding any health services or populations to cover beyond what are mandated by law, setting provider reimbursement rates, and operating state-specific data systems to enroll eligible beneficiaries and providers and to process and pay claims. This variability complicates oversight and has contributed to challenges in overseeing payments, financing, and access to quality care. 

Additional variability in state Medicaid programs also results from key Medicaid reform efforts that states may initiate. For example, under Section 1115 of the Social Security Act, the Secretary of Health and Human Services can approve waivers of traditional Medicaid requirements, and provide states with new spending authorities, for purposes of implementing Medicaid demonstration projects. The demonstrations under the law are for purposes of testing new ways to operate state programs and deliver services, and agency policy requires that the programs not increase federal costs. In the past, this authority was used by states to test, for example, whether efficiencies from managed care could help provide savings to cover otherwise ineligible populations. In recent years, many states have sought demonstrations for other purposes, such as providing long term services and supports in a managed care delivery system.

While the majority of these factors are inherent to the Medicaid program’s design, the size and diversity of the Medicaid program also make it particularly vulnerable to improper payments—including payments made for people not eligible for Medicaid or made for services not actually provided.  Our high risk segment focuses on the significant costs associated with improper payments, with the federal share estimated at $17.5 billion in fiscal year 2014. While states have the first-line responsibility for preventing improper payments, the Centers for Medicare & Medicaid Services (CMS) in the Department of Health and Human Services (HHS) has an important role in overseeing and supporting state efforts to reduce and recover improper payments.

Highlights of Significant Legislation and Key Reform Efforts

Medicaid enrollment and spending are growing under PPACA. The most significant change to Medicaid under PPACA is the option for states to expand Medicaid eligibility to non-Medicare eligible individuals under age 65—non-disabled adults without children, for example—with incomes up to 133 percent of the federal poverty level.[2] States that choose to expand Medicaid receive 100 percent federal funding for this newly eligible population through 2016, phasing to 90 percent federal funding for 2020 and subsequent years. As of June 2014, 27 states elected to expand Medicaid eligibility under PPACA.  CMS projects that federal spending for Medicaid will rise on average 7 percent per year between 2013 and 2020, as states expand coverage under the provisions of the PPACA.

PPACA put a number of other mechanisms in place that will also affect the Medicaid program, including requiring state Medicaid programs to coordinate their eligibility and enrollment systems with state health insurance exchanges ; reducing the funding available to pay hospitals that serve high proportions of low-income, uninsured populations; expanding options for providing home and community based long-term care services; and requiring new program integrity measures aimed at reducing waste, fraud, and abuse.

[1] Centers for Medicare & Medicaid Services, Office of the Actuary, 2013 Actuarial Report on the Financial Outlook for Medicaid  (Washington, D.C.: 2013).

[2] PPACA also provides for a 5 percent income disregard when calculating modified adjusted gross income for determining Medicaid eligibility, which effectively increases this income level to 138 percent of the FPL. FPL refers to federal poverty guidelines issued by the Department of Health and Human Services each year in the Federal Register. 

We have not yet rated CMS progress on the majority of the Medicaid program’s challenges because of uncertainties surrounding the program and the evolving nature of reforms.  Instead, we have identified six principal program areas where continued attention is needed.  One area of the Medicaid program for which we were able to assess progress was improper payments. Although CMS has taken positive steps, reducing Medicaid improper payments remain high-risk as the rate of improper payments has increased in recent years and federal program spending is expected to increase on average 7 percent per year between 2013 and 2020.

Medicaid Program

The effects of unprecedented changes recently made to the Medicaid program will continue to emerge in the coming years and are likely to exacerbate the challenges and shortcomings that already exist in federal oversight and management of the program. A key challenge to federal oversight is the lack of accurate, reliable, and timely data at the federal level needed to oversee the diverse and complex state Medicaid programs.  The need for data for oversight becomes even more important in light of the need to track new spending for newly eligible individuals for whom the states will receive 100 percent federal matching funds for several years. Our work to date illustrates the challenges and the need for improved federal oversight of Medicaid in six areas.

(1) Monitoring and measurement of access to quality care.

National survey data have suggested that access reported by Medicaid beneficiaries is comparable to that of individuals with private health insurance in many areas, but that Medicaid beneficiaries do face particular challenges in accessing certain types of care.[1] Access to appropriate care has been a concern because of the needs and vulnerability of the individuals covered by Medicaid, including children, the elderly, and the disabled.

