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Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government


Dually eligible beneficiaries (dual eligibles) are individuals eligible for both Medicare and Medicaid. For a certain type of dual eligibles-full-benefit dual eligibles-State Medicaid programs pay Medicare cost-sharing. Some of these payments are eligible for Federal Financial Participation (FFP). During an audit of the State of Iowa's claims for FFP for its Medicare cost sharing payments, OIG found that Iowa had made State Supplementary Payments of $1 per beneficiary per month to a group of about 41,000 dual eligibles. By making these payments, the State spent approximately $500,000 and received $39 million in FFP. We sought to determine the extent to which other States might similarly be shifting costs to the Federal government.


In addition to reviewing the information collected during the audit of Iowa's claims, we conducted additional research regarding the law and regulations governing the availability of FFP for Medicare cost-sharing, and we reviewed the data available on dual eligibles, on their Medicare cost-sharing paid by State Medicaid programs, and on the eligibility of those payments for FFP. We also interviewed staff from CMS's Office of Financial Management to better understand how State Medicaid programs pay Medicare cost sharing for dual eligibles and the data available on dual eligibles for whom States pay Medicare cost-sharing.


Although they are not unlawful, Iowa's $1 State Supplementary Payments were designed to maximize FFP. FFP has always been available for State Medicaid programs' payments of Medicare Part B premiums made on behalf of beneficiaries who receive Federal and State income assistance. Iowa's $1 payments are not intended as income assistance; instead, they were created for the express purpose of obtaining FFP for Medicare Part B premiums. The detailed Medicaid eligibility data necessary to evaluate whether other States have shifted costs in a manner similar to Iowa are not available for all States. States are not required to identify in the data they submit to CMS whether and why every dual eligible's Part B premiums are eligible for FFP. Therefore, an evaluation determining the extent to which other States might similarly be shifting costs to the Federal Government is not feasible.


We recommend that CMS (1) seek a legislative change to prevent States from using State Supplementary Payments to shift Medicare Part B premium costs for full-benefit dual eligibles to the Federal Government and (2) require States to submit more detailed eligibility information. CMS neither concurred nor nonconcurred with our recommendations. In its comments, CMS suggested that since the basis for FFP for Part B premiums is the Social Security Administration's (SSA) criteria for State Supplementary Payments, this report and its recommendations should be directed to SSA. CMS also suggested that SSA should-as an alternative to a legislative change-revise its regulatory criteria defining State Supplementary Payments to make them consistent with 42 CFR 435.232(b), which mandates guidelines for optional State Supplementary Payments. OIG has no authority to make recommendations to SSA; we continue to believe that CMS should seek a legislative change to address this issue.