	Background

The federal government and the states share responsibilities for financing  and administering Medicaid. CMS is responsible for overseeing state Medicaid programs. CMS’s Oversight of Managed Care Rate Setting Was Inconsistent and Did Not Ensure the Quality of the Data Used to Set Rates

We found that CMS had not ensured that all states were complying with  the actuarial soundness requirements and did not have sufficient efforts in  place to ensure that states were using reliable data to set managed care  rates. Specifically, in August 2010, we reported that there were  significant gaps in CMS’s oversight of 2 of the 26 states included in our  review. Second, at the time of our work, CMS had not completed a full review  of a second state’s rate setting since the actuarial soundness  requirements became effective in August 2002, and therefore may  have provided federal funds for managed care rates that were not in  compliance with all of the requirements. Variation in practices across CMS regional offices  contributed to these gaps and other inconsistencies in the agency’s  oversight of states’ rate setting. We also reported in 2010 that CMS’s efforts to ensure the quality of the  data used to set rates were generally limited to requiring assurances from  states and health plans—efforts that did not provide the agency with  enough information to ensure the quality of the data used. With  limited information on data quality, CMS cannot ensure that states’  managed care rates are appropriate, which places billions of federal and  state dollars at risk for misspending. CMS Oversight of Medicaid Supplemental Payments Needs Improvement

In our prior work, we have reported on varied financing arrangements  involving supplemental payments that shifted costs from the states to the  federal government. Our work found  that while a variety of federal legislative and CMS actions have helped  curb inappropriate financing arrangements, gaps in oversight remain. and accountability requirements in place for DSH payments. However,  these requirements are not in place for non-DSH supplemental payments,  which may be increasing. By 2010, this amount had grown to $14 billion, with a federal  share of $9.6 billion. However, according to CMS officials, states’  reporting of non-DSH supplemental payments was likely incomplete. For example, there are now improved transparency  As a result of our prior work, we have made numerous recommendations  aimed at improving federal oversight of supplemental payments. Additionally, given continued concerns associated with  Medicaid supplemental payments, we have work under way related to  states’ reporting and CMS’s oversight of DSH and non-DSH supplemental  payments. CMS’s Expanded Role in Ensuring Medicaid Program Integrity Presents Challenges to and Opportunities for Assisting States

In December 2011, we testified that the key challenge CMS faced in  implementing the statutorily established federal Medicaid Integrity  Program was ensuring effective coordination to avoid duplicating state  program integrity efforts, particularly in the area of auditing provider  claims. After examining CMS’s program expenditures,  we found that overpayments identified by its audit contractors since fiscal  year 2009 were not commensurate with its contractors’ costs. In addition, CMS reported  in 2011 that it was redesigning the National Provider Audit Program to  achieve better results. Data limitations—in particular, the use of summary  data that states submit to CMS on a quarterly basis—may have  hampered the contractors’ ability to identify improper claims beyond what  states already identified. CMS’s other core oversight activities—triennial comprehensive state  program integrity reviews and annual assessments—are broad in scope  and were conceived to provide a basis for the development of appropriate  technical assistance. However, we found that much of the information  collected from the annual assessments duplicated information collected  during triennial reviews. Finally, we found that the Medicaid Integrity Institute appears to promote  effective state coordination and collaboration. High-Risk Series: An Update.
Why GAO Did This Study

Medicaid, a joint federal-state health care program, financed care for about 67 million people at a cost of $401 billion in fiscal year 2010. At the federal level, CMS, an agency within the Department of Health and Human Services, is responsible for overseeing the design and operations of states Medicaid programs, while the states administer their respective programs day-to-day operations. The shared financing arrangement between the federal government and the states presents challenges for program oversight and Medicaid has been on GAOs list of high-risk programs since 2003, in part, because of concerns about the fiscal management of the program. Our prior work has shown that CMS continues to face challenges overseeing the Medicaid program.

What GAO Found

Oversight of managed care rate-setting has been inconsistent. In August 2010, GAO reported that the Centers for Medicare & Medicaid Services (CMS) had not ensured that all states were complying with the managed care actuarial soundness requirements that rates be developed in accordance with actuarial principles, appropriate for the population and services, and certified by actuaries. For example, GAO found significant gaps in CMSs oversight of 2 of the 26 states reviewedCMS had not reviewed one states rates in multiple years and had not completed a full review of another states rates since the actuarial soundness requirements became effective. Variation in practices across CMS regional offices contributed to these gaps and other inconsistencies in the agencys oversight of states rate setting. GAOs previous work also found that CMSs efforts to ensure the quality of the data used to set rates were generally limited to requiring assurances from states and health plansefforts that did not provide the agency with enough information to ensure the quality of the data used. With limited information on data quality, CMS cannot ensure that states managed care rates are appropriate, which places billions of federal and state dollars at risk for misspending. GAO made recommendations to improve CMSs oversight.
Oversight of supplemental payments needs improvement. GAO has reported on varied financing arrangements involving supplemental paymentsdisproportionate share hospital (DSH) payments states are required to make to certain hospitals, and other non-DSH supplemental paymentsthat increase federal funding without a commensurate increase in state funding. GAOs work has found that while a variety of federal legislative and CMS actions have helped curb inappropriate financing arrangements, gaps in oversight remain. For example, while there are federal requirements designed to improve transparency and accountability for state DSH payments, similar requirements are not in place for non-DSH supplemental payments, which may be increasing. From 2006 to 2010, state-reported non-DSH supplemental payments increased from $6.3 billion to $14 billion; however, according to CMS officials, reporting was likely incomplete. GAO made numerous recommendations aimed at improving oversight of supplemental payments.
Challenges exist related to CMSs role ensuring program integrity. In December 2011, GAO testified that the key challenge CMS faced in implementing the statutorily established federal Medicaid Integrity Program was ensuring effective coordination to avoid duplicating state program integrity efforts, particularly in the area of auditing provider claims. GAO found that overpayments identified by its audit contractors since fiscal year 2009 were not commensurate with its contractors costs, and CMS reported in 2011 that it was redesigning its audit program to achieve better results. Data limitations may have hampered the contractors ability to identify improper claims beyond what states had already identified. With regard to CMSs other core oversight activitiesannual assessments and triennial comprehensive state program integrity reviewsGAO found that much of the information collected from the annual assessments duplicated information collected during triennial reviews. Finally, CMSs Medicaid Integrity Institute, a national training program, appears to promote effective state coordination and collaboration.