Republicans say the higher payment rate for the ACA’s Medicaid-expansion population incentivizes spending and fraud at the state level.


Feb. 1—Republicans this week cited new evidence of fraud, waste, and abuse related to coverage expansions under the Affordable Care Act (ACA) to support their calls for a repeal and replacement of the law.

At multiple congressional hearings Republicans cited a range of investigations to raise concerns about the extent of misspending that has resulted from coverage expansions to 11 million under Medicaid and 11 million through ACA marketplace plans.

The latest concerning finding was that improper payments under Medicaid reached $36 billion (10.5 percent of federal Medicaid spending) in FY16, which was an increase from $29 billion (9.8 percent) in FY15, according to a new Government Accountability Office (GAO) report.

 “While the percentage of improper payments is increasing, the concerns are not new; we added Medicaid to our list of high-risk programs in January 2003, because of the program’s risk of improper payments, as well as insufficient federal and state oversight,” Carolyn Yocom, director of health care for GAO, said in written congressional testimony.

Republicans worried that the improper payments may actually be higher than GAO found because the Centers for Medicare & Medicaid Services (CMS) decided not to update overall accuracy rates for Medicaid eligibility determinations in the 39 states participating in the federal ACA marketplace until 2018.

“We want to fix this, but we don’t have accurate data to know how big the problem is,” said Rep. Tim Murphy (R-Pa.), chairman of the of the House Energy and Commerce Committee’s Oversight and Investigations Subcommittee.

At least four congressional hearings this week focused on waste, fraud, abuse under ACA coverage expansions or discussed proposed legislation aimed at limiting spending on ineligible enrollees under those programs.

Republican concerns were exacerbated by statements this week from officials with the GAO and the U.S. Department of Health and Human Services’ (HHS’s) Office of Inspector General (OIG) that they were unable to estimate either the total amount of improperly paid ACA marketplace subsidies or the number of people who receive such subsidies.

The possibility of a large number of improperly paid subsidies was raised by repeated GAO investigations that found that fictitious applicants were able to obtain subsidized ACA marketplace coverage.

“We don’t know how many got fraudulent payments, but we can conclude that everyone who applied fraudulently got the money they weren’t entitled to,” said Rep. Paul Mitchell (R-Mich.).

ACA supporters pushed back that not all the improper payments are cause for concern. Most may be appropriate but poorly documented, said Timothy Westmoreland, a senior scholar in health law at Georgetown University Law Center.

The major causes of improper payments were “unscrupulous providers” he said. However, many antifraud efforts were created or expanded by the ACA and already underway.

Westmoreland said nothing in the program-integrity reports justifies changes Republicans are considering to Medicaid, such as moving to block grants or creating per-beneficiary spending caps, as part of an effort to repeal and replace the ACA.

Republican Changes

The fraud concerns were tied to the ACA’s expansion of coverage by some policy analysts. For instance, Paul Howard, a senior fellow at the Manhattan Institute, said the open-ended federal matching rate of at least 90 percent for the ACA’s Medicaid expansion population incentivizes states to maximize their expansion population enrollments and makes fighting fraud more difficult. He used the example of New York, where hugely disproportionate Medicaid spending before the expansion was accompanied by findings of large-scale fraud.

Josh Archambault, a senior fellow at the Foundation for Government Accountability, said the federal matching rate under the ACA has “pernicious effects,” including creating incentives for states to balance budgets by cutting spending on non-expansion Medicaid populations, which have a smaller federal match. He cited the use of waiting lists for services and supports in many expansion and non-expansion states as an unintended consequence. Another consequence of unexpectedly large state costs under the ACA expansion are provider payment rate cuts that can directly impact access to care.

Archambault said the available data show that eligibility determinations are a huge area for waste, fraud, and abuse.

Among changes needed are more-frequent eligibility checks to keep states from paying managed care costs for those who no longer qualify because of income changes, death, or relocation to a different state. Without such reviews the nationwide shift to managed care can mean unnecessary and costly ongoing payments to Medicaid insurers.

Policy changes in any Medicaid overhaul, Howard said, should include giving states more leeway to spend Medicaid funding on more nonmedical services—such as housing and transportation—that could better control rising healthcare costs.

Rep. Michael Burgess (R-Texas) said he plans to introduce legislation focused on cutting Medicaid payments for those with overlapping commercial insurance coverage. Such payments were estimated to cost $25 million in six states in one year, said Ann Maxwell, assistant inspector general in HHS’s OIG.

Among the federal antifraud legislation supported by Republicans is the Verify Eligibility Coverage Act, which would require individuals to provide documentation of citizenship or lawful presence before obtaining Medicaid coverage. Another bill, the Close Annuity Loopholes in Medicaid Act, would tighten financial eligibility rules for coverage of long-term care through Medicaid.

Auditors’ Suggestions

Among the steps that the HHS OIG has urged to improve Medicaid financial safeguards are

  • Moving states to fully implement enhanced provider screening
  • Improving the completeness and accuracy of CMS data needed to effectively oversee the Medicaid program
  • Improving the accuracy of Medicaid provider information
  • Improving the use of data analytics to detect providers with questionable billing patterns that may indicate fraud or harm


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Wednesday, February 01, 2017