Consultants Help States Find Medicaid Loopholes, GAO Study Says
Thirty-four states in 2004 paid consultants on a contingency-fee basis to help the states receive larger Medicaid reimbursements from the federal government, often through "questionable billing practices," according to a Government Accountability Office study, the New York Times reports. GAO investigators on Monday in a report to Congress said such consultants, who are paid a share of the money they procure for states, drive up federal Medicaid costs in some cases by recommending financial tactics that are in violation of federal law or policy.
GAO investigators said that federal officials did not routinely review states' use of consultants. Kathryn Allen, director of health care issues for GAO, said that some states obtained additional federal money but did not increase state contributions to Medicaid. She added, "A lack of oversight and clear guidance from [CMS] has allowed states to develop new financing methods that generate additional federal costs." GAO also noted that federal officials used different standards for different states, "allowing Georgia and Massachusetts to use techniques forbidden to Maryland, Illinois and Texas," the Times reports. Allen noted that the number of states using consultants on a contingency-fee basis to boost federal Medicaid funding increased from 10 in 2002 to 34 in 2004.
GAO said Georgia paid a consultant $82 million in contingency fees from 2000 to 2004 for helping the state obtain $1.5 billion in additional federal Medicaid money. Massachusetts paid consultants $11 million in return for securing an extra $570 million. Federal guidelines issued by the Office of Management and Budget generally ban states from charging the federal government for contingency fees to contractors who secure federal funding, and neither Georgia nor Massachusetts used federal money to pay the consultants.
However, the HHS Office of Inspector General found that Colorado and Virginia had received $179,267 and $338,982, respectively, for consultant fees that were inappropriately billed to the federal Medicaid program. Colorado officials said they had not been aware of the federal prohibition, the Times reports.
Senate Finance Committee Chair Chuck Grassley (R-Iowa), who requested the GAO study, said, "It's alarming to find that a majority of states use contingency-fee consultants to increase the federal dollars they claim from Medicaid and that those increases are often achieved through schemes of questionable legality." He added, "Medicaid dollars should not be lining the pockets of consultants who plot new ways to exploit the system." Grassley also said that Congress and CMS officials have "an obligation to establish clear-cut ground rules and make sure they're followed."
CMS Administrator Mark McClellan said his agency "does not have the authority to require states to disclose their use of contingency-fee consultants" but added that Congress could impose such a requirement. McClellan also said the Bush administration has acted to improve the financial management of Medicaid, resulting in at least 23 states halting some improper financial practices.
Massachusetts Health and Human Services Secretary Ronald Preston said that using contingency-fee consultants was a "fiscally responsible" way for states to obtain federal aid.
William Copeland, a consultant for the state of Georgia, said states hired Medicaid consultants because "the program is large, complex and incoherent, and most states cannot afford to hire all the full-time experts they need to unravel the complexities" (Pear, New York Times, 6/28).