With Medicaid accounting for more than a quarter of governmentwide improper payments, the Centers for Medicare and Medicaid Services plans to launch new eligibility audits for the program.

“The expansion of Medicaid under the Affordable Care Act provided an unprecedented level of financial support for newly eligible, able-bodied adults,” CMS Administrator Seema Verma told the Senate Homeland Security and Governmental Affairs Committee on Tuesday. “This created an opportunity for states to shift costs to the federal government, and requires us to ensure states are accurately determining eligibility.”

CMS will initiate new eligibility review audits and will implement new requirements for Payment Error Rate Measurement (PERM) audits. The agency created the PERM program, which measures improper payments in Medicaid, under the 2002 Improper Payments Information Act.

The agency also strengthened its requirements for managed-care audits earlier this year following a GAO report released in June. 

“Nobody is auditing managed care right now, and this is about almost half of Medicaid spending,” Comptroller General Gene Dodaro told lawmakers. “They’re going to start doing some audits, but they have limited resources and they’re only covering the audits on a three-year cycle. It’ll take three or four years to get through all the states.”

In June, CMS released the first-ever scorecard for  Medicaid and the Children’s Health Insurance Program (CHIP). The scorecard aims to shed more light on Medicaid and CHIP enrollment and annual expenditures by state.

“For too long, we have lacked transparency in the performance and outcomes of this critical program,” Verma said.

Sen. Claire McCaskill (D-Mo.), the committee’s ranking member, also signaled her support for greater transparency in how managed care organizations spend federal dollars. However, she added that improper payments don’t always necessarily translate into outright fraud.

“I think often we’re conflating the terms, and when we throw out the figure $37 billion in improper payments, I think the notion that is conjured up in most Americans’ minds is ‘Oh my gosh, there are $37 billion worth of frauds and cheats, and we are somehow giving them money,'” McCaskill said “That is not the case with improper payments. The reality is fraud only accounts for a portion of the total improper payments, most of which result from provider screening and enrollment errors.”

To reduce the burden on states and improve review accuracy, federal contractors will conduct the PERM reviews. However, Dodaro urged CMS to work more closely with state auditors.

“Managed care has grown over the years without a lot of good payment integrity and oversight processes in place. CMS is planning to start that, but I think state auditors are a tremendously untapped resource,” he said, adding that state auditors have a very deep and longstanding knowledge of the state Medicaid programs.

McCaskill also signaled her support for greater involvement from state auditor, which can also sound the alarm on fraud more effectively

“Their results and findings are telegraphed in a very bold way to the policymakers in those states,” McCaskill said.

In addition to improper payments, GAO, in a report released Tuesday, also highlighted risk concerns with demonstrations, through which CMS gives states the flexibility to spend money to test new coverage and service delivery approaches.

The report found demonstrations made up one-third of Medicaid spending in fiscal 2015.

However, the report highlights that CMS recently limited states’ ability to accrue unspent demonstration funds, resulting in an estimated $63 billion in federal savings between 2016 and 2018.

GAO also highlighted supplemental payments that are made over and above the reimbursement of claims for Medicaid. In 2017, the agency found that supplemental payments totaled $48 billion.

“CMS plans to issue a proposed rule in spring 2019 to establish new reporting requirements for supplemental payments,” the report stated.

Dodaro also demonstrated his support for the Payment Integrity Information Act, which aims to have agencies undertake additional efforts and develop plans to prevent improper payments before they happen.

He also urged Congress and GAO to play a stronger oversight role in state reporting data to the Transformed Medicaid Statistical Information System (T-MSIS).

“The states are beginning to report all the data now, but I think our concern is that the data be accurate and complete,” Dodaro said. “I think it would be appropriate to ask CMS to regularly report to the Congress on the quality of the data and ask GAO to evaluate that as well.”

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