Improving Medicaid Cash Management Will Reduce Federal Interest Costs

HRD-81-94: Published: May 29, 1981. Publicly Released: May 29, 1981.

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GAO reviewed the state systems for recovering Medicaid overpayments to providers and for returning the federal share of these overpayments to the Department of Health and Human Services (HHS).

GAO found that over $11 million in Medicaid and other program funds were in non-interest-bearing checking accounts in three states. Because the banks had use of this money, the federal and state governments lost incurred interest of over $1.3 million. One of the banks involved reported earning $512,000 on the Medicaid funds it held for an 11-month period. Some states drew federal funds in excess of current disbursement needs, invested the balances, and retained the interest earned. States had not returned the federal share of $23 million it identified as uncollected overpayments. The time that elapsed between when states made cash collections and when they returned the federal share enabled states to earn substantial amounts of interest on federal funds.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In August 1982, HCFA issued instructions for establishing uniform procedures for handling uncashed Medicaid checks.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator of the Health Care Financing Administration (HCFA) to establish procedures for uniform crediting of the federal share of uncashed Medicaid checks and ensure that such credits are timely and accurate.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: Section 9512 of the Consolidated Omnibus Budget Reconciliation Act of 1985 requires that overpayments be recouped in 60 days, regardless of when the state collected the overpayment. HCFA is rewriting the proposed regulations to conform to the requirements in the Consolidated Omnibus Budget Reconciliation Act of 1985.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to modify the procedures through which the federal share of recovered Medicaid overpayments is returned to eliminate the long elapsed time between recovery and return of the federal share.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: All states, except those with state statutory or constitutional constraints, have taken action to minimize the amount of federal Medicaid money being held by them.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to review Medicaid cash management practices in all states, except the 10 largest where actions are currently underway, and take appropriate actions to minimize the amount of federal money being held by the states.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Implemented

    Comments: In August 1982, HCFA issued instructions covering state requirements for the agreements between Medicaid fiscal agents and the banks it uses for Medicaid checking services.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to require states or their fiscal agents to have written agreements with the banks used for Medicaid checks, which ensure that Medicaid checking services are obtained at reasonable costs considering both bank charges and the ability of banks to invest deposit balances.

    Agency Affected: Department of Health and Human Services

 

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