Access to oral and mental health services.  State Medicaid programs have struggled to ensure that beneficiaries, particularly children, receive appropriate oral health and mental health services when needed.  High rates of dental diseases remain prevalent across the nation, especially in vulnerable and underserved populations. Medicaid beneficiaries, children in particular, have showed increases in the use of  dental services but still visited the dentist less often than privately insured children. These visits are essential to preventing future high cost dental services. Medicaid children may also not be receiving appropriate mental health treatment and services. Access to providers of mental health services is not solely a problem for Medicaid children; however, children on Medicaid have additional issues regarding receipt of appropriate mental health services. For example, national survey data indicate concerns that children on Medicaid may be inappropriately prescribed psychotropic drugs and are not receiving needed mental health services, such as counseling and therapy.

Access to preventive health services. Preventive health services can serve as a mechanism to promote better health and avoid high cost medical treatments in the future. The higher prevalence of some health conditions among Medicaid beneficiaries nationally that can be identified and managed by preventive services suggests that more can and should be done to ensure Medicaid beneficiaries receive these services.

  • States are required to provide preventive services through Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services. However, national data suggest that receipt of these services is below established goals, states have not properly reported the extent to which these services are provided as required, and data are lacking on whether treatments, to address conditions identified through screenings and checkups, are actually provided.
  • Federal law historically has not required states to cover preventive services for adults in Medicaid, and coverage of these services and access to them has varied across the states.  PPACA required states to cover certain recommended preventive services for newly eligible adults in states that expand coverage under the law; preventive services for adults in Medicaid continue to be an optional benefit otherwise. For adults in Medicaid, PPACA provides incentives for states to cover recommended preventive services.  Proper monitoring will require effective data systems.

(2) Financing structure and transparency, including financing of the program during economic downturns and data needed to understand state funding sources

Medicaid financing is a joint responsibility of the federal government and the states. The federal government shares in the costs of state Medicaid payments using a Federal Medical Assistance Percentage (FMAP), a statutory formula based in part on each state’s per capita income. States with lower per capita incomes receive higher matching rates. States are responsible for financing the non-federal share of their programs, and can use state general funds as well as other sources, such as taxes on health care providers and transfers of funds from local governments.

Financing Structure. During economic downturns, states typically experienced increased Medicaid enrollment while their own revenues declined.  Our work has found that past efforts to provide states with assistance during economic downturns—by increasing the FMAP formula—were not as responsive to states’ Medicaid needs as they could have been. In response to a mandate by Congress, we developed a prototype formula, which offers an automatic timely and targeted option for providing states with temporary assistance during national economic downturns.[2]

Transparency of State Funding Sources. States have increasingly relied on funds from sources other than state general funds to finance the non-federal share of their programs, such as health care provider taxes and funds transferred from local governments and local government health care providers. Although such sources are allowed under certain circumstances, the increased reliance on these sources has implications for federal spending and beneficiary access. Such sources can create incentives for states to overpay providers that contribute funds to the state for the non-federal share in order to reduce state obligations, and can result in cost shifts to the federal government. Also, it is unclear whether increased federal funding improves beneficiary access. CMS does not collect accurate and complete data on state sources of funds to finance the Medicaid program, which makes it difficult for CMS and federal policymakers to oversee the program and assess the need for and make changes.  For example, it is difficult to determine whether increased reliance on providers and local government to fund the non-federal share primarily serves to provide fiscal relief to the state by increasing federal funding, or whether the increase in federal funding results in an increase in net payments to providers that in turn improves beneficiary access. 

(3) Spending transparency and payment oversight, including understanding spending trends and oversight of payments to institutional providers

Under broad federal requirements, each state designs and operates its Medicaid program, including setting fee-for-service payment rates and paying qualified health care providers for covered services provided to Medicaid beneficiaries. The federal government shares in the cost of state payments. CMS is responsible for ensuring that state Medicaid payments are consistent with federal requirements, including requirements that Medicaid payments be economical and efficient. To oversee the program, CMS needs information on state spending as well as on payments states make to individual providers.

