Steps Taken to Improve Oversight Activities but Some Previously Identified Weaknesses Remain

CMS has undertaken several steps to improve its Medicaid financial  management activities including its efforts to oversee state claims for  federal reimbursement and to identify payment errors. CMS hired about 90  funding specialists who are examining high-risk state funding practices  and working with states to eliminate those practices that inappropriately  increase federal costs. However, it is too soon to assess the impact they will have on improving  overall financial management and addressing emerging issues that put  federal Medicaid dollars at risk because some have just recently been  initiated, and results are not known yet. Further, there are other  previously identified weaknesses that the agency has not addressed. CMS also has not incorporated the use of the MSIS in its oversight of state  claims or other systems projects intended to help improve its analysis  capabilities. Further, CMS has not developed profiles to document  information on state fraud and abuse controls to use in its oversight of  state claims. Because these issues are important to  further improving and sustaining CMS’s oversight activities, we reiterate  our prior recommendations in these areas. Goal for Reducing Questionable Federal Reimbursement Helps Promote Accountability

CMS has recently developed a specific goal aimed at reducing  questionable federal reimbursement and evaluating its oversight activities. CMS has improved its processes for tracking its financial management  activities and the attainment of the goals it has set. Specifically, CMS has not instituted mechanisms to measure how the risk  of inappropriate federal reimbursement has changed as a result of  corrective actions taken. Finally, CMS has not  developed a strategic plan specific to its Medicaid financial management  activities. Use of HCFAC Funds to Enhance Medicaid Oversight Initiatives

During fiscal years 2003 through 2005, CMS received almost $46 million  from the HCFAC account that it has used to help fund programs related to  its oversight of Medicaid. The HCFAC account provided about $12 million to CMS for the funding  specialists for fiscal years 2004 and 2005. The funding specialists have  been funded on an annual basis with appropriations from the HCFAC  account. There is the chance that adequate funding might not be provided  through the HCFAC process in any given year for the funding specialists;  thus CMS officials have told us they would like to pursue ways of making  the funding specialist positions permanent. Other Medicaid projects included in table 5 that CMS used HCFAC funds  for include:  interagency agreements between CMS and OIG for OIG audits of high-risk  issues such as family planning services in managed care, skilled  professional medical personnel, upper payment limits, school-based  claims, home- and community-based services, and Medicaid administrative  costs reported by state agencies other than the Medicaid single state  agency;    Medicare-Medicaid data match project developed to identify improper  billing and utilization patterns by matching Medicare and Medicaid claims  information on providers and beneficiaries;    Payment Accuracy Measurement, PERM, and SCHIP Error Rate Pilot  Projects, which allow states to test a methodology to determine improper  payment error rates in their SCHIP and/or Medicaid programs;    Transaction, Information, Inquiry and Program Performance System to  develop and enhance an integrated financial management tool linking  existing CMSO data systems and tools containing critical financial,  statistical, administrative, and other data;    an organizational study of Medicaid financial processes within CMS done  by OIG under an interagency agreement with OIG;    a project referred to as the Annuities Project, which used both qualitative  and quantitative research methods to develop a comprehensive picture of  states’ experience with the use of annuities as an asset-sheltering device  by Medicaid applicants and their spouses;    a Waiver Management System Database project, which updated a current  Waiver Management System Database; and    a project to research options for automating the Medicaid state plan  process from the creation and submission of state plan amendments at the  state level through approval at the central office and regional offices. While CMS’s  actions address previously identified weaknesses and recommendations  from our 2002 report related to (1) targeting resources to higher risk areas,  (2) monitoring performance, (3) establishing mechanisms for ensuring  accountability, (4) developing an approach to payment accuracy reviews  and (5) incorporating advanced control techniques, it is too soon to assess  the impact they will have on improving overall financial management and  addressing emerging issues that put federal Medicaid dollars at risk  because the results of some efforts are not known yet. Recommendations for Executive Action

To further improve and sustain CMS’s oversight of state claims, including  its ability to identify and address emerging issues, we recommend that the  Administrator of CMS take the following two additional actions:    Create permanent funding specialist positions. To determine how CMS used funds from the Health Care Fraud and Abuse  Control (HCFAC) account for fiscal years 2003 through 2005, we obtained  from CMS a list of Medicaid projects that were funded from the HCFAC  account in fiscal years 2003 through 2005. Medicaid Financial Management: Better Oversight of State Claims for  Federal Reimbursement Needed.
Why GAO Did This Study

Medicaid--the federal-state health care financing program--covered over 56 million people at a cost of $295 billion in fiscal year 2004, the latest fiscal year for which complete data are available. The Centers for Medicare & Medicaid Services (CMS) is the federal agency responsible for overseeing states' Medicaid programs and ensuring the propriety of expenditures reported by states for federal reimbursement. In 2002, GAO reported on weaknesses in CMS's oversight of Medicaid financial management and made recommendations to CMS to strengthen its oversight process. In fiscal year 2003, CMS started receiving funds from the Health Care Fraud and Abuse Control (HCFAC) program to help improve Medicaid financial management. GAO was asked to evaluate CMS's financial management activities, including following up on prior recommendations. In this report, GAO examined (1) the extent to which CMS has improved its ability to identify and address emerging issues that put federal Medicaid dollars at risk and (2) how CMS used funds for Medicaid from the HCFAC account.

What GAO Found

CMS has undertaken several steps to improve its Medicaid financial management activities, including its efforts to oversee state claims for federal reimbursement and to identify payment errors. CMS hired about 90 funding specialists, thus enhancing its ability to address high-risk state funding practices that inappropriately increase federal costs. CMS also created a new unit that centralized responsibility for approving state plan amendments related to reimbursement. CMS continued to identify billions of dollars in questionable federal reimbursement through focused financial reviews. CMS also set goals aimed at reducing questionable federal reimbursement and holding financial managers accountable and enhanced its internal processes for tracking results of its financial management activities. These and other efforts, such as CMS's approach for measuring payment errors under the Improper Payments Information Act, represent improvements in the processes that CMS uses in its oversight of states. While these actions also address previously identified weaknesses and recommendations from our 2002 report, it is too soon to assess the impact they will have on improving overall financial management and addressing emerging issues that put federal Medicaid dollars at risk because some have just recently been initiated and results are not known yet. Further, there are a number of previously identified weaknesses that the agency has not yet addressed. Specifically, CMS has not instituted mechanisms to measure how the risk of inappropriate federal reimbursement has changed as a result of corrective actions taken. In addition, CMS has not incorporated the use of the Medicaid Statistical Information System database into its oversight of states' claims or other systems projects intended to improve its analysis capabilities. Further, CMS has not developed profiles to document information on state fraud and abuse controls to use in its oversight of state claims. Finally, CMS has not developed a strategic plan specific to its Medicaid financial management activities. Because these issues are important to further improving and sustaining CMS's oversight activities, we reiterate and build on our prior recommendations in these areas. During fiscal years 2003 through 2005, CMS received almost $46 million from the HCFAC account that it used to help fund programs related to its oversight of the Medicaid program, including about $12 million for the funding specialists for fiscal years 2004 and 2005. The funding specialist positions have been funded on an annual basis with appropriations from the HCFAC account. There is the chance that adequate funding might not be provided through the HCFAC process in any given year for the funding specialists; therefore, creating permanent funding specialist positions is important. CMS used the other $34 million for other projects such as researching options for automating the Medicaid state plan process, and interagency agreements with the OIG to conduct audits of high-risk areas. GAO obtained documentation to support the use of HCFAC funds for these projects.