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Medicaid Program

This information appears as published in the 2017 High Risk Report.

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Current State of the Medicaid Program

Overview of Medicaid’s Challenges

The size, growth, and diversity of the Medicaid program presents oversight challenges, and we designated Medicaid as a high-risk program in 2003 due to 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 low-income and medically needy populations. This federal-state program covered an estimated 72.2 million people in fiscal year 2016 and is the largest health program as measured by enrollment and the second largest as measured by expenditures, second only to Medicare. A source of significant pressure on federal and state budgets, estimated Medicaid outlays for fiscal year 2016 were $575.9 billion, of which $363.4 billion was financed by the federal government and $212.5 billion by the states.[1]

Medicaid allows states significant flexibility to design and implement their programs, resulting in more than 50 distinct programs; this variability complicates program oversight and has contributed to challenges in overseeing program payments and beneficiaries’ access to services.[2] 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, deciding whether to cover any health services or populations 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. For example, states may pay health care providers for each service they provide on a fee-for-service (FFS) basis; contract with managed care organizations (MCO) to provide a specific set of Medicaid-covered services to beneficiaries, and pay them a set amount per beneficiary per month; or rely on a combination of both delivery systems.

Variability among 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 waive traditional Medicaid requirements and authorize states to expend funds on Medicaid demonstrations to test new ways to deliver services. State Medicaid programs also differ in whether and how they have elected to expand Medicaid as allowed under the Patient Protection and Affordable Care Act (PPACA), which gave states the option to expand Medicaid eligibility to nearly all adults under age 65 with incomes up to 133 percent of the federal poverty level (hereafter referred to as newly eligible adults).[3] States that elected to expand Medicaid received 100 percent federal funding for this newly eligible population through 2016, with the federal share declining to 90 percent for 2020 and subsequent years. As of October 2016, 31 states and the District of Columbia had opted to expand Medicaid eligibility under PPACA. In 2015, the Centers for Medicare & Medicaid Services (CMS) projected that total spending for Medicaid will rise an average of 6.4 percent per year from 2015 to 2024 (see figure 19).

Figure 19: Growth Trends in Total Medicaid Spending by Eligibility Group

Figure 19: Growth Trends in Total Medicaid Spending by Eligibility Group

States also vary in the extent to which they are affected by economic downturns, which in turn can affect their Medicaid programs. The federal government matches most state expenditures using a statutory formula based in part on each state’s per capita income. We and others have noted that states’ efforts to fund Medicaid can be challenged during economic downturns, when Medicaid enrollment can rise and state revenues can decline. To ensure that federal funding efficiently and effectively responds to the program’s countercyclical nature, we have emphasized the need for timely and targeted federal assistance to stabilize states’ funding of Medicaid during such periods.[4] Such assistance would support states with declining revenues or increased enrollment during a national economic downturn, further stabilizing the financing of this important program.

An overarching challenge for the Medicaid program is the lack of accurate, complete, and timely data CMS needs to oversee the diverse and complex state Medicaid programs. Our work has made it clear that insufficient data have affected CMS’s ability to ensure proper payments and beneficiaries’ access to services. CMS’s two primary data sets—the CMS-64, which serves as the basis for calculating the amount of federal matching funds for states, 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 state financing, payments, and overall spending in the Medicaid program. However, the data’s usefulness is limited because of issues with completeness, timeliness, and accuracy. Improved data would enhance CMS oversight, allowing for improved monitoring of program financing and payments, beneficiary access, and compliance with Medicaid laws and requirements. CMS has acknowledged the need for improved Medicaid data and has undertaken a number of steps aimed at streamlining and improving the quality of data currently reported by states and available to CMS for oversight purposes.[5]


[1] Centers for Medicare & Medicaid Services, Office of the Actuary, 20163 Actuarial Report on the Financial Outlook for Medicaid  (Baltimore, Md.: 2017).

