Skip Navigation
United States Flag

An official website of the United States government. Here's how you know >

A New Look for HHS-OIG. Learn More >>

Change Font Size

#2 Effectively Administering the Medicaid Program to Improve Oversight of Managed Care, Address High Improper Payments, and Strengthen Program Integrity

Why This Is a Challenge

With over 72 million enrolled individuals, Medicaid serves more enrollees than any other Federal health care program and represents one-sixth of the national health economy. Effectively administering the Medicaid program takes on heightened urgency as the program expands under the Patient Protection and Affordable Care Act (Affordable Care Act) and undergoes other significant modernization reforms. The Centers for Medicare & Medicaid Services (CMS) reported that Federal and State Medicaid expenditures are projected to increase at an average annual rate of 6.4 percent and reach $921 billion by 2024.

Effectively administering Medicaid continues to be a top management challenge for HHS, given the needs of the beneficiaries served and longstanding vulnerabilities related to oversight of Medicaid managed care; high improper payment rates; and harnessing program integrity tools, including data, to protect the program from fraud, waste, and abuse.

Continue reading about this challenge >>

View Other Challenges

Key Components of the Challenge

Oversight of Medicaid Managed Care. The vast majority of Medicaid beneficiaries are enrolled in managed care. OIG has identified challenges to ensuring that these beneficiaries have access to high-quality care and that Medicaid funds are expended properly. For instance, OIG has found that varying State standards for access (e.g., States range from requiring one primary care provider for every 100 to 2,500 enrollees) and limited appointment availability may limit beneficiary access to services. OIG has also found that CMS does not have complete and timely managed care data from State Medicaid agencies. These data are necessary to identify and address possible fraud, waste, and abuse.

Improper Payment Rates Are High. Reducing improper payments to providers is a critical element in protecting the financial integrity of the Medicaid program. In FY 2015, HHS did not meet its established improper payment target for Medicaid. HHS set a FY 2015 target of 6.7 percent for Medicaid. However, the actual improper payment rate for FY 2015 was 9.8 percent. Although not all improper payments are fraud, all improper payments pose a risk to the financial security of the Medicaid program.

Program Integrity Needs Strengthening. CMS and State Medicaid agencies have a shared responsibility to ensure that Medicaid expenditures are spent appropriately and also to protect the program from fraud, waste, and abuse. However, OIG has found that the Affordable Care Act's screening tools designed to strengthen provider enrollment were not fully implemented by State Medicaid agencies. In addition, OIG has found that CMS's national Medicaid database-essential to effective program oversight-is incomplete and additional data are needed to enhance national program integrity activities. (For more information on improving the flow of complete, accurate, and timely information, see TMC #3.) Finally, OIG identified significant and persistent vulnerabilities related to personal care services (PCS), including ineffective program safeguards to ensure that beneficiaries are not exposed to unsafe or suboptimal care and Medicaid is not exposed to high improper payments. (For more information on ensuring quality in PCS and other services, see TMC #7.)

Progress in Addressing the Challenge

New Medicaid Managed Care Regulations. In May 2016, CMS issued a Medicaid Managed Care Final Rule. The rule addressed numerous OIG recommendations and will strengthen oversight of managed care entities by improving accountability and transparency. For example, the rule expanded requirements for managed care organizations to report data related to utilization and quality of services. The rule also requires State Medicaid agencies to develop and implement provisions ensuring that beneficiaries have adequate access to Medicaid covered services. Once provisions are implemented, State Medicaid agencies will be required to annually validate network adequacy.

Improper Payment Rate Corrective Action Plans. CMS determined that the primary reasons for the high FY 2015 improper payment rate errors were related to State Medicaid agencies' difficulties coming into compliance with new requirements. These include enrolling all referring or ordering providers, screening providers under the Affordable Care Act risk-based screening process, and including the attending provider National Provider Identifier on all electronically-filed institutional claims. CMS has engaged with State Medicaid agencies to develop State-specific corrective action plans that address these reasons for the high improper payment rate. CMS has also facilitated national best practice calls to share ideas across States, offered ongoing technical assistance, and provided additional guidance, as needed, to address the root causes of these improper payments.

CMS Working with States to Implement Program Integrity Measures. CMS indicated that it is taking actions to address provider enrollment vulnerabilities identified by OIG. CMS recently released guidance, "Medicaid Provider Enrollment Compendium," to assist State Medicaid agencies in implementing disclosure requirements and the Affordable Care Act's screening and enrollment requirements. Furthermore, CMS's final rule on managed care requires State Medicaid agencies to screen and enroll all network providers. This new requirement is a significant step in addressing a large number of providers previously exempt from State Medicaid agencies' screening and enrollment requirements. CMS continues to work with States to improve Medicaid data. Specifically, CMS works with all State Medicaid agencies to submit complete, accurate, and timely data. In addition, CMS conducted focused reviews of State Medicaid agencies' high-risk program integrity areas, including State Medicaid agencies' implementation of provider enrollment and screening provisions of the Affordable Care Act. Finally, CMS is assessing what actions it can implement to address the longstanding and persistent PCS vulnerabilities identified by OIG.

What Needs To Be Done

Full Implementation of the Medicaid Managed Care Regulation. CMS's issuance of the Medicaid Managed Care Final Rule is a positive step in addressing the managed care vulnerabilities identified by OIG. The final rule is the first major update to Medicaid managed care regulations in more than a decade. To facilitate full implementation of the final rule, CMS should continue to provide guidance to State Medicaid agencies in a timely manner and work closely with them to develop effective strategies to meet new requirements.

Reduce the Improper Payment Rate. CMS should continue its engagement with State Medicaid agencies to develop corrective action plans. Moreover, CMS should ensure that State Medicaid agencies are implementing and monitoring the effectiveness of their corrective action plans. Finally, CMS should continue innovative approaches, such as the creation of the Program Integrity Board, which leverages multiple CMS resources to identify payment vulnerabilities.

Ensure States Fully Implement Program Integrity Measures. CMS should continue to work with State Medicaid agencies to fully implement Affordable Care Act-required program integrity tools. Full implementation of these tools is critical to safeguarding the Medicaid program. CMS must ensure that State Medicaid agencies rigorously screen providers and make accurate beneficiary eligibility determinations. CMS should also continue to work with State Medicaid agencies to ensure that the submission of all required Medicaid data is complete, accurate, and timely. Finally, CMS must do more to address vulnerabilities in home- and community-based services, such as PCS. OIG recommends that CMS take a more active role to promote program integrity in PCS by promulgating regulations to, among other things, establish minimum qualifications and require attendants to undergo background checks and enroll in Medicaid or register with State Medicaid agencies.

Key OIG Resources

TMC Navigation

Choose a Challenge

Office of Inspector General, U.S. Department of Health and Human Services | 330 Independence Avenue, SW, Washington, DC 20201