	Background

American Samoa, CNMI, Guam, Puerto Rico, and the U.S. Virgin Islands  are five territories of the United States. Additionally, federal Medicaid  funding in states is not subject to a limit, provided the states contribute  their share of program expenditures for services provided. In contrast,  federal Medicaid funding in each territory is subject to a statutory cap. According to  CMS officials, this funding can be used once territories expend their  Medicaid and CHIP funding each year. For example, although not required, they  can establish program integrity units, which are tasked with identifying  and recovering improper payments. For example, territories must establish  Medicaid Fraud Control Units (MFCU), which are tasked with  investigating Medicaid fraud and other health care law violations, or  receive an exemption from CMS from establishing one. The territories  are also required to implement a Medicaid Management Information  System (MMIS), which is a claims processing and information retrieval  system that includes capabilities for reporting claims data, enrollee  encounter data, and conducting pre- and post-payment review. Medicaid and CHIP Eligibility and Benefits Reflect the Territories’ Unique Circumstances

Due to the flexibility territories have in administering their Medicaid and  CHIP programs, the territories’ program eligibility and benefits not only  reflect their unique circumstances, but also differ from one another and  from the states. Specifically, Guam covers all of the 17  mandatory Medicaid benefits; CNMI and the U.S. Virgin Islands cover  nearly all of the benefits; and American Samoa and Puerto Rico cover 10  of the 17 benefits. 1.) Officials from the four territories that do not cover all mandatory Medicaid  benefits cited multiple reasons for not doing so, including limited funding  and a lack of infrastructure. In particular, officials from Puerto Rico and American Samoa said that their  programs do not cover nursing facility services due to insufficient  funding and because they do not have nursing homes;
CNMI officials noted that its program does not cover freestanding birth  center services because there are no such facilities in the territory;  and due to the lack of available providers, certain specialty services  covered by American Samoa, CNMI, and Guam are only available off- island. 2.) Temporary Funding Has Enabled the Territories to Increase Medicaid and CHIP Spending, although Future Shortfalls Remain a Concern

The recent temporary increases in federal funding have enabled the  territories to increase Medicaid and CHIP spending, and avoid federal  funding shortfalls. Most notably, PPACA’s appropriation of an additional  $7.3 billion in Medicaid funding for the territories—available for  expenditure through at least fiscal year 2019—provided them flexibility in  terms of when they choose to draw down the additional funds. As a result, the territory officials noted that the territories  may run out of the temporary funding early, have to make program cuts  once the funding is exhausted, or both. Limited Territory and Federal Oversight Efforts Provide Little Assurance of Medicaid and CHIP Program Integrity

Territory and federal oversight efforts provide little assurance that the  territories’ Medicaid and CHIP funds are protected from fraud, waste, and  abuse. Federal Officials Reported Making Limited Program Integrity Efforts, Citing the Small Amount of Medicaid Spending in the Territories

With regard to program oversight, CMS’s general practice has been to  conduct comprehensive program integrity reviews in all of the states;  however, of the five territories, it has conducted such reviews only in  Puerto Rico, the most recent of which was released in January 2012 and  produced multiple findings. While Medicaid spending  in the territories is small as a proportion of total Medicaid spending, such  limited federal oversight efforts provide little assurance that Medicaid is  protected from fraud, waste, and abuse, and are inconsistent with federal  internal control standards regarding the identification, analysis, and  response to relevant risks as part of achieving program objectives. Additionally, until recently, CMS regulations exempted territories from the  requirement to develop an MMIS, which could provide more detail on the  territories’ Medicaid and CHIP spending, including increasing the level of  detail on the territories’ CMS-64 reporting. Such limited federal efforts in the  territories are inconsistent with federal internal control standards  regarding identifying and responding to relevant risks when conditions  change, such as when PPACA significantly increased territories’ federal  Medicaid funding. Recommendation for Executive Action

To ensure the appropriate level of Medicaid program integrity oversight in  the territories, we recommend that the Acting Administrator of CMS  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 MFCU 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.
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.

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.

What GAO Recommends

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.