Spending transparency.  CMS’s two primary data sets—the CMS-64, which aggregates states’ expenditures, and the Medicaid Statistical Information System (MSIS), which is designed to report individual beneficiary claims data—have the potential to offer a robust view of payments and overall spending in the Medicaid program; however, their usefulness is limited because of issues with timeliness, completeness, and accuracy of the data. We identified inconsistent CMS guidance and state practices that resulted in differences between these two data sets that could not be quantified. We have also identified gaps in the data, for example, the lack of reporting of large supplemental payments that states often make. With timely, complete, and accurate data sets, CMS oversight would be enhanced, allowing for monitoring aggregate spending trends, per beneficiary spending growth, comparison of differences in provider payment levels, and cross-state comparisons of spending.  Such capabilities would be useful and are needed to ensure the fiscal integrity of the program, facilitate efforts to manage program costs, and provide information needed for decision-making by CMS and Congress regarding program changes.

Oversight of Medicaid Payments to Institutional Providers.  Over the years, we and others have reported on payments that states have made to some institutional providers, such as hospitals and nursing facilities, and which have raised questions.  In particular, concerns have been raised about states making large supplemental Medicaid payments—payments in addition to the fee-for-service payments made to providers for services they provided—often to government providers, such as local government and state operated hospitals and other health care facilities. States’ supplemental payments that result in total Medicaid payments well in excess of a provider’s costs raise questions about whether payments are consistent with the statutory requirement that payments be economical and efficient, and are actually  for covered Medicaid services. Concerns have also been raised about higher regular, claims-based payments made to government facilities.

(4) Managed Care payment oversight, including need for better data and assurance that payments are actuarially sound

Two thirds of Medicaid beneficiaries receive some of their services in a managed care delivery system, in which the state makes payments to managed care organizations (MCOs) for each beneficiary they enroll and cover. Total payments in fiscal year 2014 were an estimated $169 billion. The federal government provides federal funding for state payments made to MCOs for Medicaid beneficiaries enrolled. The MCOs bear some or all of the risk for the costs of providing or paying for contractually agreed-upon health care services for enrollees. Federal law requires that states collect encounter data—information on the services and treatments provided to enrollees—from MCOs and submit these data to CMS. States are also required to submit information on the methodology for determining actuarial soundness of MCO payment rates, including a description of the data used. CMS cannot ensure the quality of the data used to set MCO payment rates or whether states’ rates are appropriate, and this lack of assurance places billions of federal and state dollars at risk for misspending.

(5) Budget neutrality of and expansion of federal liability for new costs in large Medicaid demonstrations 

Section 1115 of the Social Security Act authorizes the Secretary of HHS to waive certain federal Medicaid requirements and allow costs that would not otherwise be eligible for federal matching funds for experimental, pilot, or demonstration projects that are likely to assist in promoting Medicaid objectives. The demonstrations provide a way for states to test and evaluate new approaches for delivering Medicaid services. In fiscal year 2014, an estimated $89 billion in federal funds was spent under these demonstrations. By policy, demonstrations should be budget neutral to the federal government; they must not increase federal costs. However, HHS has approved demonstration spending limits that were significantly higher than what was supported in the approval documentation.

Budget Neutrality of Medicaid Demonstrations. Federal spending on Medicaid demonstrations could be reduced by billions of dollars if HHS were required to improve the process for reviewing, approving, and making transparent the basis for spending limits approved for Medicaid demonstrations. However, HHS continues to approve demonstrations that are not budget neutral.[3] In 2013 Arkansas became the first state HHS approved to test whether providing premium assistance to purchase private coverage offered on the health insurance exchange will improve access for newly eligible Medicaid beneficiaries. HHS approved a spending limit for the demonstration that was based, in part, on hypothetical costs—significantly higher payment amounts the state assumed it would have to make to providers if it expanded coverage under the traditional Medicaid program. We estimated that, by including these costs, the 3-year, nearly $4 billion spending limit that HHS approved for the state’s demonstration was approximately $778 million more than what the spending limit would have been if it was based on the state’s actual payment rates for services under the traditional Medicaid program.

Additional flexibility granted to Arkansas and 11 other states to increase the spending limit if costs proved higher than expected sets another precedent, further eroding the integrity of HHS’s process. If, as it did with Arkansas, HHS allows states to use an approach to expanding Medicaid that is expected to cost more under expansion than the existing Medicaid program with fewer cost controls in place, there could be significant cost implications for the federal government. Our concerns with HHS’s process and criteria are long-standing. In 2013 we reported that because HHS did not follow its budget neutrality policy in the approval of four state demonstrations, an estimated $32 billion with an estimated federal share of about $21 billion in excess spending was approved. Billions of dollars were approved through expenditure authorities for new payments beyond what states could have made under traditional Medicaid requirements.