[2] Medicaid essentially operates as 56 separate programs—1 in each of the 50 states, the District of Columbia, and each of the 5 largest U.S. territories: American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, and the U.S. Virgin Islands.

[3] PPACA also provides for 5 percent of an applicant’s income to be disregarded when calculating modified adjusted gross income for determining Medicaid eligibility, which effectively increases this income level to 138 percent of the federal poverty level.

[4] See GAO, Medicaid: Changes to Funding Formula Could Improve Allocation of Funds to States, GAO-16-377T (Washington, D.C.: Feb. 10, 2016); and Medicaid: Prototype Formula Would Provide Automatic, Targeted Assistance to States during Economic Downturns, GAO-12-38 (Washington, D.C. Nov. 10, 2011).

[5] In its Comprehensive Medicaid Integrity Plan, CMS noted efforts to improve the quality and consistency of Medicaid data reported to CMS. See CMS, Comprehensive Medicaid Integrity Plan, Fiscal Years 2014-2018. For example, CMS has an ongoing effort to implement the Transformed Medicaid Statistical Information System (T-MSIS) to increase and improve the data collected through MSIS. T-MSIS is to include data about enrollees, services, and costs, including FFS claims, managed care encounters, beneficiary eligibility and demographics, and provider enrollment.

Our Work Suggests the Need for Continued Attention in Five Principal Areas

The effects of ongoing reforms and other changes to the Medicaid program will continue to emerge in the coming years, and congressional interest in how to improve this important program remains high. In July 2015—the 50th anniversary of Medicaid—we testified on key issues facing the program and oversight gaps, based on dozens of our reviews of the Medicaid program.[1] That report and our other work to date illustrate the continuing challenges facing Medicaid and the need for improved federal oversight in five areas:

1.  Financing and Provider Payment Transparency and Oversight
2.  Managed Care Payments and Utilization Oversight
3.  Growing Expenditures for and Oversight of Large Medicaid Demonstrations
4.  Monitoring and Measurement of Access to Quality Care
5.  Growing Expenditures for Long-Term Care Services

Financing and Provider Payment Transparency and Oversight

Complete and accurate data on state financing and payments to individual providers is essential for CMS to effectively oversee state Medicaid programs. Without more transparent information on state funding sources and program payments, CMS is unable to determine whether program expenditures are appropriate or to ensure the fiscal integrity of the program. Congress has held multiple hearings on these issues, including a November 2015 hearing at which the House Committee on Energy and Commerce, Subcommittee on Health, examined possible legislative remedies to address concerns we have raised in multiple reports about the transparency of Medicaid financing and payments to individual providers.[2]

Financing transparency and oversight. In recent years, states have increasingly relied on funds from providers and local governments to finance the nonfederal share of Medicaid, with implications for federal costs. While states finance the nonfederal share in large part through state general funds, they also depend on other sources of funds, such as taxes on health care providers and transfers of funds from local governments. Our 2013 survey of states found that, in 2012, states financed over one-quarter—over $46 billion—of the nonfederal share of Medicaid with funds from health care providers and local governments, an increase of over 21 percent since 2008 from these sources. Our work has illustrated that by requiring providers to supply all or more of the nonfederal share of Medicaid payments, states can claim an increase in federal matching funds without a commensurate increase in state expenditures. This shifts costs from the state to the federal government.

Identifying the sources of nonfederal funds is essential to assessing their effect; however, CMS does not collect complete or accurate information on these sources of nonfederal funds. Apart from data on provider taxes and donations, CMS does not require states to provide information on the funds they use to finance Medicaid nor ensure that the data they do collect are accurate and complete. This lack of transparency in states’ sources of funding hinders CMS’s ability to determine whether increasing payments to providers provides fiscal relief to the state or whether increasing payments to providers improves beneficiary access. Without accurate information on how states finance their Medicaid programs, CMS is also unable to ensure that states comply with federal requirements. For instance, under federal law, at least 40 percent of the state share must be from state funds, which includes state general funds, provider taxes and donations, and transfers from other state agencies.[3] CMS disagreed with our recommendation to take action to improve the information available on states’ sources of the nonfederal share of Medicaid payments. In 2015, legislation was introduced that would require CMS to take such action.[4]

