States Should Intensify Efforts To Promptly Identify and Recover Medicaid Overpayments and Return the Federal Share

HRD-80-77: Published: Jun 10, 1980. Publicly Released: Jun 10, 1980.

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GAO reviewed five 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 at least $222.6 million in substantiated or potential overpayments had been identified but not collected, even though much of this amount has been outstanding for several years. The five States had recovered about $18.7 million in Medicaid funds for which they either had not returned or did not promptly return the Federal share. Moreover, many funds recovered by the States are deposited in interest-bearing accounts, but the States have not consistently shared this interest with the Federal Government. GAO believes that these conditions resulted because the Health Care Financing Administration (HCFA) had not established consistent policies and guidelines for States to use in administering overpayment recovery activities. Also, HCFA did not have a clear policy explaining when and under what circumstances Federal financial participation in outstanding overpayments would be denied. State systems for recovering overpayments and for returning the Federal share of such funds were fragmented, cumbersome, uncoordinated, and slow.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HHS should prescribe standards for States' Medicaid overpayment recovery systems. The standards should cover such areas as defining the responsibilities of organizational units involved in overpayment recovery; performance standards similar to Medicare for the States' overpayment recovery systems, including timely audits, resolution of appeals, recovery actions, and the return of the Federal share of recoveries; and accounting controls, including the recording and aging of accounts receivable. Also, HHS should take credit for overpayments on the first quarterly request for Federal Medicaid grant funds submitted after the overpayments are substantiated, unless the States demonstrate that their overpayment recovery systems are effective and in substantial conformance with HHS standards. If a State's system is effective and meets HHS standards, the State should be allowed a reasonable period for resolving disputes and recovering overpayments before returning the Federal share. Finally, HHS should require the States to return to the Federal Government a proportionate share of any interest earned on overpayment recoveries.

    Agency Affected:


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