	Background

Among health care programs, Medicaid is the largest as measured by  enrollment (over 73 million in fiscal year 2017) and the second largest as  measured by expenditures ($596 billion in fiscal year 2017), second only  to Medicare. 1.) The partnership between the federal government and states is a central  tenet of the Medicaid program. Managed care continues to be a  growing component of the Medicaid program. In fiscal year 2017,  expenditures for managed care were $280 billion, representing almost  half of total program expenditures, compared with 42 percent in fiscal  year 2015. 3.) They  also reported about $680 million in recoveries related to fraud in fiscal  year 2017—almost double the recoveries from fiscal year 2016. Three Broad Areas of Risk Threaten the Fiscal Integrity of Medicaid

Our prior work has identified three broad areas of risk to the fiscal  integrity of Medicaid: improper payment rates, state use of supplemental  payments, and oversight of demonstration programs. Estimated Improper Payments Exceed 10 Percent, and Do Not Fully Account for All Program Risks

CMS annually computes the national Medicaid improper payment  estimate as a weighted average of states’ improper payment estimates  for three component parts—fee-for-service, beneficiary eligibility  determinations, and managed care. The national  rate in fiscal year 2017 was 10.1 percent, or $36.7 billion. Lack of Transparency and Federal Oversight of States’ Use of Supplemental Payments Increase Program Risk

Supplemental payments are payments made to providers—such as local  government hospitals and other providers—that are in addition to the  regular, claims-based payments made to providers for services they  provided. Supplemental payments have been growing and totaled more than $48  billion in 2016. Absent Better Oversight, Demonstrations May Increase Federal Fiscal Liability

Demonstration programs, comprising about one-third of total Medicaid  expenditures in fiscal year 2015, can be a powerful tool for states and  CMS to test new approaches to providing coverage and delivering  services that could reduce costs and improve outcomes. However, our  prior work has identified several concerns related to demonstrations,  including the need for ensuring that (1) demonstrations meet the policy  requirements of budget neutrality—that is, they must not increase federal  costs—and (2) evaluations are used to determine whether  demonstrations are having their intended effects. HHS  concurred with these recommendations. Fundamental Actions Needed to Strengthen Oversight and Manage Program Risks

Across our body of work, we have made 83 recommendations to CMS  and HHS and suggested 4 matters for congressional consideration to  address a variety of concerns about the Medicaid program. The agencies  generally agreed with our recommendations and have implemented 25 of  these recommendations to date, and CMS still needs to take fundamental  actions in three areas—having more timely, complete, and reliable data;  conducting fraud risk assessments; and strengthening federal-state  collaboration—to strengthen Medicaid oversight and better manage  program risks. Data on states’  spending on these services were also not accurate or complete. However, CMS had not conducted a fraud risk assessment for Medicaid,  and had not designed and implemented a risk-based antifraud strategy. Greater Federal-State Collaboration to Strengthen Program Oversight

The federal government and the states play important roles in reducing  improper payments and overseeing the Medicaid program, including  overseeing spending on Medicaid supplemental payments and  demonstrations. Medicaid: Further Action Needed to Expedite Use of National Data for  Program Oversight.
Why GAO Did This Study

Medicaid, a joint federal-state health care program overseen by CMS, is a significant component of federal and state budgets, with total estimated expenditures of $596 billion in fiscal year 2017.
Medicaid allows significant flexibility for states to design and implement program innovations based on their unique needs. The resulting diversity of the program and its size, make the program particularly challenging to oversee at the federal level and also vulnerable to improper payments. In fiscal year 2017, estimated improper payments were $36.7 billion in Medicaid, up from $29.1 billion in fiscal year 2015. Further, the Medicaid program accounted for about 26 percent of the fiscal year 2017 government-wide improper payment estimate.
This testimony focuses on the (1) major risks to the integrity of the Medicaid program, and (2) actions needed to manage these risks. This testimony draws on GAO's reports issued between November 2012 and May 2018 on the Medicaid program.

What GAO Found

GAO's work has identified three broad areas of risk in Medicaid that also contribute to overall growth in program spending, projected to exceed $900 billion in fiscal year 2025.
1) Improper payments , including payments made for services not actually provided. Regarding managed care payments, which were nearly half (or $280 billion) of Medicaid spending in fiscal year 2017, GAO has found that the full extent of program risk due to overpayments and unallowable costs is unknown.
2) Supplemental payments , which are payments made to providers—such as local government hospitals—that are in addition to regular, claims-based payments made to providers for specific services. These payments totaled more than $48 billion in fiscal year 2016 and in some cases have shifted expenditures from the states to the federal government.
3) Demonstrations , which allow states to test new approaches to coverage. Comprising about one-third of total Medicaid expenditures in fiscal year 2015, GAO has found that demonstrations have increased federal costs without providing results that can be used to inform policy decisions.
GAO's work has recommended numerous actions to strengthen oversight and manage program risks.
Improve data. The Centers for Medicare & Medicaid Services (CMS), which oversees Medicaid, needs to make sustained efforts to ensure Medicaid data are timely, complete, and comparable from all states, and useful for program oversight. Data are also needed for oversight of supplemental payments and ensuring that demonstrations are meeting their stated goals.
Target fraud. CMS needs to conduct a fraud risk assessment for Medicaid, and design and implement a risk-based antifraud strategy for the program.
Collaborate. There is a need for a collaborative approach to Medicaid oversight. State auditors have conducted evaluations that identified significant improper payments and outlined deficiencies in Medicaid processes that require resolution.

What GAO Recommends

As a part of this body of work, GAO has made 83 recommendations to address shortcomings in Medicaid oversight and suggested four matters for congressional consideration. The Department of Health and Human Services and CMS have generally agreed with these recommendations and have implemented 25 of them. GAO will continue to monitor implementation of the remaining recommendations.