Medicaid and CHIP: Increased Funding in U.S. Territories Merits Improved Program Integrity Efforts

GAO-16-324 Published: Apr 08, 2016. Publicly Released: May 09, 2016.
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What GAO Found

Eligibility and benefits for Medicaid and the state Children's Health Insurance Program (CHIP) in five U.S. territories—American Samoa, Commonwealth of the Northern Mariana Islands (CNMI), Guam, Puerto Rico and the U. S. Virgin Islands—differ from one another and from the states, generally reflecting the territories' unique circumstances. For example, Guam is the only territory that covers all 17 mandatory Medicaid benefits, while American Samoa and Puerto Rico cover 10 of the 17 benefits. Officials from the territories that do not cover all mandatory benefits cited multiple reasons for not doing so, including limited funding and a lack of infrastructure, and, in some cases, exercised available flexibility to exclude certain benefits.

Temporary increases in federal funding have enabled the territories to increase Medicaid and CHIP spending. Unlike the states, whose Medicaid funding is not subject to a capped allotment—provided they contribute their share—territories are subject to a capped allotment, and historically have exhausted available federal Medicaid and CHIP funds each year. Most notably, the Patient Protection and Affordable Care Act (PPACA) provided the territories an additional $7.3 billion through at least fiscal year 2019. Officials in four territories cited positive effects of the additional funding, such as the ability to enroll more providers and cover more services; however, some officials also expressed concerns about the temporary nature of the funding, noting that they may have to make program cuts once the funding is exhausted—and that future shortfalls remain a concern.

Despite temporary increases in Medicaid funding, GAO found little assurance that territory Medicaid funds are protected from fraud, waste, and abuse.

Program oversight mechanisms: Only Puerto Rico has developed a program integrity unit, which, although not required, is tasked with identifying and recovering improper payments and is a management best practice. Additionally, no territory has established a Medicaid Fraud Control Unit—which identify and prosecute Medicaid fraud—or received an exemption from doing so, as required by federal law.

Program information: Territories lack detail on the types and volume of services they provide, contrary to federal reporting requirements, resulting in limited information on how territories spend their federal Medicaid funding. Until recently, the Centers for Medicare & Medicaid Services (CMS), within the Department of Health and Human Services (HHS), exempted the territories from the requirement to implement a claims processing and information retrieval system with program integrity capabilities, although the U.S. Virgin Islands has established a partnership to use such a system.

Program assessments: CMS has performed assessments on Medicaid program integrity effectiveness and compliance only for Puerto Rico. Although not required, such assessments have been conducted on all states.

CMS does provide technical assistance, with the activities of CMS officials varying across the territories. Officials from CMS noted that funding for program integrity would count against the territories' capped allotments. Nonetheless, such limited efforts by the territories and federal government are inconsistent with federal internal control standards regarding identifying and responding to risks, particularly in light of increased federal Medicaid spending in the territories as a result of PPACA.

Why GAO Did This Study

Notable differences exist in the funding and operation of Medicaid and CHIP—joint federal-state health financing programs for low-income and medically needy individuals—in the territories versus the states. For example, the territories are subject to certain funding restrictions, such as capped annual federal funding, that are not applicable to the states. Further, certain federal requirements regarding eligibility, benefits, and program integrity do not apply to the territories' programs, and certain otherwise applicable requirements have not been enforced. In recent years, various laws—such as PPACA—have increased funding for Medicaid and CHIP in the territories.

This report examines (1) eligibility and benefit characteristics of the territories' Medicaid and CHIP programs, (2) Medicaid and CHIP spending in the territories, and (3) Medicaid and CHIP program integrity efforts in the territories. GAO reviewed laws and regulations, data on five territories' Medicaid and CHIP spending, and federal internal control standards. GAO also interviewed CMS and territory Medicaid officials.

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GAO recommends that the Acting Administrator of CMS examine and select from a broad array of activities—such as establishing program oversight mechanisms, assisting in improving program information, and conducting program assessments—to develop a cost-effective approach to protecting territories' Medicaid programs from fraud, waste, and abuse. HHS concurred with GAO's recommendation.

Recommendations for Executive Action

Agency Affected Recommendation Status
Centers for Medicare & Medicaid Services To ensure the appropriate level of Medicaid program integrity oversight in the territories, the Acting Administrator of CMS should reexamine CMS's program integrity strategy and develop a cost-effective approach to enhancing Medicaid program integrity in the territories. Such an approach could select from a broad array of activities, including--but not limited to--establishing program oversight mechanisms, such as requiring territories to establish a Medicaid Fraud Control Unit or working with them to obtain necessary exemptions or waivers from applicable program oversight requirements; assisting territories in improving their information on Medicaid and CHIP program spending; and conducting additional program assessments of program integrity as warranted.
Closed – Implemented
CMS has made progress in enhancing Medicaid program oversight in the territories. Puerto Rico and the U. S. Virgin Islands established Medicaid Fraud Control Units (MFCU) for their Medicaid programs, which were certified by the HHS-OIG in December 2018 and CMS worked with the remaining territories (American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands) to obtain waivers from the requirement to establish a MFCU in 2017. CMS has also worked to improve its information on Medicaid and CHIP program spending in the territories. Specifically, as of January 2019, Puerto Rico and the U. S. Virgin Islands were submitting Transformed Medicaid Statistical Information System data-information on beneficiary utilization and expenditures-to CMS, and the agency reports that it will continue working with the remaining territories to improve their data collection and reporting. Finally, CMS conducted a focused program integrity review on the Puerto Rico Medicaid program in 2016 and conducted comprehensive off-site reviews of the Medicaid programs for the remaining four territories in 2017 and 2018.

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