GAO's 2013 High-Risk Update: Medicare and Medicaid

What GAO Found

Medicare Program: CMS has not met GAO's criteria to have the Medicare program removed from the High-Risk List. For example, although CMS has made progress in measuring and reducing improper payment rates in different parts of the program, it has yet to demonstrate sustained progress in lowering the rates. Because the size of Medicare relative to other programs leads to aggregate improper payments that are extremely large, continuing to reduce improper payments in this program should remain a priority for CMS. Further, CMS should complete some actions required by the Patient Protection and Affordable Care Act (PPACA) that were designed to improve the integrity of the program, such as determining which providers must post surety bonds to help in recovering payments for fraudulent billing, using fingerprint screening for high-risk providers, issuing a final regulation that requires providers to disclose additional information, and establishing core elements for provider compliance programs.

Medicaid Program: Congress, HHS, and CMS have taken steps to improve the fiscal integrity of Medicaid, and CMS has implemented certain GAO recommendations, such as improving the information collected on certain supplemental payments and issuing guidance to states to better prevent payment of improper claims. However, more federal oversight of Medicaid's fiscal and program integrity is needed.

Why GAO Did This Study

This testimony discusses GAO's recent work on Medicare and Medicaid. Since 1990, GAO has regularly reported on programs as part of our high-risk series, which focuses on government operations that we have identified as high risk due to their greater vulnerability to fraud, waste, abuse, and mismanagement or their need to address economy, efficiency, or effectiveness challenges. GAO's high-risk series has brought much-needed focus to problems impeding effective government and costing billions of dollars each year. These remarks on Medicare and Medicaid are drawn from GAO's 2013 high-risk update.

Medicare Program: In 2012, the Medicare program covered more than 49 million elderly and disabled beneficiaries at an estimated cost of $555 billion, and reported improper payments estimated to be more than $44 billion. The Centers for Medicare & Medicaid Services (CMS), which administers Medicare for the Department of Health and Human Services (HHS), is responsible for implementing payment methods that encourage efficient service delivery, managing Medicare to provide efficient and cost-effective services to beneficiaries, safeguarding the program from loss, and overseeing patient safety and care. Like health care spending in general, Medicare spending has grown faster than growth in the economy for many years. In the coming years, continued growth in the number of Medicare beneficiaries and program spending will create increasing challenges for the federal government.

GAO designated Medicare as a high-risk area in 1990 because of its complexity and susceptibility to improper payments, which, added to its size, have led to serious management challenges. Medicare spending must be held much more firmly in check to sustain the program over the long term, while continuing to ensure that beneficiaries have access to appropriate health care. To help do so, GAO has identified opportunities to make Medicare payment methods more efficient and cost-effective. In addition, the size of the program makes it important for CMS to manage program functions more effectively and better oversee the program's integrity and quality of patient care.

Medicaid Program: The Medicaid program is a federal and state program that covered acute health care, long-term care, and other services for about 70 million low-income people in fiscal year 2011; it is one of the largest sources of funding for medical and health-related services for America's most vulnerable populations. Medicaid consists of more than 50 distinct state-based programs. The federal government matches state expenditures for most Medicaid services using the Federal Medical Assistance Percentage, a statutory formula based in part on each state's per capita income. Medicaid is a significant expenditure for the federal government and the states, with total expenditures of $436 billion in 2011. CMS is responsible for overseeing the program at the federal level, while states administer their respective programs' day-to-day operations.

GAO designated Medicaid as a high-risk program because of its size, growth, diversity of programs, and concerns about the adequacy of fiscal oversight, which is necessary to prevent inappropriate program spending. Both Congress and the administration have demonstrated commitment and leadership to making Medicaid fiscal and program integrity a priority.

For more information, contact Kathleen King at 202-512-7114 or kingk@gao.gov or Carolyn Yocom at 202-512-7114 or yocomc@gao.gov.