Oversight of payments to institutional providers. Over the years, we and others have reported on CMS’s oversight of payments that states often make to institutional providers, such as hospitals and nursing facilities, which have raised questions. In particular, concerns have been raised about states making large Medicaid supplemental payments—payments in addition to the regular, claims-based 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.[5] In fiscal year 2015, the latest date for which data are available, these payments totaled about $55 billion. 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.[6]

Among other concerns related to CMS oversight of supplemental payments, we have found the agency lacks a policy and process for determining whether payments made to individual providers are economical and efficient, as required by law, and lacks clear guidance on appropriate methods for states to distribute payments.[7] For example, in 2015, we reported that three hospitals in New York received supplemental payments that resulted in overall Medicaid payments to the hospitals that greatly exceeded their cost of providing Medicaid services. CMS, in response, required New York to retroactively reduce supplemental payments to the hospitals by more than $1.5 billion—including $771 million in federal funds—over 4 years.

Further, in a 2016 report, we found that selected states distributed supplemental payments to hospitals largely based on the availability of local government funds to finance the nonfederal share, rather than on the volume of services each hospital provided. In addition, officials from hospitals that received payments above costs reported using the excess revenues from these supplemental payments broadly, from covering the costs of uninsured patients to funding general hospital operations, maintenance, and capital purchases, such as for a helicopter.

Based on the findings from these reports, we have recommended that CMS (1) clarify criteria for determining the economy and efficiency of payments to individual providers, (2) issue guidance clarifying its policies that supplemental payments should be linked to the provision of Medicaid services and not be contingent on the availability of local financing, and (3) require provider-specific reporting of certain types of supplemental payments. In 2015, legislation was proposed that would require CMS to collect provider-specific data on states’ supplemental payments.[8] As of fall 2016, CMS was pursuing regulatory actions to address some of the concerns we raised, including requiring states to report information about how they distribute supplemental payments.

Managed Care Payments and Utilization Oversight

As of 2014, the latest date for which this information is available, more than three-fourths of Medicaid beneficiaries received some of their services in a managed care delivery system, in which the state typically contracts with managed care organizations (MCO) to provide a specific set of services for beneficiaries for a set amount per beneficiary per month. Federal spending for managed care in fiscal year 2014 was $107 billion, which accounted for over one-third of federal Medicaid spending that year and represented a significant increase from 2013. Increased enrollment and spending for Medicaid managed care makes effective federal and state oversight of this large and complex component of the Medicaid program critical, and underscores the need for reliable data to assess the appropriateness of states’ payments to MCOs and beneficiaries’ access to MCO services. In our work examining federal expenditures for MCOs, we determined that state payments to MCOs in 2014 varied widely across and within 8 states as did the average annual MCO payments per beneficiary, which ranged from $2,784 in California to $5,180 in Pennsylvania.[9] While this variation could be due, in part, to differences in the enrolled population and geographic costs and utilization patterns, it suggests the need to further examine the relationship between higher MCO spending and beneficiaries’ experiences.

Further, federal law requires states to collect encounter data—records of health care services for which MCOs pay—and submit these data to CMS using MSIS. Having reliable encounter data that provides information on service utilization is important as MCOs receive a fixed amount per beneficiary regardless of the number of services used and therefore may have financial incentives to limit beneficiaries’ access to services. However, in our work examining beneficiary utilization of services, we could not fully assess utilization patterns for Medicaid managed care beneficiaries in 19 states because MSIS data were either not available (11 states) or were unreliable (8 states).[10] In May 2016, CMS issued a final rule for Medicaid managed care that includes provisions aimed at improving Medicaid managed care encounter data submissions.[11] For example, for contracts with MCOs and limited benefit health plans beginning on or after July 1, 2017, states are required to include provisions regarding the maintenance of encounter data, and, by July 1, 2018, to have procedures in place to validate that the enrollee encounter data these entities submit are complete and accurate.[12]

