Medicaid - High Risk Issue
Medicaid plays an important role in providing health care coverage for about 70 million low-income individuals, including children, adults, and individuals who are aged or disabled. The program is jointly financed by the federal government and the states and costs more than $550 billion a year.
The Centers for Medicare & Medicaid Services (CMS) is the agency within the Department of Health and Human Services (HHS) that oversees the program at the federal level. An overarching challenge for the Medicaid program is the lack of accurate, complete, and timely data that affects CMS’s ability to oversee states’ diverse Medicaid programs and to ensure proper payments and beneficiaries’ access to services. Medicaid is high risk because of concerns about inadequate federal oversight of the large and growing program. Medicaid’s ongoing transformation— due to the aging of the population and other changes to state programs—highlights the importance of federal oversight, in particular with regards to transparency and oversight, program integrity, financing and operations, and access to quality care.
Transparency and oversight: The lack of complete and reliable data on states’ spending and financing of the nonfederal share of the program hinders federal oversight.
- CMS does not have the data needed to understand payments states make to individual providers nor a standard process for assessing whether payments are economical and efficient as required by law. Most states have made Medicaid payments to hospitals that exceeded those hospitals’ costs of providing Medicaid services, and there have been cases where the state’s Medicaid payments exceeded the hospital’s total operating costs. States are not required to limit Medicaid payments to Medicaid costs, but payments that greatly exceed Medicaid costs raise questions about whether those payments are economical and efficient, and ultimately used for Medicaid purposes.
- States have increasingly relied on funds from sources other than state general funds to finance the nonfederal share of their programs, such as health care provider taxes and funds transferred from local governments and local government health care providers. While states are permitted to finance up to 60 percent of the nonfederal share from local government funds, some states have restricted certain types of Medicaid payments to just those providers able to secure local funding, and have made these payments contingent on such funding. Arrangements that make Medicaid payments contingent on local funding of the nonfederal share are counter to CMS policy. Moreover, reliance on providers and local governments for Medicaid funding can create incentives that result in cost shifts to the federal government.
Figure: Example of How One State's Use of Non-State Sources to Fund Medicaid Payments to Nursing Facilities Shifted Medicaid Costs to the Federal Government in State Fiscal Year 2012
Improvements in the HHS criteria, policy, and process for approving states’ spending under demonstrations—state projects that may test new ways to deliver or pay for care—are needed to potentially prevent billions of dollars in unnecessary federal spending. Medicaid expenditures on such demonstrations reached $165 billion in fiscal year 2015, which represents close to one-third of total Medicaid spending that year.
- HHS’s criteria and approval documents have not always been clear as to how approved demonstration spending would further Medicaid objectives, and demonstration approvals have sometimes lacked assurances that demonstration spending would not duplicate other federal funds received by states.
- 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.
Program integrity: With estimated improper payments totaling more than $36 billion in federal dollars in fiscal year 2016, CMS needs to improve the effectiveness of its program integrity efforts to help identify and prevent improper payments, such as payments for non-covered services or services that were billed for but never provided.
- CMS has taken steps to improve Medicaid program integrity, including establishing requirements that all Medicaid managed care providers enroll with the state Medicaid agency, providing states with federal data to strengthen enrollment screening, and providing additional guidance to states on specific provider screening and reporting provisions in the 21st Century Cures Act. However, available federal data do not include all of the information necessary for states to effectively and efficiently process Medicaid provider applications. As a result, states and managed care plans rely on fragmented information from multiple and disparate databases to screen managed care providers, and often struggle to access and use these databases because of difficulties conducting provider matches across databases.
- CMS completed three checks for duplicate coverage and coverage gaps for individuals transitioning between Medicaid and health insurance exchange coverage in states with federally facilitated exchanges and intends to conduct checks twice per year. However, CMS has not developed a plan, including thresholds for the level of duplicate coverage it deems acceptable, to routinely monitor the effectiveness of those checks.
- There are also gaps in CMS’s efforts to ensure that only eligible individuals are enrolled into Medicaid, and that Medicaid expenditures for enrollees, including enrollees newly eligible as a result of the Patient Protection and Affordable Care Act (PPACA) expansion, are matched appropriately by the federal government.
- Five U.S. territories have seen temporary increases in federal Medicaid funding, but there is little assurance that Medicaid funds are protected from fraud, waste and abuse. Federal and territory officials cited resource constraints and the territories’ smaller Medicaid expenditures as reasons for limited oversight efforts in the territories.
Financing and operations:
The federal government and states share in the financing of the Medicaid program, with the federal government matching most state expenditures for Medicaid services based on the Federal Medical Assistance Percentage (FMAP) formula, which uses per capita income to calculate each state’s federal matching rate.
