Medicaid - High Risk Issue
Medicaid—a joint federal-state program—plays an important role in providing health care coverage for low-income, medically needy individuals. However, overseeing this program can be challenging, given its size and complexity.
The Medicaid program, overseen by the Centers for Medicare & Medicaid Services (CMS), spends more on medical and health-related services than any other federal program (except Medicare). GAO designated Medicaid as high risk in 2003 because of concerns about federal oversight of this large, growing, and complex program.
Medicaid covered about 75 million people in fiscal year 2018, at an estimated cost of $629 billion—$393 billion of which was paid by the federal government. CMS has projected that Medicaid spending will grow at an average rate of 5.7 percent per year from fiscal years 2017 through 2026. In fact, Medicaid spending is expected to reach $1 trillion by fiscal year 2026.
Growth Trends in Total Medicaid Spending by Eligibility Group
Both the federal government and the states fund Medicaid and are jointly responsible for overseeing it. The states can choose (within broad federal requirements) how to oversee, finance, and deliver care through their Medicaid programs—which has resulted in 56 different Medicaid programs across the states and territories.
Medicaid’s ongoing transformation—due to the aging population, increased spending per enrollee, and expansion of state programs—emphasizes the need for improved program oversight. CMS faces oversight challenges in four areas: improper payments, appropriate use of program dollars, Medicaid data, and access to quality care.
Estimated improper payments—including payments made for people not eligible for Medicaid or for services not actually provided—was 9.8 percent of Medicaid spending ($36.2 billion) in fiscal year 2018. CMS needs to improve the effectiveness of its oversight of improper payments and related payment risks, particularly in the following areas.
Managed care: Managed care organizations (MCO) provide a specific set of Medicaid services to beneficiaries for a set payment from states (referred to as capitated payments). These payments are generally paid on a per beneficiary per month basis, and can help states reduce Medicaid costs. However, there are risks related to such state MCO payments and risks with payments from MCOs to providers.
Payment Risks Related to State Medicaid Program Payments to Managed Care Organizations (MCO)
a Examples of data issues include inaccurate encounter data, MCO reported costs that are not allowable, overpayments that are not adjusted, or data that do not reflect changes in care delivery practices that have affected MCO costs.
b Examples of unfulfilled contract requirements may include an MCO not establishing an adequate provider network, reporting inaccurate encounter data for services, or not reporting the amount of overpayments the MCO made to providers.
- Provider eligibility: States and MCOs face challenges in screening MCO providers to ensure that only eligible providers participate in Medicaid. For instance, data used for screening are fragmented across multiple databases and federal agencies, and MCOs are not required to make their data on ineligible providers publicly available.
- Beneficiary eligibility: CMS and the states need to ensure that only eligible individuals are enrolled in Medicaid, and CMS needs to ensure that state expenditures for enrollees (including enrollees newly eligible as a result of the Patient Protection and Affordable Care Act expansion) are correctly matched by the federal government.
Appropriate use of program dollars
States have significant flexibility in how they finance and deliver Medicaid services. While this flexibility is an important aspect of the program, it could also mean that some Medicaid dollars are spent for activities and services that are not allowed by the program, or that do not have clear value to beneficiaries.
- Demonstrations: States and CMS can test new coverage and service delivery approaches under section 1115 of the Social Security Act. CMS had approved demonstrations to test new Medicaid approaches for nearly three-quarters of states as of November 2016. However, conclusive results on the effectiveness of these demonstrations are not available because CMS has not required timely evaluations of demonstrations from states. Further, CMS neither requires that federal evaluations results be made public, nor consistently monitors the money spent on these demonstrations.
Federal Demonstration Expenditures as a Percentage of Total Federal Medicaid Expenditures, by State, Fiscal Year 2015
- Supplemental payments: These payments, which are made to providers (such as local government hospitals) but not linked to specific beneficiary services, are growing. However, CMS does not know the extent to which individual providers receive these payments nor whether these payments are economical or efficient as required by federal law. States have also increasingly relied on funds from other sources, such as local governments and taxes from health care providers, to finance the nonfederal share of their Medicaid programs. However, reliance on providers and local governments for Medicaid funding can create incentives that result in cost shifts to the federal government.
- General oversight of expenditures: CMS has saved over $5 billion in the past 4 years by identifying errors in state spending reports, such as finding expenditures that lacked supporting data or were not allowed under Medicaid rules. However, CMS is not targeting these reviews on states and expenditures that present the highest risk. Therefore, it may be missing chances to save additional federal dollars.
CMS lacks accurate, complete, and timely Medicaid data, which affects its ability to oversee Medicaid programs.
- CMS needs to ensure that the data collected through the Transformed Medicaid Statistical Information System (T-MSIS) are timely, complete, and comparable. All states, the District of Columbia, and Puerto Rico are currently submitting T-MSIS data. However, CMS has yet to fully ensure the quality of these data, or articulate specific plans and associated time frames for using these data for oversight.
- The need for improved data is particularly relevant to managed care due to its increasing share in terms of enrollment and spending. CMS has provided states with limited information on how to ensure reliability of managed care encounter data, which is key to setting appropriate rates and overseeing MCOs.
Examples of Medicaid Managed Care Encounter Data Uses
a Federal law requires capitation rates to be actuarially sound, meaning that they must be certified by an actuary as being reasonably calculated for the populations expected to be covered and for the services expected to be furnished under contract, among other things. See 42 U.S.C. § 1396b(m)(2)(A)(iii); 42 C.F.R. § 438.4 (2017).
b HEDIS is a standardized dataset designed by the National Committee for Quality Assurance and used by health plans to measure performance on various dimensions of care and service, including effectiveness of care, access and availability of care, experience of care, utilization and risk adjusted utilization, and relative resource use.
c Under the Medicaid Drug Rebate Program, pharmaceutical manufacturers agree to pay rebates to states in order to have their outpatient drugs covered by Medicaid.