Growing Expenditures for and Oversight of Large Medicaid Demonstrations

Medicaid demonstrations have become a significant proportion of Medicaid expenditures, growing steadily from about $50 billion, or about 14 percent of total Medicaid expenditures in fiscal year 2005, to $165 billion, or close to one-third of total Medicaid expenditures in fiscal year 2015.[13] 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 can provide a way for states to test and evaluate new approaches for delivering Medicaid services. By policy, demonstrations should be budget neutral to the federal government; that is, they must not increase federal costs. In July 2015, CMS changed its organizational structure and increased its staffing to oversee section 1115 demonstrations and their growing role in the Medicaid program, and we continue to assess CMS’s approval and oversight of spending for these demonstrations.

Expenditure authorities in Medicaid demonstrations. Using its authority under Section 1115 of the Social Security Act to approve costs that would not otherwise be matchable under Medicaid, HHS has approved Medicaid spending for a wide range of purposes beyond extending coverage to new populations or for new benefits. For example, HHS approved demonstrations that allowed 5 states to spend up to $9.5 billion to fund state health programs that were previously financed at least in part by the state or potentially other federal programs. HHS also approved 8 states to make more than $26 billion in supplemental payments to hospitals and other providers. We found that HHS’s criteria and approval documents were not always clear as to how approved spending would further Medicaid objectives.[14] For example, some of these state programs appeared to be only tangentially related to improving health outcomes for low-income individuals and lacked documentation explaining how approving them would promote Medicaid objectives. We also found that demonstration approvals sometimes lacked assurances that demonstration spending would not duplicate other federal funds received by states.

In response to our work, HHS issued general criteria for determining whether demonstrations met Medicaid objectives, which it had not delineated before. HHS also committed to identifying in approval documents how each expenditure authority promoted Medicaid objectives and providing assurances that demonstration funds would not duplicate other federal funds. While issuing the general criteria is a useful first step, we maintain that given the breadth of the Secretary’s authority under section 1115—the exercise of which can result in billions of dollars of federal expenditures for costs that would not otherwise by allowed under Medicaid—more explicit criteria are needed.

Budget neutrality of Medicaid demonstrations. We remain concerned about the Secretary of HHS’s lack of an adequate budget neutrality policy including the criteria and process for reviewing and approving demonstration spending limits and the lack of a written, up-to-date policy that is readily available to state Medicaid directors and others. In multiple reports, we have found that 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. For example, in 2014, we reported that HHS had approved a spending limit for Arkansas’s demonstration—to test whether providing premium assistance to purchase private coverage through the health insurance exchange would improve access for newly eligible Medicaid beneficiaries—that was based, in part, on hypothetical, not actual, costs. We estimated that by allowing the state to use hypothetical costs, HHS approved a demonstration spending limit that was over $775 million more than what it would have been if it was based on the state’s actual payment rates for services under the traditional Medicaid program.

Another troubling precedent is that HHS granted Arkansas and 11 other states additional flexibility in their demonstrations to increase the spending limit if costs proved higher than expected.[15] Our report on Arkansas was the latest in a series of reports showing significant concerns with HHS’s process for reviewing and approving spending under demonstrations. For example, in 2013 we reported that, for 4 of 10 demonstrations we reviewed, HHS approved spending limits that exceeded those that were supported in documentation and by HHS’s own policy by an estimated $32 billion. We have recommended that HHS (1) better ensure that valid methods are used to demonstrate budget neutrality, (2) clarify criteria for reviewing and approving demonstration spending limits, (3) document and make public the basis for approved spending limits, and (4) update its written budget neutrality policy to reflect the actual criteria and processes used to develop and approve demonstration spending limits.

