ADP Systems:

Better Control Over States' Medicaid Systems Needed

IMTEC-89-19: Published: Aug 2, 1989. Publicly Released: Aug 2, 1989.

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GAO evaluated the Health Care Financing Administration's (HCFA) management of and control over federal funds for helping states, to acquire, operate, and enhance automated Medicaid systems by reviewing 129 automation-funding requests states made between November 1985 through July 1988.

GAO found that HCFA: (1) approved 116 automation requests, totalling about $119 million, which lacked such federally required supporting evidence as cost and benefit analyses and evaluations of alternatives; (2) did not adequately define the information states needed to include in automation requests; (3) lacked information on the status of 112 projects costing about $110 million, since it did not require states to report on approved automation projects; (4) generally did not determine whether completed automation projects were providing the expected benefits; and (5) funded automation enhancements at a 90-percent funding rate, although the applicable laws authorized 90-percent funding for automation acquisition and 75-percent funding for automation operation.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: HCFA contends that the abovementioned requirements have always been in place. It has not revised its manual, but has placed increased emphasis on its regulations by notifying the states that costs must be reported and projects must be evaluated.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to amend the State Medicaid Manual, Part 11, to include: (1) the regulatory requirements for states to prepare and submit cost and benefit analyses with all requests for federal funding of automated systems; (2) guidelines for preparing cost and benefit analyses, recognizing that the effort expended in performing such analyses should be commensurate with the estimated costs of proposed projects; and (3) a requirement for states to evaluate system alternatives, including reviewing systems already developed or planned by other states, and submit these evaluations with requests for funding of automated systems.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: Regional offices continue to review states' funding requests and have increased their monitoring of state projects. A work group has been formed to strengthen project oversight.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to amend HCFA State Medicaid Manual, Part 11, to require: (1) states periodically to notify the regional offices of the status of approved projects in order to facilitate review of the progress and completion of these projects; and (2) regional offices to conduct post-implementation reviews of completed projects in order to determine if projected benefits are being achieved and identify systems that could provide benefits to other states.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: GAO recommended lowering the federal funding rate from 90 percent to 75 percent for state enhancements for Medicaid systems. HCFA agreed, but lowered the rate, through Regulation BQC-59, dated October 13, 1989, to 50 percent.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to consider the application of a 75-percent federal funding rate for enhancements to states' Medicaid systems.

    Agency Affected: Department of Health and Human Services

 

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