Access to quality care
Medicaid enrollees have diverse health needs, and CMS oversight helps ensure that they have access to quality care.
Medicaid beneficiaries who need long-term care can get services in their homes, community settings, or in an institution (such as a nursing home). Many states contract with MCOs to provide this care.
- CMS does not consistently require states to report information on beneficiary concerns or provider shortages for long-term care services provided by MCOs.
- CMS lacks comprehensive data on critical incidents of abuse, neglect, and exploitation in Medicaid assisted-living services because current guidance on what states should identify and report annually on these incidents is unclear.
Selected Incidents Defined as Critical for States’ Largest Medicaid Programs Providing Assisted-Living Facility Services, as Reported by 48 States, 2014
GAO-19-10: Published: Oct 19, 2018. Publicly Released: Nov 19, 2018.
States collect data on Medicaid services to help the Centers for Medicare & Medicaid Services (CMS) oversee the managed care program. For example, this data can help set managed care payment rates, identify inappropriate billing patterns, and ensure access to services. But what if the data isn’t reliable? CMS started requiring states to have independent audits of their data to help ensure reli...
GAO-18-687T: Published: Aug 21, 2018. Publicly Released: Aug 21, 2018.
In June, we testified on what the Centers for Medicare & Medicaid Services (CMS) could do to address billions of dollars’ worth of improper payments and protect the Medicaid program from fraud. This testimony addresses what CMS has done to address these issues, such as its plans to review how selected states determine Medicaid eligibility what additional actions CMS could take to improve its...
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-18-70: 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-21-343SP: Published: Feb 17, 2021. Publicly Released: Feb 17, 2021.
In emergencies such as pandemics, natural disasters, and recessions, states and the federal government have used the Medicaid program to help ensure that the nation's most vulnerable citizens continue to have access to essential health services. Medicaid currently serves more than 70 million Americans of all ages. With examples drawn from several GAO reports, our 2-page "capsule" illustrates how t...
GAO-21-229: Published: Feb 5, 2021. Publicly Released: Feb 5, 2021.
States and U.S. territories paid contractors about half of their Medicaid spending for health care and other services in 2018. In the same year, Puerto Rico paid contractors almost all of its Medicaid spending—97 percent of $2.5 billion. We found that the Centers for Medicare & Medicaid Services (CMS) does not oversee contracting in Puerto Rico, where former officials face allegations of contrac...
GAO-21-196: Published: Jan 14, 2021. Publicly Released: Jan 14, 2021.
State-reported data helps the federal government oversee the Medicaid program. Our prior work found issues with the completeness and accuracy of the data in the federal repository and made recommendations. Since then, federal Medicaid administrators have improved that data. For example, we found that all states provided at least some data in nearly all of the Medicaid-related topic areas, and that...
GAO-21-98: Published: Dec 7, 2020. Publicly Released: Dec 7, 2020.
States and the federal government share in financing Medicaid, a health care program for low-income and medically needy people. States mostly use their general funds to finance the nonfederal share, but they can also use funds from care providers and local governments. From 2008 to 2018, states relied more heavily on the other funds. Since the federal government matches all nonfederal funds, respo...
GAO-21-49: Published: Nov 16, 2020. Publicly Released: Dec 16, 2020.
Medicaid spends about a third of its budget on long-term services and supports for adults and children with disabilities and chronic conditions. Over half of states contract with managed care organizations to provide those services. We examined 6 states, each of which reported finding significant problems with the quality of care provided through these contracts. In some cases, the problems led to...
GAO-21-17: Published: Oct 14, 2020. Publicly Released: Nov 13, 2020.
The Centers for Medicare & Medicaid Services (CMS) conducts financial management reviews to verify states' appropriate spending of federal Medicaid funds. Since FY2016, CMS started 49 financial management reviews, usually focused on one state. As of June 2020, most reviews were still ongoing. Some states won't address the problems identified until the reviews are done, leaving federal and state do...
GAO-20-179: Published: Sep 9, 2020. Publicly Released: Sep 9, 2020.
The Centers for Medicare & Medicaid Services (CMS) reimburses states for most Medicaid costs—health care costs and administrative costs, such as IT. CMS reimbursed states $34.3 billion for Medicaid IT systems in FY 2008-18. The documentation of CMS's reviews for most IT funding requests 2016-2018 lacked information, indicating that reviews may not have been complete. CMS is supposed to oversee s...
GAO-20-616: Published: Aug 6, 2020. Publicly Released: Aug 6, 2020.
Substance use disorders affected 19.3 million adults in the U.S. in 2018. One treatment option for such disorders is services delivered by peer providers—individuals who use their own personal experiences recovering from substance use disorder to support others in their recovery. State Medicaid programs can choose to cover services offered by peer providers, but it is an optional benefit. We fou...
GAO-20-571R: Published: Jul 14, 2020. Publicly Released: Jul 14, 2020.
This report, based on past work, describes ways states pay for their share of Medicaid, a program that finances health care for certain low-income people and others through a federal-state partnership. The federal government provides matching funds based in part on state estimates of their costs. States can use money from local governments and other sources to pay some costs. We found that throu...
GAO-20-407: Published: Apr 30, 2020. Publicly Released: Jun 1, 2020.
Medicaid is administered at the state level and overseen at the federal level. State Medicaid officials identified some federal policies that pose challenges for effective program administration. For example: Residents of certain mental health institutions are generally excluded from Medicaid coverage. This can make it harder to offer a full range of services to people with complex or changing m...