(6) Growing expenditures for long-term services and high expenditure beneficiaries

Medicaid is the nation’s primary payer for long-term services and supports—with an estimated $126 billion in long term care expenditures in fiscal year 2014. The elderly and disabled are also among the highest cost Medicaid beneficiaries. 

Monitoring of Long Term Care Services Provided in the Community.  While more than half of Medicaid long term care spending is for beneficiaries residing in institutions, spending has increased for services provided in the home and community based settings. In  fiscal year 2011 about 45 percent of long term care spending was for Home and Community Based Services (HCBS), up from 32 percent in 2002. Transitioning thousands of beneficiaries from institutions to community settings will take time. Proper monitoring of these new programs and federal guidance and direction to states will prove essential. While community based long term care can improve beneficiary quality of life, better data and monitoring are needed to ensure that the services provided do not have a detrimental effect on health outcomes, and to ensure skilled providers are providing services commensurate with payments they receive.

Eligibility for Nursing Home Care. Federal law includes provisions to discourage individuals from reducing their countable assets in order to establish financial eligibility for Medicaid nursing home coverage. However, methods exist through which individuals, sometimes with the help of attorneys, can reduce their countable assets and qualify for Medicaid nursing home coverage, for example, by transferring them to family members. Our recent work in selected states showed that some applicants had significant total resources—both countable and not countable—but most did not. Given the complexities involved in identifying applicants transferring assets, it may be reasonable for states to adhere to a risk-based approach and focus their eligibility determination efforts on applicants who appear to be more likely to have assets or to have transferred assets that would make them ineligible.

High Expenditure Beneficiaries. Research on Medicaid has demonstrated that a small percentage of beneficiaries account for a disproportionately large share of Medicaid expenditures. Understanding states’ expenditures for high-expenditure populations—both those dually eligible for Medicare and Medicaid, and those who are Medicaid-only—could enhance efforts to manage Medicaid expenditures

Emerging Issues

Under PPACA, states may choose to expand Medicaid to new adult populations and those that do so receive significant increases in federal funding. States in future years may also apply to waive certain health insurance exchange requirements, using a new demonstration authority established under PPACA.  This, coupled with the demographic trends of an aging population, will create additional challenges and risks for overseeing the Medicaid program.

Increased federal spending. Given the federal government is responsible for 100 percent of the costs of new beneficiaries eligible for Medicaid for several years as a result of the PPACA expansion, it is important that CMS have timely and accurate data to understand the basis for states’ claims for federal reimbursement for new enrollees.

Expanded demonstration authority.  PPACA establishes a new type of waiver, state innovation waivers, which HHS may approve beginning in 2017.  States may apply to waive certain health insurance exchange requirements established under PPACA and may seek approval of such a waiver in combination with a section 1115 demonstration. In addition to meeting other statutory requirements, state innovation waivers may not be approved unless it is determined they will not increase the federal deficit.  

Access to Care.The enrollment of a new demographic of individuals in Medicaid as a result of PPACA may change the demand for services, as well as require changes to the number and types of providers available under the Medicaid program. States and CMS will need to ensure that new beneficiaries, many of whom are likely to be enrolled in managed care, have access to providers with capacity to deliver necessary services

Increased Demand for Long-Term Care and Changes in Care Delivery. The continued trend of providing long-term care services in home and community settings, coupled with PPACA provisions providing states with more flexibility to provide HCBS and expanded benefits to those receiving HCBS, will increase the need for guidance and monitoring of these services. Ensuring appropriate eligibility for services—and receipt of quality services in the most appropriate location—will be important.

Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks

Medicaid improper payments

CMS has demonstrated some leadership commitment to reducing improper payments and has issued guidance to improve corrective actions taken by states. However, the overall improper payment rate increased to 6.7 percent in fiscal year 2014, compared to 5.8 percent in fiscal year 2013. CMS continues to face persistent challenges in reducing improper payments that will require additional attention to leadership commitment, capacity, action plans, monitoring, and demonstrated progress. For example, CMS needs continued leadership commitment to ensure that ongoing efforts—such as working with states to identify and collect improper payments—benefit from reliable data systems that effectively monitor the costs and benefits of actions taken to reduce improper payments. CMS also needs to address emerging areas where fundamental gaps in oversight capacity exist. For example, many Medicaid beneficiaries receive services under managed care, and states’ use of managed care is expected to increase significantly over the next 5 years, yet CMS and states lack effective program integrity systems for care delivered by managed care organizations (MCO). Similarly, in 2012, approximately 13 percent of Medicaid enrollees had private health insurance and the number of Medicaid enrollees who also have private health insurance is expected to increase with the expansion of Medicaid. While the private insurer should pay before Medicaid does, there are challenges with ensuring this happens, and CMS has not implemented a robust ongoing effort to collect and share information about states’ initiatives to identify Medicaid enrollees with private insurance.