- The current FMAP formula does not adequately address variation in the demand for services in each state, geographic cost differences, and state resources. There are multiple alternative data sources that could be used to develop measures of these state characteristics. Those measures could be combined in various ways to better align federal funding with states’ needs, offering them greater fiscal stability.
- Also, past efforts to provide states with temporary increases in federal assistance during national economic downturns were not as responsive to states’ economic conditions as they could have been. There are opportunities to improve the timing, amount, and duration of assistance provided to states, such as by using an automatic mechanism to trigger federal assistance and by better targeting assistance based on each state’s level of need. In designing an approach to providing assistance, policymakers could adjust the level of funding and other elements—such as when and how to start, end, and target the assistance—depending on circumstances such as competing budget demands and other state fiscal needs beyond Medicaid. One such option for providing automatic, timely, and targeted assistance during downturns is shown in the figure below. This option relies on economic data (e.g., the monthly employment-to-population ratio or EPOP) to begin assistance.
Figure: Prototype Formula for Temporary Increased FMAP Assistance to States
- Federal spending for Medicaid managed care increased from $27 billion in fiscal year 2004 to $107 billion in fiscal year 2014, and represented 38 percent of total federal Medicaid spending in fiscal year 2014—the most recent year for which these data are available. State payments to Medicaid managed care organizations (MCO) in 2014 varied widely across and within certain states reviewed, as did the average annual MCO payment per beneficiary, which ranged from $2,784 in one state to $5,180 in another state. As of 2014, more than three-fourths of Medicaid beneficiaries received some of their services in a managed care delivery system.
Figure: Comprehensive Risk-Based Managed Care Penetration in Medicaid by State, as of July 1, 2013
Increased enrollment and spending for Medicaid managed care make effective oversight critical; however, states’ oversight of Medicaid managed care varies. For example,
- five of eight states reviewed in 2015 required managed care organizations to annually meet minimum medical loss ratio (MLR) percentages—standards that ensure a certain proportion of payments are for medical care;
- state-reported encounter data—records on health care services for which MCOs pay—which federal law requires states to collect and submit to CMS, were either not available or were unreliable in 19 states reviewed in 2015; and
- states vary in methods used to assign beneficiaries to managed care plans.
- Medicaid’s growing expenditures for long-term care services and supports for aged and disabled beneficiaries—which were an estimated $152 billion in fiscal year 2016, or about one quarter of the program’s total annual expenditures that year—also warrant increased attention. The demand for these services is expected to increase as the nation’s population ages and life expectancy increases. 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.
Access to quality care: 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. Additionally, Medicaid beneficiaries may experience challenges accessing other types of services as well as providers. 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.
- State Medicaid programs have struggled to ensure that children receive appropriate oral health and mental health services when needed. For example, children in Medicaid took psychotropic medications at a higher rate than those with private insurance, and may not be receiving needed mental health services, such as counseling and therapy.
- Due to variation across states in the scope, functionality, and availability of resources on provider information, Medicaid beneficiaries in fee-for-service arrangements may face challenges in identifying available providers.
GAO-17-598T: Published: May 2, 2017. Publicly Released: May 2, 2017.
A growing number of people rely on Medicaid personal care services for help with daily tasks like bathing and eating. However, these types of services are at high risk for fraud and abuse—e.g., services that were paid for but never provided. We testified that federal and state rules for protecting Medicaid beneficiaries varied across personal care services programs. We also found that Medicaid...
GAO-17-386T: Published: Jan 31, 2017. Publicly Released: Jan 31, 2017.
Medicaid is a joint federal-state health care program for low income and medically needy people, with an estimated $36 billion in improper payments in fiscal year 2016. We've identified some ways to reduce these errors, such as by confirming that Medicaid's participants and health care providers meet eligibility requirements, effectively overseeing managed care organizations, and ensuring that pa...
GAO-17-173: Published: Jan 6, 2017. Publicly Released: Feb 6, 2017.
Medicaid made an estimated $36 billion in payment errors in 2016—underscoring the need for improved oversight. Federal Medicaid administrators rely on state-reported data to inform oversight activities, but we found continuing concerns regarding such data's completeness, accuracy, and timeliness. Although Medicaid administrators cite a key initiative to gather new, better data and improve prog...
GAO-16-377T: Published: Feb 10, 2016. Publicly Released: Feb 10, 2016.
In prior work, GAO identified alternative measures that could be used to allocate Medicaid funding to states more equitably than the current Federal Medical Assistance Percentage (FMAP) formula, which uses per capita income (PCI) to calculate each state's federal matching rate. GAO found that PCI is a poor proxy for both the size of a state's population in need of Medicaid services and the ability...
