An August 2018 report by the Government Accountability Office (GAO) titled, “MEDICAID CMS Needs to Better Target Risks to Improve Oversight of Expenditures,” (the GAO Report) identified several weaknesses in CMS’s oversight of Medicaid. Specifically, CMS inadequately assures that expenditures—reported quarterly by states—are consistent with Medicaid requirements and matched with the correct amount of federal funds. The GAO recommends that CMS reconfigure its resources using a risk-based model and strengthen its internal protocols and sampling methodology to more aptly target higher risk areas in its reviews. The Department of Health and Human Services concurred with these recommendations. Therefore, Medicaid providers, especially those in these higher risk areas, may face increased overpayment scrutiny if CMS implements the GAO’s recommendations.
CMS’s role in overseeing Medicaid includes reviewing expenditures reported by state programs to verify that states appropriately spent their Medicaid funds consistent with Medicaid requirements. CMS is also responsible for reviewing and distributing federal matching funds to states based on state’s reported expenditures, including matching funds at a higher-than-standard rate for certain types of services and populations. Through these reviews, CMS has resolved errors that reduced federal spending by over $5.1 billion in fiscal years 2014 through 2017.
Growth in Medicaid over the last decade, due in part to Medicaid expansion under the Affordable Care Act, has resulted in a non-insignificant increase in the amount of federal spending on Medicaid. In fiscal year 2017, Medicaid accounted for about $370 billion in federal spending. Aside from keeping pace with program growth, CMS’s review of reported expenditures has also become increasingly complex due to variation in states’ Medicaid programs (e.g., Section 115 waiver programs) and an increasing number of different matching rates. Given these changes in the growth and variation in federal Medicaid expenditures, Congress asked the GAO to examine CMS oversight of state-reported expenditures.
With respect to reviewing state expenditures, the GAO Report identified weaknesses in how CMS targets its resources to address risks when reviewing whether expenditures are supported and consistent with requirements. Most notably, the GAO Report identified that CMS allots similar levels of staff resources to review expenditures across states, despite differing levels of risk across those states. For example, similar staff resources are devoted to reviewing California’s and Arkansas’s expenditures, which represent 15 percent and 1 percent of federal Medicaid spending, respectively. CMS has also canceled a third of its in-depth financial management reviews of expenditures that are considered to be at risk of not meeting program requirements over the last 5 years.
Additionally, the GAO found limitations in CMS’s processes for reviewing expenditures that receive higher-than-standard federal matching rates. The GAO Report notes that internal guidance for examining variances in these expenditures was unclear and that not all reviewers were investigating significant variances in quarter-to-quarter expenditures. Furthermore, the GAO Report found that review procedures for expenditures for individuals newly eligible for Medicaid under the Affordable Care Act were not tailored to different risk levels among states. For example, CMS reviewed claims for the same number of enrollees in California as for Arkansas, even though California had 10 times the number of newly eligible enrollees as Arkansas.
The GAO recommends that CMS should complete a comprehensive national risk assessment of resources related to the oversight of expenditures reported by states and deploy proportional resources to higher risk areas. The GAO also recommends strengthening internal guidance for reviewers, and revising sampling methodologies to better target high-risk areas. The Department of Health and Human Services concurred with these recommendations.
A conclusion of the GAO Report is that without clear internal guidance and better targeting of risks in its review procedures for expenditures receiving higher matching rates, CMS may be overpaying states. Thus, the GAO Report represents an early indicator that state Medicaid agencies, and their providers, may be the focus of increased scrutiny resulting in greater instances of CMS claw backs of overpayments.
The GAO Report is available here.
