New reporting requirements could affect $48 billion in supplemental payments to Medicaid providers, a government watchdog says.


Aug. 21—States that broadly exceeded their Medicaid expansion enrollment projections will be among those targeted in recently launched eligibility audits, a senior administration official told Congress this week.

Seema Verma, administrator for the Centers for Medicare & Medicaid Services (CMS), told the Senate Homeland Security and Governmental Affairs Committee that her agency is launching several initiatives to cut fraud and improper payments in Medicaid.

A crackdown on improper payments is important both because of the program’s growing share of funding that is provided by the federal government and because of the rate of improper payments. In FY17, Medicaid had $37 billion in improper federal payments—the highest of any government agency—according to an April report by the Government Accountability Office (GAO).

One way the administration plans to cut improper payments is through recently launched audits of states’ eligibility determinations for new enrollees.

Verma cited investigations by the Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services of eligibility determinations by California, New York, and Kentucky, which found the states did not comply with federal and state eligibility determination requirements. Those missteps resulted in more than $1.2 billion in federal payments—in just one year—for nearly 600,000 enrollees who were ineligible or potentially ineligible, according to OIG projections.

Audits Begin

CMS has begun to review states that the OIG previously found to be high-risk and will examine how they determine which groups are eligible for Medicaid benefits, Verma said. Additionally, the agency will prioritize the states that most aggressively expanded Medicaid coverage under the Affordable Care Act (ACA).

“What I’m concerned about and one of the things that we’re going to be looking at, in terms of these eligibility reviews, is looking at states where we have seen very high levels of enrollment that were beyond what was predicted,” Verma said. “I think that’s an issue.”

Twenty-four states projected 5.5 million new Medicaid enrollees would sign up for the ACA expansion, but actual sign-ups reached at least 11.5 million among them, according to a 2016 report by the right-leaning Foundation for Government Accountability (FGA).

Critics of the ACA, including Trump administration officials, said the healthcare reform law’s federal match of at least 90 percent for new Medicaid enrollees incentivized states to sign up ineligible enrollees, who will drive much of the projected $741 billion in federal Medicaid costs over the coming decade.

The new CMS audits appear to go beyond the OIG audits, which targeted three of the four states that the FGA concluded most exceeded their Medicaid enrollment projections under the ACA.

California’s ACA Medicaid sign-ups reached 3.8 million, or 322 percent more than projected. New York’s 235,000 enrollees were 276 percent of projections, and Kentucky’s 439,000 were 134 percent of projections.

It’s not clear whether the findings of the coming CMS audits could result in the ejection of ineligible Medicaid beneficiaries from the program or just reclassifications of their Medicaid status. Verma cited previous findings of pregnant beneficiaries in the ACA-enrollee category, with those beneficiaries subsequently moved to the previous-eligibility category (which has a lower federal match). The launch of CMS’s eligibility audits followed the 2017 decision by Oregon to kick nearly 55,000 enrollees off its Medicaid program after the state found they no longer qualified or failed to respond to an eligibility check.

The ACA Medicaid expansion, which added an estimated 11.2 million new beneficiaries by 2016, has been a key financial support for many hospitals, according to financial analysts.

CMS also has directed contractors to resume measuring improper payment rates related to eligibility under the Payment Error Rate Measurement (PERM) system. That assessment had been suspended by the Obama administration

The audits are unlikely to affect providers if they result in simply a reshuffling of beneficiaries’ eligibility status under Medicaid. However, bigger impacts could hit Medicaid insurers, from which CMS expected to have recouped about $9.5 billion in rate adjustments for overpayments from 2014 through 2016, Verma said.

Supplemental Payments

Another CMS initiative could affect hospitals by restricting supplemental payments, which are provider payments on top of regular, claims-based payments for specific services. In FY16, Medicaid paid providers $48 billion in supplemental payments.

Verma said CMS plans to issue a proposed rule in spring 2019 to create new reporting requirements that will lay out the details of supplemental payments.

GAO has urged that CMS establish “approval criteria and review processes to ensure these payments are economical and efficient, as well as arrange for more accurate reporting of how states are financing their share of these payments, among other things,” the watchdog agency noted in a report this week.

“When we’re dealing with states, we need to understand where the matching dollars come from, we need to understand all of the back-end deals—how the match is being provided, then what money goes back to the states and what money goes back to providers,” Verma said. “We need to have transparency around that to make sure it is appropriate.”

Verma and senators repeatedly raised concerns that states are using a variety of arrangements to have providers fund states’ shares of the Medicaid match and paying them back with funds provided by the federal government.

Sen. Ron Johnson (R-Wis.), chairman of the panel, said he planned additional hearings on the use of provider taxes and other ways that states fund their share of Medicaid.

“These things are all perfectly legal, but it’s a way for states to get more,” Johnson said. 

Eugene Dodaro, comptroller general of the United States, told the senators that the total amount generated by such state “gimmicks” is unknown, but the scale likely would reduce their comparable concern about inappropriately categorized Medicaid enrollees to “peanuts.”

Referring to public reporting on the methods states use to obtain supplemental funding, Dodaro said, “In my opinion, that will completely stop the gimmicks.”


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

Publication Date: Wednesday, August 22, 2018