HHS has generally disagreed that changes to its policy and process are needed. Congress has held hearings, sent letters to CMS, and proposed legislation regarding how CMS reviews and approves demonstration spending limits. Although HHS has not issued a written budget neutrality policy as of October 2016, HHS has taken some steps to improve its oversight, including issuing a report in October 2015 to Congress on actions taken with respect to Medicaid demonstrations. The report discussed some steps HHS has taken and planned to take to improve access to program information and the transparency of its criteria for approving expenditures. Further, in 2016 HHS took steps to change its budget neutrality methodology that are intended to result in more appropriate demonstration spending limits.[16] Nonetheless, we maintain that HHS must take the additional actions specified in our recommendations to improve the transparency of its demonstration approvals.

Monitoring and Measurement of Access to Quality Care

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. 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.[17] To help assess Medicaid enrollees’ access to care, CMS needs better data.

Access to preventive, oral, and mental health services. 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. For example, states are required to provide preventive services for children through the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit. However, national data collected by HHS suggest that Medicaid beneficiaries receive these services at rates below established goals. In addition, our 2016 work showed that, due to variation across states in the scope, functionality, and availability of resources on provider information, Medicaid beneficiaries in FFS arrangements may face challenges in identifying available providers in their respective states. State Medicaid programs have also 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 increased their 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 have problems accessing mental health providers and may not be receiving appropriate mental health treatment and services. For example, national survey data indicate concerns that some children enrolled in Medicaid may be inappropriately prescribed psychotropic drugs and are not receiving needed mental health services, such as counseling and therapy.

Better data needed to assess enrollees’ access to care. CMS’s ability to assess beneficiaries’ access to services is complicated by insufficient data. For example, in reviewing states’ EPSDT reports for our 2011 report, we found reporting errors large enough to overstate the extent to which children received services, and we found that states did not always report required data on the number of children referred for additional services. Further, the currently reported state data do not indicate whether children referred for preventive services actually received the services.

CMS has taken steps to better identify reporting errors and obtain corrected data, but as of September 2016, CMS has no plans to require states to report whether children received the treatment services for which they were referred. Our 2015 work on MCOs described above also points out the need for better data to understand MCO beneficiaries’ access to covered services, including differences in access that could help explain the wide variation in MCO payments per beneficiary we identified. Finally, given that PPACA requires states to cover certain recommended preventive services for newly eligible adults in states that expanded Medicaid under the law, data are needed to determine whether this coverage helps improve beneficiaries’ access to and receipt of these services.

Growing Expenditures for Long-Term Care Services

Medicaid is the nation’s primary payer of long-term care services and supports (LTSS) for aged and disabled individuals. Medicaid spending (federal and state) on LTSS is significant—in 2016, we reported LTSS spending was an estimated $152 billion in fiscal year 2014 (see figure 20), or about one-quarter of the program’s total expenditures annually. The demand for LTSS is expected to increase as the nation’s population ages and life expectancy increases, including individuals with disabilities and complex health needs who require long-term services and supports.

Figure 20: Medicaid Expenditures for Long-Term Services and Supports, Fiscal Years 1994-2014

Figure 20: Medicaid Expenditures for Long-Term Services and Supports, Fiscal Years 1994-2014

Monitoring of long-term care services provided in the community. Medicaid LTSS spending for services provided to beneficiaries in home- and community-based settings has grown rapidly and now exceeds spending for care provided in institutional settings, such as nursing homes. Monitoring and oversight of these services is important for ensuring quality of care, as the individuals who rely on these services are among Medicaid’s most vulnerable, and while home- and community-based services can enable people to live more independently, the services are not without risk.

