GAO says millions of dollars are slipping through Medicaid cracks

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The Centers for Medicare and Medicaid Services isn't doing enough to mitigate improper payments in the Medicaid system and the GAO wants the agency to take action, according to a new report from the Government Accountability Office. 

With Medicare under somewhat fearful scrutiny and reports circulating that it could be insolvent by 2026, reigning in any kind of documentation errors or overpayments that send waste money and drain an already drying reservoir should be a top priority. 

Hospitals which serve large populations of patients that rely on Medicare and Medicaid should also be alarmed at overpayments, since jeopardizing those programs means jeopardizing already tenuous revenue streams and operating margins.

Medicaid paid $171 billion to managed care organizations and CMS estimated that about 0.3 percent of that went to improper payments while 10 percent of payments in the Medicaid system as a whole were improper, CMS said. 

GAO analyzed state and federal reviews of managed care and the estimating method after the Energy and Commerce Committee requested the report. 

The investigation found that current efforts to accurately estimate the improper rate for Medicaid managed care payments fails to include overpayments and unallowable costs. For one thing, the GAO said the Payment Error Rate Measurement review looks only at capitated payments and therefore does not accurately weigh all "program integrity risks."  

Capitated payments are periodic payments that state Medicaid agencies make to managed care organizations to provide services to enrollees and to cover other allowable costs like administrative expenses. But the managed care component of the PERM doesn't include medical reviews of services delivered to enrollees, nor does it include reviews of MCO records or data. This constitutes another limitation of the current system, the GAO said.

Additionally, the GAO reviewed 27 federal and state audits and those investigations pinpointed some key program risks.Ten of those audits, in fact, identified roughly $68 million in overpayments and unallowable MCO costs that were not accounted for by PERM estimates. Another one of the investigations yielded a $137.5 million settlement.

The audits and investigations were conducted over more than 5 years between January 2012 and September 2017 and involved a small fraction of the more than 270 MCOs operating nationwide as of September 2017.

"To the extent that overpayments and unallowable costs are unidentified and not removed from the cost data used to set capitation rates, they may allow inflated MCO payments and minimize the appearance of program risks in Medicaid managed care," the report said.

CMS and states have tried to improve Medicaid managed care oversight by updating regulations, reviewing managed care programs and federal integrity audits, but some of these measures have only been implemented recently and others likely won't actually address the managed care risks in all states, the GAO said. What's more, they don't guarantee the reporting of overpayments to providers or unallowable costs.

More action at the state level seems needed as well. The report said that while states are required to report overpayments they have identified and recouped along with state expenditures on a quarterly basis, the responses of the program integrity officials in 13 of the 16 states the GAO contacted indicated most officials could not accurately calculate the magnitude of overpayments in their managed care programs, signaling the possible need for more federal oversight or coordination.

Moreover, officials in seven of the 13 states could not or did not identify the share of total reported Medicaid overpayments that occurred in managed care, and in 11 of the 13 states, officials said they didn't directly monitor MCO payments to providers. Of those 11 states, officials in four said they depend on the MCOs to report overpayments and exclude the overpayments from the data used to set capitation rates. 

"As long as states are not taking action to identify overpayments in managed care, they cannot be assured that they are accurately paying MCOs for medically necessary services provided to enrollees," GAO said. 

The GAO has made the recommendation that the CMS administrator "should consider and take steps to mitigate the program risks that are not measured in the PERM including overpayments and unallowable costs. Those steps could include revising the PERM methodology or focusing additional audit resources on managed care."

While CMS struggles to reign in such issues in the Medicaid system, progress has been made with improper payments in the Medicare system. In December 2017, a CMS principal deputy administrator for Operations reported in a blog post that improper Medicare payments for Medicare fee-for-service payments dropped from 11 percent in 2016 to 9.5 percent in 2017, representing a $4.9 billion decrease. It's the first time since 2013 that the Medicare FFS improper payment rate sunk below the 10 percent compliance threshold stipulated in the Improper Payments Elimination and Recovery Act of 2010.

Twitter: @BethJSanborn
Email the writer: beth.sanborn@himssmedia.com