Report Recommends Greater Oversight of Medicaid Payments

Medicaid lacks sufficient oversight of its payments to private insurers that administer services, potentially leading to improper payments to the plans, according to a Government Accountability Office report released on Wednesday, Reuters reports.
Medicaid increasingly contracts with private insurers to provide services for beneficiaries (Lentz, Reuters, 8/4).

In 2008, about half of all Medicaid beneficiaries -- or 20 million individuals -- received coverage through managed care plans. The plans received $62 billion in payments from federal and state governments in 2007 (McCarthy, CongressDaily, 8/5).

Under the managed care model, Medicaid pays a fixed rate for a set of services, as opposed to a fee for each individual service.

GAO Conclusions

GAO determined that the managed care rates are rarely reviewed, or are reviewed with insufficient data in some states.

For example, CMS has not reviewed rates in Nebraska since 2002, while Tennessee received $5 billion in annual federal funds based on rates that were not certified by an actuary or reviewed for compliance (Reuters, 8/4). CMS learned that Tennessee's payments were not "actuarially sound" after GAO began its research.

The report also uncovered inconsistent CMS reviews of rate-setting in six regional CMS offices.

CMS generally relied on assurances from states and health plans to determine the adequacy of rates, despite those sources often failing to provide CMS with sufficient data to verify rate quality.

CMS began using common checklists to review rate-setting for different states during the course of the review, but that solution does not address the variations in how regional offices consider rates, according to GAO (Reichard, CQ HealthBeat, 8/4).

The report recommends that CMS better track rates in all states and set clear standards for rate reviews (Reuters, 8/4).

Baucus, Grassley Call for More Aggressive Oversight

In response to the GAO report, Senate Finance Committee Chair Max Baucus (D-Mont.) and the committee's ranking Republican Chuck Grassley (Iowa) called on CMS to more aggressively oversee Medicaid, CongressDaily reports.

Grassley said that the report shows that "Medicaid could be overpaying in some cases and underpaying in others," adding, "In a program that spends hundreds of billions of dollars, that's a problem" (CongressDaily, 8/5).