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Management Challenge 1: Protecting an Expanding Medicaid Program from Fraud, Waste, and Abuse

Why This Is a Challenge

A young girl having a medical exam

Protecting the integrity of Medicaid takes on heightened urgency as expenditures and beneficiaries served continue to grow. As of September 2015, 29 states and the District of Columbia are expanding Medicaid eligibility to include a larger group of qualifying adults pursuant to the Patient Protection and Affordable Care Act (Affordable Care Act) and Medicaid waivers. Further, states that have not expanded eligibility have also seen increases in Medicaid enrollment. Taking into account the obstacles associated with expanding eligibility, along with long-standing program integrity issues, Medicaid continues to be a top management challenge for the Department of Health and Human Services (Department or HHS).

Expansion of Medicaid Eligibility. As of August 2015, the Centers for Medicare & Medicaid Services (CMS) reported that enrollment in Medicaid and the Children's Health Insurance Program (CHIP) had increased by 13.6 million people since Affordable Care Act-expanded eligibility criteria went into effect in October 2013. To ensure effective management of the expanding program, updating eligibility systems to ensure appropriate eligibility determinations and applicable Federal Medical Assistance Percentage (FMAP) is imperative. A main source of Medicaid's 6.7 percent improper payment rate (as reported in fiscal year (FY) 2014) is attributed to payments made on behalf of ineligible individuals. (For more information on improper payments, see Management Challenge 4.) For example, eligibility errors occur when beneficiaries lose eligibility status because they are no longer residents of the state and/or failed to report a change in circumstances but remain enrolled in a state's Medicaid program. The Public Assistance Reporting Information System (PARIS) Medicaid Interstate Match program was designed to reduce these errors by identifying beneficiaries who are enrolled in multiple state Medicaid programs, but state participation in the match is limited and its effectiveness in reducing improper payments is inconsistent.

Improving Oversight of Medicaid Managed Care. As of 2011, approximately 75 percent of Medicaid beneficiaries nationwide are enrolled in managed care. To be effective, oversight must include robust program integrity measures, have and use accurate and timely data, and ensure that beneficiaries have sufficient access to services. In a December 2011 report, the Office of Inspector General (OIG) found that the predominant program integrity concerns of both states and plans are provider fraud - billing for services that were not provided, were medically unnecessary, or upcoded - and beneficiary fraud - including prescription drug abuse. Fraud or abuse by managed care plans themselves, such as manipulating bids to increase reimbursement, also pose program integrity challenges. States are required to collect and submit encounter data that document the managed care services that beneficiaries receive, but some states do not submit any data and others do not submit all of the required data elements. As a result, CMS does not have the data necessary to identify and address possible fraud, waste, and abuse. Further, OIG has identified issues that may impede beneficiaries' access to care, including limited appointment availability and varying state standards for access (e.g., states range from requiring one primary care provider for every 100 to 2,500 enrollees.).

Improving the Effectiveness of Medicaid Data and Systems. A functional, national Medicaid database is essential to effective oversight. However, national Medicaid data are not complete, accurate, or timely, and additional data are needed to enhance national program integrity activities. CMS still faces challenges in its attempts to improve the availability and quality of Medicaid data. Limited implementation by states has hindered CMS's Transformed Medicaid Statistical Information System (T-MSIS) initiative, which is CMS's key effort to modernize and enhance the usefulness of state Medicaid data. Other CMS attempts to improve data sharing between states have not been fully successful. For example, CMS established a data-sharing system to implement the Affordable Care Act requirement that providers terminated for cause (i.e., for reasons of fraud, integrity, or quality) in one state Medicaid program, CHIP, or that have had their Medicare billing privileges revoked are terminated by all other state Medicaid programs. However, data within that system was often incomplete and did not provide useful information to states in order to carry out the Affordable Care Act requirement for terminating providers. OIG work found 12 percent of providers terminated for cause in one state Medicaid program in 2011 were still participating in other states' Medicaid programs as of January 2014. (For more information on data systems and information, see Management Challenge 3.)

State Policies That Inflate Federal Costs. Long-standing concerns exist about states' Medicaid policies that result in the federal government paying a greater share of Medicaid costs than the FMAP percentages dictate. Misalignment of costs and payments at certain state-operated facilities can inflate federal costs. For example, New York Medicaid payments to state-run developmental centers were inflated by more than $1 billion in FY 2009. In another example, Pennsylvania used a state tax on Medicaid managed care plans to draw down almost $1 billion in federal funds over a three-year period. Additionally, the lack of transparency related to state waiver programs present challenges to ensure that payments are consistent with efficiency, economy, and quality of care, and do not improperly inflate federal costs. The Government Accountability Office (GAO) has found that CMS's approval process for section 1115 waivers may increase federal costs, in part, because it is not clear how CMS determines whether a waiver is budget neutral.1

Ensuring Quality Care for Medicaid Beneficiaries. OIG work has demonstrated that children enrolled in Medicaid do not receive all required preventive screenings and has identified quality-of-care concerns regarding children's treatment with antipsychotic drugs. Some of the quality-of-care concerns included poor monitoring of the children's treatment with drugs, children being prescribed the wrong treatment, and children taking too many drugs. Furthermore, OIG has identified significant and persistent vulnerabilities related to Medicaid personal care services, which often includes ineffective program safeguards intended to ensure medical necessity, patient safety, and quality. (For more information on ensuring quality in nursing home, hospice, and home-and community-based care, see Management Challenge 6).

