SMDL #01-015  
January 19, 2001 
Dear State Medicaid Director: 
We are writing this letter to address concerns expressed by some Medicaid Directors 
that implementation of Medicaid simplification strategies could lead to a higher 
Medicaid error rate and possible federal disallowances. 
We share the States' view that program integrity remain a high priority for the 
Medicaid program. However, we do not believe that such concerns need be a barrier 
to program simplification. The record to date shows that both goals are compatable 
and achievable. 
Over the past several years, the combined efforts and effective partnership of States, 
the Health Care Financing Administration (HCFA), the Office of the Inspector General 
(OIG), and others has been successful in reducing improper payments and 
combating fraud. At the same time, the national average Medicaid eligibility error 
rate has been below two percent for over ten years, and no State has been subject 
to disallowances for more than six years resulting from erroneous eligibility 
determinations. Many States have taken significant steps to simplify their enrollment 
and retention procedures, without any apparent impact on their error rates. 
HCFA and OIG have a common interest in ensuring that all aspects of the Medicaid 
program work well. Eligibility determinations and program effectiveness work in 
concert. It is just as unacceptable to deny eligibility to program benefits as a result 
of complicated and burdensome application and retention procedures as it is to enroll 
ineligible individuals. Program integrity and accurate and efficient eligibility 
determinations go hand in hand. 
Both HCFA and OIG want all eligible people to be enrolled in the Medicaid program in 
the most simplified process possible within a strong program integrity environment. 
The concept of program integrity includes efforts to provide benefits effectively and 
efficiently to eligible individuals. State initiatives to streamline verification 
requirements, use simplified mail-in forms at the point of enrollment and at 
reenrollment, and rely on information available through other programs and on post-
eligibility data matches, can be consistent with program integrity goals. 
Our views on program integrity are consistent with the National Medicaid Fraud and 
Abuse Initiative and are shared by members of Congress as well as the General 
Accounting Office (GAO). Furthermore, while Congress is properly concerned about 
the potential for fraud, waste and abuse in both Medicaid and Medicare, recent 
legislation expanding States' options for promoting enrollment of children 
demonstrates that there is broad support of State efforts to simplify Medicaid 
application and retention procedures in ways that are designed to promote the 
enrollment of eligible individuals. HCFA's efforts to encourage Quality Control pilot 
projects, which allow States to focus on quality control issues that they believe are 
most pressing in their State, offer further support to State efforts to simplify 
enrollment procedures. We encourage you to visit HCFA's webpage to learn more 
about pilots at http://www.hcfa.gov/medicaid/regions/mqchpg.htm.  The collaborative efforts of State and Federal agencies have proven to be successful 
in ensuring program integrity in the Medicaid program. We believe that we can 
achieve continued success as we balance the need to minimize improper payments 
and the incidence of fraud with the important goal of simplifying program 
administration and ensuring that all eligible persons receive the coverage to which 
they are entitled. HCFA and OIG are committed to working with you to that end. 
Please direct any questions to your servicing HCFA regional office. 
Sincerely, 
__________________________  ___________________________ 
Timothy M. Westmoreland  Michael Mangano 
Director  Acting Inspector General 
Center for Medicaid and State Operations  Office of the Inspector General 
cc:  
HCFA Regional Administrators  
HCFA Associate Regional Administrators for Medicaid and State Operations  
TANF Administrators  
Lee Partridge, Director, Health Policy Unit - American Public Human Services 
Association  
Brent Ewig, National Association for State and Territorial Health Officials  
Joy Wilson, Director, Health Committee - National Conference of State Legislators  
Matt Salo, Director of Health Legislation - National Governors' Association