From the U.S. Government Accountability Office, www.gao.gov Transcript for: Medicaid Payments to Health Care Providers Description: Audio Interview by GAO staff with Katherine Iritani, Director, Health Care Related GAO Work: GAO-15-322 Medicaid: CMS Oversight of Provider Payments Is Hampered by Limited Data and Unclear Policy Released: May 2015 [ Background Music ] [ Narrator: ] Welcome to GAO's Watchdog Report, your source for news and information from the U.S. Government Accountability Office. It's May 2015. Under Medicaid, states pay health care providers and receive federal matching funds for their payments. We have previously found that some states’ excessive Medicaid payments to certain provider institutions shifted costs inappropriately from states to the federal government. A team led by Katherine Iritani, a director in GAO's Health Care team, recently compared state Medicaid payments to government and private health care provider institutions. GAO's Jacques Arsenault sat down with Katherine to discuss what they found. [ Jacques Arsenault: ] How do states determine how much to pay Medicaid providers? [ Katherine Iritani: ] Within certain federal rules, states have flexibility for determining who to pay and how much to pay them. States make regular payments through the claims process to hospitals and other providers, but states also make another kind of payment called supplemental payments that are payments above and beyond the regular payment rates. And these payments across the country amount to tens of billions of dollars, but are not reported on a consistent basis to the federal government and often are directed to hospitals. So supplemental payments there is much less known about it so what we try to do in this work was to actually, in a couple selected states, obtain the supplemental payment data, obtain the regular claims data, and analyze how much individual providers were receiving on an average daily payment basis. [ Jacques Arsenault: ] And so then in your report, what did you find about how these payments to government providers compared to payments to private providers? [ Katherine Iritani: ] We selected three large states to try to do this assessment of how payments to government providers compared to private in California, Illinois, and New York. And, as I mentioned, the data is challenging. We actually were not able to use the data that California had, so we focused on the remaining two states where we did have some useable data. And basically what we found in looking at the payments to providers there was that the trends were somewhat inconclusive. In Illinois, the average daily payment amounts for government providers was about the same as what they were paying private providers. And in New York, government hospitals, local government hospitals, were paid on average higher daily payment than private hospitals. But the reason that the average was higher was actually just large payments that were made to two hospitals. In New York that was driving up the average. What was particularly striking in the analysis was the large variation in the payments, the daily payment amounts that the states were making to individual hospitals. There was a wide range. And those payments, for example, in Illinois, the daily payments for local government hospitals range from less than $600 to almost $10,000 on a daily basis. [ Jacques Arsenault: ] That sounds like a lot of variation. Can you talk about some of the effects of this variation that you found? [ Katherine Iritani: ] The concern that we raised with the large variation is that without having this kind of information and assessment the federal government doesn't know whether or not payments are excessive. We looked at some of the highly paid hospitals and found a number of hospitals, a small number in each of the states, where the Medicaid payments exceeded the hospitals’ cost of providing care to Medicaid beneficiaries. A small number of hospitals received Medicaid payments that exceeded the total operating cost of the hospital. So, it just raises questions about whether or not the payments are being used for Medicaid. [ Jacques Arsenault: ] Let me ask you then what kinds of oversight does the Centers for Medicare and Medicaid Services conduct regarding payments to hospitals and other providers? [ Katherine Iritani: ] Well CMS has program integrity efforts that look at the individual claims for services—the regular payments. There is much less oversight on the supplemental payment side and CMS really lacks the data to assess payments to individual providers because it doesn't have that data on the supplemental payments. [ Jacques Arsenault: ] And, finally, what would you say is the bottom line of this report? [ Katherine Iritani: ] So Medicaid's a very important program for the 60 plus million people that depend on it--low income and medically needy individuals. It's a very costly program—500 billion less in cost to federal government and states. And without data on the payments that are being made to providers, it's really hard for the federal government to oversee the program and ensure that payments are appropriate. [ Background Music ] [ Narrator: ] To learn more, visit GAO.gov and be sure to tune in to the next episode of GAO's Watchdog Report for more from the congressional watchdog, the U.S. Government Accountability Office.