GAO-16-195T: Published: Nov 3, 2015. Publicly Released: Nov 3, 2015.
GAO has found that complete and reliable data are lacking on the tens of billions in Medicaid supplemental payments states often make, hindering transparency and oversight. In a November 2012 report, GAO found that Congress and the Centers for Medicare & Medicaid Services (CMS) have acted to improve transparency and accountability for one type of Medicaid supplemental payment known as disproportio...
GAO-18-528: Published: Jul 26, 2018. Publicly Released: Jul 26, 2018.
Almost half—$171 billion—of Medicaid spending in 2017 went to managed care organizations (MCO). In Medicaid managed care, states pay a set periodic amount to MCOs for each enrollee, and MCOs pay health care providers for the services delivered to enrollees. Used effectively, managed care can help states reduce Medicaid costs. However, managed care still is at risk of making incorrect payments...
GAO-18-598T: Published: Jun 27, 2018. Publicly Released: Jun 27, 2018.
The Medicaid program helped provide health care to an estimated 73 million people in fiscal 2017 at a cost of about $596 billion. This joint federal and state program continues to grow, and remains on our high risk list due to concerns about the adequacy of federal oversight and the program's vulnerability to fraud. This testimony focuses on the major risks to the integrity of Medicaid. Efforts n...
GAO-18-291: Published: May 7, 2018. Publicly Released: Jun 6, 2018.
Medicaid paid $171 billion—about half its total 2017 federal expenditures—to managed care organizations. The Centers for Medicare & Medicaid Services estimated that about 0.3% of that amount were improper payments. For the entire Medicaid program, CMS estimated about 10% of payments were improper, which led us to question the managed care rate. We examined state and federal reviews of manage...
GAO-18-444T: Published: Apr 12, 2018. Publicly Released: Apr 12, 2018.
Improper payments have continued to grow in the Medicaid program, despite efforts to reduce them. The federal-state health care program spent about $596 billion in FY2017, with an estimated $37 billion of federal spending going to improper payments—that's up from $29.1 billion in 2015. This testimony, which is based on numerous GAO reports from the last 3 years, focuses on additional actions ne...
GAO-18-220: Published: Jan 19, 2018. Publicly Released: Feb 20, 2018.
About one-third of Medicaid's spending goes toward demonstrations, which allow states to test new approaches to delivering Medicaid services. Do they save money? Improve care? The short answer is that states and the federal government don't fully know. We found that the federal government did not require complete and timely evaluations from the states, so conclusive results were not available. Mo...
GAO-18-179: Published: Jan 5, 2018. Publicly Released: Feb 5, 2018.
Older people and people with disabilities receiving Medicaid assisted living services—over 330,000 in 2014—can be vulnerable to abuse, neglect or exploitation. The Centers for Medicare & Medicaid Services oversees how states monitor such incidents, but its guidance has been unclear. More than half of the 48 states providing these services couldn’t tell us the number or nature of critical in...
GAO-18-103: Published: Dec 14, 2017. Publicly Released: Jan 16, 2018.
Medicaid spent $87 billion in FY2015 for long term care services provided in homes and community settings. To receive these services, individuals’ needs must first be assessed—by a government agency, independent contractor, care provider, or others. However, a conflict of interest can exist if the assessor has a financial interest in the outcome. For example, one state took steps to address c...
GAO-18-70: Published: Dec 8, 2017. Publicly Released: Jan 8, 2018.
State-reported data help the federal government oversee the Medicaid program, which made an estimated $36.7 billion in payment errors in 2017. However, there have been longstanding concerns that those data are not sufficient for effective oversight. To help, federal administrators established a new data repository. Nearly all states now submit data that could be used to improve oversight and prog...
GAO-18-88: Published: Dec 5, 2017. Publicly Released: Dec 5, 2017.
The approach that the Centers for Medicare & Medicaid Services (CMS) has taken for managing fraud risks across its four principal programs—Medicare, Medicaid, the Children's Health Insurance Program (CHIP), and the health-insurance marketplaces—is incorporated into its broader program-integrity approach. According to CMS officials, this broader program-integrity approach can help the agency de...
GAO-17-735SP: Published: Sep 12, 2017. Publicly Released: Sep 12, 2017.
Nearly 1 in 3 Americans relies on Medicare or Medicaid for services from hospital stays and lab tests to flu shots and prescription drugs. The Centers for Medicare and Medicaid Services uses an extensive network of private contractors to administer its programs. In FY 2016, CMS spent about $7.2 billion on these contracts, an increase of about 40% since 2012. We found that 97% of this amount went...