Progress in Addressing the Challenge

CMS is working to promote Medicaid expansion program integrity by providing technical assistance to the states, developing new procedures on eligibility determination and payment accuracy, and training state staff on reporting and accounting for expenditures of newly eligible individuals. For FYs 2014- 2017, CMS required each state to implement an annual 50-State Medicaid and CHIP Eligibility Review Pilot program strategy.

If implemented, CMS's June 2015 Notice of Proposed Rulemaking (NPRM), which revises its Medicaid managed care regulations, may address several identified issues, including requirements for providers participating in Medicaid managed care to enroll in Medicaid, new standards for beneficiary access, more timely, complete and accurate submission of managed care encounter data to states, and increased safeguards against fraud, waste, and abuse. CMS also reports that it has updated its guidance on program integrity in Medicaid managed care.

CMS reports that it continues to improve its data and technology capabilities. In May 2015, CMS implemented T-MSIS with the first state. CMS reports that states are fully engaged in the transition from the Medicaid Statistical Information System (MSIS) to T-MSIS, which includes a CMS-led process to test implementation to address data gaps and other issues. However, CMS has not indicated when all states will be submitting T-MSIS data. CMS has also issued a NPRM to permit partial disallowance or deferral of Medicaid Management Information System (MMIS) expenditures if a state fails to produce all federally required program management data and information, including T-MSIS.

In response to the Affordable Care Act requirement regarding provider terminations, CMS reported that it implemented a new Medicaid provider termination notification system (TIBCO) in 2014. Under this new system, CMS reports that it is verifying state-submitted provider termination data before the data is made available to other states through TIBCO.

CMS is continuing to work with states to curb policies that inflate federal costs. CMS has approved a State Plan Amendment and entered into a $1.9 billion settlement with New York for the state to repay amounts associated with inflated costs for state-run developmental centers and other related costs. Finally, CMS issued a letter to state health officials on the treatment of health care-related taxes and their effect on federal matching funding.

In response to OIG's work, CMS reported that it plans to work with states to monitor the use of antipsychotic drugs, implement additional quality measures related to treatment of children with antipsychotic drugs, and encourage states to request their managed care programs to address quality-of-care concerns by conducting periodic reviews of medical records of children treated with antipsychotic drugs. CMS also reported that it has disseminated two strategy guides on required preventive screenings to states and providers, began developing a quality measure specific to vision screenings, held listening sessions with states, and provided training related to federal Early and Periodic Screening, Diagnosis, and Treatment (EPSDT). CMS reported that it performed state-specific program integrity reviews, one of which focused on curbing fraud and abuse in personal care services.

What Needs To Be Done

CMS should continue to develop robust oversight for the Medicaid expansion. CMS must be vigilant in addressing program integrity risks associated with Medicaid expansion, including monitoring states' compliance with eligibility requirements and FMAP expenditures.

CMS should continue to work with states to ensure the submission of complete, accurate, and timely T-MSIS data. If states fail to submit timely T-MSIS data, CMS should use its statutory enforcement mechanisms or seek legislative authority to employ alternative tools to compel state participation. OIG is conducting work regarding CMS's and states' progress in implementing T-MSIS.

CMS should continue to improve the data available for states to terminate providers terminated from another state Medicaid agency, CHIP, or Medicare by implementing a mandatory state reporting requirement of all for cause provider terminations. Required reporting is a crucial part of creating a comprehensive data source and effective oversight.

CMS should strengthen its oversight of state Medicaid waivers, including monitoring the costs of such waivers, and ensure that any oversight actions taken are publicly reported.

CMS should continue to promote awareness of safe treatment and best practices for treating children with antipsychotic drugs and consider ways that states could implement periodic reviews of medical records of children who receive antipsychotic drugs. CMS should also continue its efforts to improve delivery of preventive screenings for children, particularly on required reporting of vision and hearing screenings.

Key OIG Resources


1 GAO, Medicaid Demonstrations: More Transparency and Accountability for Approved Spending are Needed, June 24, 2015

Management Challenge 2: Fighting Fraud, Waste, and Abuse in Medicare Parts A and B

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