CMS continues to make the reduction of Medicaid improper payments a priority, but remaining gaps in oversight resulted in the agency partially meeting five key criteria for reducing improper payments. The program continues to grow in size and spending and, in 2022, is expected to cover as many as 18 million additional individuals as a result of PPACA. The federal government is responsible for more than 90 percent of the costs of newly eligible individuals, making it important that CMS effectively lead and assist states in reducing improper payments. Despite agency actions, gaps in oversight remain that will challenge CMS’s ability to reduce the improper payment rate.

Leadership commitment: CMS partially met the criteria for leadership commitment, due to remaining weaknesses in the oversight of improper payments. CMS established an entity to focus on program integrity, which provides training and technical assistance to states on approaches to preventing improper payments and guidance to states on program integrity issues. However, additional leadership is needed to address remaining weaknesses in federal oversight, including ensuring complete, reliable, and timely data to support agency oversight and program integrity efforts. While CMS is currently undertaking a national effort to implement an enhanced claims data system to support, among other actions, program integrity efforts, the implementation is still ongoing, and it is uncertain when the system will be fully functional for use by CMS and the states. In the interim, other actions can and should be taken to support and guide states’ efforts to prevent improper payments. These include, for example, taking steps to ensure that program integrity efforts are cost effective.

Capacity: CMS partially met the criteria for capacity. Although the agency has implemented various initiatives to enhance the resources dedicated to Medicaid program integrity, increased coordination with state program integrity efforts could expand oversight of the program to areas that are currently lacking. For example, while many of the newly enrolled Medicaid beneficiaries from PPACA will receive services through Medicaid managed care contracts, we found in May 2014 that the federal government and states are not well-positioned to identify improper payments made to MCOs. Expanded oversight is needed to ensure that MCOs are taking appropriate actions to identify and prevent improper payments. In addition, we found in November 2012 that although CMS’s comprehensive reviews yield considerable information about states’ program integrity activities, the agency did not deploy its audit resources to focus on states with identified vulnerabilities.

Action plan: CMS has taken steps to develop action plans to address the improper payments, but only partially met the criteria for action plans due to missing action plans that the agency is legally required to provide to the Congress. As required by law, in July 2014, CMS issued its Comprehensive Medicaid Integrity Plan for fiscal years 2014-2018, a 5-year plan for ensuring the integrity of the Medicaid program by combating fraud, waste, and abuse. In addition, in July 2013, CMS issued guidance to states to clarify that all identified nonpayment errors—such as certain coding errors that could have but did not result in a payment error—should be included in state corrective action plans, and in August 2013, the agency updated website guidance and the manual used by states to clarify information states should include in corrective action plans. However, CMS is not in compliance with other required reporting on Medicaid improper payments. The agency is required to report to Congress annually on the use and effectiveness of the funds appropriated for the Medicaid Integrity Program—a program established to protect against Medicaid fraud, waste, and abuse, including improper payments—but there have been delays, and the agency had not, as of December 2014, reported for fiscal years 2013 and 2014.

Monitoring: While CMS has taken steps to improve its monitoring of improper payments, the agency only partially met the criteria for monitoring because of insufficient data. In 2013, CMS eliminated duplication between improper payment reviews conducted by review contractors at the federal level and reviews conducted by audit contractors in each state. In addition, CMS has indefinitely suspended annual state program integrity assessments, which we found to be duplicative and prone to error. However, despite these improvements in its approaches to conducting audits of Medicaid payments, the expenditure and audit activity data collected by CMS make it difficult for the agency to accurately calculate the return on investments made. As a result, it is not clear whether CMS is targeting resources to the most effective audit activities or whether CMS has the capability of using this information to determine which audit activities should be adjusted or discontinued.

