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The Department of Health and Human Services Centers for Medicare & Medicaid Services (CMS), the agency that oversees the program at the federal level, faces many challenges in overseeing payments and ensuring that children covered by Medicaid receive needed services. Because of concerns about inadequate federal oversight of the large and growing program, Medicaid has been designated as high risk.

• CMS has not developed an effective program integrity strategy to identify and prevent fraud, waste, and abuse, despite estimated improper payments totaling more than $20 billion a year in federal funds. It currently uses different audit approaches with varying results.

Figure 1: Number of Audits and Potential NMAP Overpayments and through February 2012

• Medicaid is the largest payer of long-term care and these services comprise over one-quarter of the total Medicaid expenditures. Variation in states’ policies and practices raises questions regarding how states determine Medicaid eligibility for long-term care and implement federal requirements to ensure that only eligible individuals receive Medicaid coverage.

Figure 2: Percentage of Nationwide Spending on Long-Term Care Services, by Payment Source (2009)

• Children in Medicaid receive basic preventive health care for some services at rates similar to those of children with private insurance. However, many families experience difficulties accessing some types of services, such as mental and oral health services. Although states are required to provide these services, millions of children do not receive them.

Figure 3: Percentage of Children in Medicaid Receiving Any Dental Service, Fiscal Year 2008

• Gaps remain in federal oversight of supplemental Medicaid payments that states often make to certain providers as lump sum payments that are not based on claims for specific services, and can generate tens of billions of dollars in federal matching funds for states.

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