In the case of personal care services—an important type of long-term care service to help individuals who have limited ability to care for themselves—beneficiaries receiving these services include aged individuals and individuals with physical, developmental, or intellectual disabilities. When personal care services are provided in a private home, other providers or community members may not be present to help discourage or report questionable activities. Further, depending on the state and the personal care services program, personal care attendants who provide personal care services may not be required to have specialized training. Personal care services—for which Medicaid paid $15 billion on a fee-for-service basis in calendar year 2015—are also among the highest at risk for improper payments, including for services which were billed but never provided to the beneficiary. In 2014, CMS estimated over $2 billion of payment errors for Medicaid personal care services.[18] In 2016, we found that while CMS has taken several steps to improve oversight of personal care services, it has not collected all required state reports on beneficiaries’ health and welfare for some programs, and it could do more to harmonize the patchwork of federal program requirements intended to oversee beneficiary safety and assure that billed services are provided. Such harmonization would help ensure a more consistent administration of policies and procedures and could enhance oversight.[19]

Finally, another important change in the delivery of Medicaid-funded LTSS is the rapid growth in managed care, which in 2014 accounted for almost 15 percent of Medicaid LTSS expenditures. We will continue to monitor Medicaid’s use of managed care to deliver LTSS as well as other aspects of the program’s growing support for LTSS and examine the implications for oversight.


[1] See GAO, Medicaid: Overview of Key Issues Facing the Program, GAO-15-746T (Washington, D.C.: July 8, 2015).

[2] See GAO, Medicaid: Completed and Preliminary Work Indicate that Transparency around State Financing and Payments to Providers Is Still Needed for Oversight, GAO-14-817T (Washington, D.C.: July 29, 2014); Medicaid: Overview of Key Issues Facing the Program, GAO-15-746T (Washington, D.C.: July 8, 2015); and Medicaid: Improving Transparency and Accountability of Supplemental Payments and State Financing Methods, GAO-16-195T (Washington, D.C.: Nov. 3, 2015).

[3] The remaining 60 percent may be derived from funds from local governments. 42 U.S.C. § 1396a(a)(2).

[4] For example, H.R. 1362 was introduced in March 2015 to require each state to report each source of funds, each entity providing such funds, and the amount of funds from each source, used by the state to finance the non-federal share of expenditures under Medicaid. On November 3, 2015, the House Committee on Energy and Commerce, Subcommittee on Health, held a hearing at which our concerns related to transparency of state financing arrangements were discussed. However, no additional action was taken on H.R. 1362 in the 114th Congress.

[5] Supplemental payments made by states include Disproportionate Share Hospital (DSH) payments, Medicaid Upper Payment Limit (UPL) payments, and supplemental payments authorized under Medicaid demonstrations. States are required by federal law to make DSH payments to certain hospitals to help offset these hospitals’ uncompensated care costs for serving large numbers of Medicaid and uninsured low-income individuals. Medicaid UPL supplemental payments are made by states to hospitals and other providers that are above the regular Medicaid payments but within the UPL, which is defined as the amount that Medicare would pay for comparable services. Under Section 1115 of the Social Security Act, states may apply to and receive approval from CMS for a demonstration that allows states to deviate from their traditional Medicaid program. Spending authorities under the demonstrations provide states with the ability to claim federal Medicaid funds for new types of expenditures, including the costs of making additional payments, that is, supplemental payments, to providers from funding pools authorized under the demonstrations.

[6] Concerns have also been raised about higher, regular claims-based payments made to government facilities.

[7] Federal law requires that payments to providers be economical and efficient, as well as sufficient to ensure that Medicaid care and services are available at least the extent that such care and services are available to the general population in the same geographic area. 42 U.S.C. § 1396a(a)(30)(A).

[8] For example, H.R. 2151 was introduced in April 2015, to require states to conduct annual audits, and report annually on Medicaid UPL payments to individual institutional providers. It would also require the Secretary of HHS to issue guidance to states that identifies permissible methods for calculating Medicaid UPL payment amounts. On November 3, 2015, the Subcommittee on Health, House Energy and Commerce Committee held a hearing to discuss this and other legislation proposed to improve the Medicare and Medicaid programs. However, no additional action was taken on H.R. 2151 in the 114th Congress.

[9] These numbers reflect the average payment per full year equivalent, which represents 12 months of enrollment.