Demonstrated progress: CMS partially met the criteria for demonstrated progress. Although the agency has taken actions to improve the detection of improper payments, expanded oversight is needed. In December 2013, the agency launched a new process for collecting, storing, and delivering Medicaid provider termination notifications for all state-submitted Medicaid terminations and Medicare revocations. In 2013, the agency also developed a new and more accurate methodology for calculating improper payments and updated its guidance to states to improve their corrective action plans to address errors that resulted in improper payments. However, CMS needs to improve its oversight of MCOs and provide states with additional support for managed care oversight.

[1] In calendar years 2008 and 2009, less than 4 percent of beneficiaries who had Medicaid coverage for a full year reported difficulty obtaining medical care, which was similar to individuals with full-year private insurance.

[2] GAO-12-38.

[3]A federal review team led by CMS and including representatives from other HHS agencies, HHS Secretarial offices, and the Office of Management and Budget (OMB) reviews state Medicaid demonstrations. While OMB is part of the federal review team, it defers approval of demonstrations to HHS. CMS’s Office of Actuary provides nationwide data on projected Medicaid cost growth, but is not part of the federal review team. 

We have a number of Matters for Congressional Consideration and recommendations to HHS and CMS for addressing some of these issues related to financing, payment oversight, demonstration spending, and access-related issues.

Selected Key Matters for Congressional Consideration

  • Medicaid Financing. To ensure that federal funding efficiently and effectively responds to the countercyclical nature of the Medicaid program, Congress may wish to consider enacting an FMAP formula that is targeted for variable state Medicaid needs and provides automatic, timely, and temporary increased FMAP assistance in response to national economic downturns.
  • Supplemental Payment Oversight. To improve the transparency of and accountability for certain high-risk Medicaid payments that annually total tens of billions of dollars, Congress may wish to consider requiring CMS to improve reporting of and guidance related to certain supplemental payments and to require states to submit annual independent audits of such payments.
  • Medicaid Demonstration Approval Process.  To improve the fiscal integrity of Medicaid, Congress may wish to consider requiring increased attention to fiscal responsibility in the approval of Section 1115 Medicaid demonstrations by requiring the Secretary of HHS to improve the demonstration review process through steps such as (1) clarifying criteria for reviewing and approving states’ proposed spending limits, (2) better ensuring that valid methods are used to demonstrate budget neutrality, and (3) documenting and making public material explaining the basis for any approvals.

Selected Key Recommendations to the Department of Health and Human Services and Centers for Medicare & Medicaid Services

  • Medicaid Demonstration Approval Process. To improve the transparency of the process for reviewing and approving spending limits for Section 1115 Medicaid demonstrations, we recommended that the Secretary of Health and Human Services update the agency's written budget neutrality policy to reflect actual criteria and processes used to develop and approve demonstration spending limits, and ensure the policy is readily available to state Medicaid directors and others.
  • Monitoring Children’s Access to Quality Care. To improve oversight of children’s receipt of needed services in Medicaid and CHIP, we recommended that the Administrator of CMS establish a plan to review information reported on children’s receipt of services, ensure identified problems are corrected, and  work with states on improving reporting for children in managed care and fee-for-service and for capturing information on children’s receipt of needed treatment services, that is, treatments for which they are referred.

CMS has also taken positive steps to improve the improper payment rate for Medicaid in recent years, including implementing certain recommendations we had previously made. However, as described above, there are several areas where CMS needs to take action to address issues and recommendations that have not been fully implemented, including improving reporting of key data so that they provide reliable and complete data needed for ensuring effective oversight; implementing effective program integrity processes for managed care; ensuring clear reporting of overpayment recoveries; and refocusing efforts on approaches that are cost-effective. While these and other CMS actions are underway, it is too soon to assess their effectiveness in reducing improper payments. In addition, responsibility for program integrity activities is spread across multiple state and federal entities, resulting in fragmentation. Careful coordination is necessary to ensure maximum program coverage and avoid unnecessary duplication of program integrity efforts. As a result, and in light of the projected growth in program spending and gaps in oversight, Medicaid improper payments remain high-risk, and CMS needs to take additional actions to address gaps in oversight.

Looking for our recommendations? Click on any report to find each associated recommendation and its current implementation status.
Medicaid: Data Sets Provide Inconsistent Picture of Expenditures

GAO-13-47: Published: Oct 29, 2012. Publicly Released: Nov 29, 2012.
Medicaid: States' Use of Managed Care

GAO-12-872R: Published: Aug 17, 2012. Publicly Released: Sep 17, 2012.