[10] Among other reasons, we determined that data were unreliable in that states reported that fewer than 30 percent of beneficiaries used at least 1 service, a threshold established by Mathematica for evaluating the completeness and usability of the data, and states did not report services using a standard coding convention. See GAO, Medicaid: Service Utilization Patterns for Beneficiaries in Managed Care, GAO-15-481 (Washington, D.C.: May 29, 2015).

[11] 81 Fed. Reg. 27498 (May 6, 2016).

[12] Under the rule, CMS may defer or disallow federal matching funds on all or part of an MCO’s contract if its data do not comply with regulatory requirements. 81 Fed. Reg. at 27881, 27895 (to be codified at 42 C.F.R. §§ 438.242, 438.818).

[13] Expenditures are adjusted for inflation to 2015 dollars using the gross domestic product price index and exclude administrative costs.

[14] GAO, Medicaid Demonstrations: Approval Criteria and Documentation Need to Show How Spending Furthers Medicaid Objectives, GAO-15-239 (Washington, D.C.: Apr. 13, 2015).

[15] In September 2014, the Chairman of the House Committee on Energy & Commerce and the Ranking Member of the Senate Committee on Finance sent a letter to CMS asking among other things how the agency planned to ensure that spending for those newly eligible under Arkansas’s demonstration would not cost the federal government more than it would have cost under traditional Medicaid.

[16] For example, according to CMS officials, starting in May 2016, the agency began reducing the amount of accumulated savings that states can carry over when demonstrations are renewed, which was previously unlimited.

[17] In calendar years 2008 and 2009, less than four 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.

[18] The challenges and risks associated with these and other Medicaid improper payments are discussed on page 578 of this report.

[19] The 21st Century Cures Act imposes new requirements for personal care and home health services offered under the state plan that require an in-home visit by a provider. Specifically, personal care services provided on or after January 1, 2019, and home health services provided on or after January 1, 2023, must be electronically verified with respect to service type, date, and location, among other factors. Pub. L. No. 114-255, § 12006 (2016).

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

We have suggested Congress take the following actions:

  • To improve the transparency of and accountability for certain high-risk Medicaid payments that total tens of billions of dollars annually, Congress should 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.
  • To improve the fiscal integrity of Medicaid, Congress should consider requiring increased attention to fiscal responsibility in approving 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.
  • To ensure that federal funding efficiently and effectively responds to the countercyclical nature of the Medicaid program, Congress should consider enacting a federal matching formula that targets variable state Medicaid needs and provides automatic, timely, and temporary increased federal assistance in response to national economic downturns.

In addition, we have made recommendations to HHS and CMS, including:

  • To improve CMS’s oversight of Medicaid payments, the Administrator of CMS should develop (1) a policy establishing criteria for when such payments at the provider level are economical and efficient; and (2) a process for identifying and reviewing payments to individual providers, once criteria are developed, in order to determine whether they are economical and efficient.
  • To improve the transparency of the process for reviewing and approving spending limits for comprehensive section 1115 demonstrations, the Secretary of Health and Human Services should 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.
  • To meet HHS’s fiduciary responsibility of ensuring that section 1115 waivers are budget neutral, the Secretary should better ensure that valid methods are used to demonstrate budget neutrality, by developing and implementing consistent criteria for considering proposals for section 1115 demonstration waivers.
  • To better understand the effect of certain personal care services on beneficiaries and more consistently administer policies and procedures across personal care services programs, the Secretary of HHS should direct the Administrator of CMS to (1) collect and analyze required state information on the impact of certain personal care services programs, and (2) take steps to further harmonize federal requirements across programs providing personal care services.
  • In light of the need for accurate and complete information on children’s access to health services under Medicaid and State Children’s Health Insurance Program (CHIP), CMS should work with states to identify additional ways to improve reports used to monitor children’s access to services, including identifying how to capture information related to whether children receive treatment services for which they are referred.
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