MEDICAID

Key Issues Facing the 

Program 

Report to Congressional $GGUHVVees

July 2015

GAO-15-677

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-15-677, a report to 

congressional addressees

July 2015

MEDICAID

Key Issues Facing the Program

Why GAO Did This Study

The Medicaid program marks its 

50th anniversary on July 30, 2015. 

The joint federal-state program has 

grown to be one of the largest sources 

of health care coverage and financing 

for a diverse low-income and medically 

needy population. Medicaid is 

undergoing transformative changes, 

in part due to PPACA, which expanded 

the program by allowing states to opt 

to cover low-income adults in addition 

to individuals in historic categories, 

such as children, pregnant women, 

older adults, and individuals with 

disabilities.

GAO has a large body of work on 

challenges facing Medicaid and gaps 

in federal oversight. This report 

describes (1) key issues that face the 

Medicaid program based on this work, 

and (2) program and other changes 

with implications for federal oversight. 

GAO reviewed its reports on Medicaid 

issued from January 2005 through 

July 2015; reviewed documentation 

from the Centers for Medicare & 

Medicaid Services (CMS), the HHS 

agency that oversees Medicaid; and 

interviewed CMS officials.

What GAO Recommends

GAO has made over 80 

recommendations regarding 

Medicaid, some of which HHS has 

implemented. GAO has highlighted 

24 key recommendations that have 

not been implemented. HHS agreed 

with and is acting on some and did not 

agree with others. GAO continues to 

believe that all of its recommendations 

have merit and should be 

implemented. HHS provided technical 

comments on a draft of this report, 

which GAO incorporated as 

appropriate.

What GAO Found

GAO identified four key issues facing the Medicaid program, based on prior work.

• Access to care: Medicaid enrollees report access to care that is generally 

comparable to that of privately insured individuals and better than that of 

uninsured individuals, but may have greater health care needs and greater 

difficulty accessing specialty and dental care.

• Transparency and oversight: The lack of complete and reliable data on 

states’ spending—including provider payments and state financing of the 

non-federal share of Medicaid—hinders federal oversight, and GAO has 

recommended steps to improve the data on and scrutiny of states’ spending. 

Also, improvements in the Department of Health and Human Services’ (HHS) 

criteria, policy, and process for approving states’ spending on 

demonstrations—state projects that may test new ways to deliver or pay for 

care—are needed to potentially prevent billions of dollars in unnecessary 

federal spending, as GAO previously recommended.

• Program integrity: The program’s size and diversity make it vulnerable to 

improper payments. Improper payments, such as payments for non-covered 

services, totaled an estimated $17.5 billion in fiscal year 2014, according to 

HHS. An effective federal-state partnership is key to ensuring the most 

appropriate use of funds by, among other things, (1) setting appropriate 

payment rates for managed care organizations, and (2) ensuring only eligible 

individuals and providers participate in Medicaid. 

• Federal financing approach: Automatic federal assistance during economic 

downturns and more equitable federal allocations of Medicaid funds to states 

(by better accounting for states’ ability to fund Medicaid) could better align 

federal funding with states’ needs, offering states greater fiscal stability. GAO 

has suggested that Congress could consider enacting a funding formula that 

provides automatic, timely, and temporary increased assistance in response 

to national economic downturns.

Medicaid’s ongoing transformation—due to the Patient Protection and Affordable 

Care Act (PPACA), the aging of the U.S. population, and other changes to state 

programs—highlights the importance of federal oversight, given the implications 

for enrollees and program costs. Attention to Medicaid’s transformation and the 

key issues facing the program will be important to ensuring that Medicaid is both 

effective for the enrollees who rely on it and accountable to the taxpayers. GAO 

has multiple ongoing studies in these areas and will continue to monitor the 

Medicaid program for the Congress.

View GAO-15-677. For more information, 

contact Katherine M. Iritani at (202) 512-7114 

or iritanik@gao.gov or Carolyn L. Yocom at 

(202) 512-7114 or yocomc@gao.gov.
Page i GAO-15-677 Medicaid Key Issues

Letter 1

Results in Brief 3

Background 6

Key Issues Facing the Medicaid Program 15

Medicaid’s Ongoing Transformation Highlights the Importance of 

Federal Oversight 65

Agency Comments 70

Appendix I Medicaid-Related Matters for Congressional Consideration and 

Agency Recommendations 72

Appendix II Selected Characteristics of States’ Medicaid Programs 76

Appendix III GAO Contacts and Staff Acknowledgments 78

Related GAO Products 79

Tables

Table 1: Key Design Choices Contained in GAO Prototype 

Formula and Policy Considerations 62

Table 2: Alternative Data Sources that Could Improve Equity 

across States 64

Table 3: Open Medicaid-Related Matters for Congressional 

Consideration, by Key Issue, as of July 2015 72

Table 4: Selected Open Medicaid-Related Recommendations, by 

Key Issue, as of July 2015 73

Figures

Figure 1: Key Issues Facing the Medicaid Program 4

Figure 2: Medicaid Expenditures by Category, Fiscal Year 2014 8

Figure 3: Medicaid Enrollment and Expenditures, by Eligibility 

Group, Fiscal Year 2011 10

Figure 4: Federal-State Medicaid Partnership Framework 12

Contents
Page ii GAO-15-677 Medicaid Key Issues

Figure 5: Regular Federal Medical Assistance Percentage 

(FMAP); Medicaid Enrollment, Spending, and Managed 

Care; and Medicaid Expansion Under the Patient 

Protection and Affordable Care Act (PPACA), by State 14

Figure 6: Percentage of Medicaid-Covered Individuals Who 

Reported Difficulties Obtaining Necessary Care or 

Services, by Full-Year Insurance Status, Calendar Years 

2008-2009 16

Figure 7: Percentage of Individuals Who Cited Specific Reasons 

for Delaying Medical Care in Calendar Year 2009, by 

Insurance Status 17

Figure 8: Specialty Physicians’ Acceptance of Children as New 

Patients, and Physicians’ Level of Difficulty Referring 

Children for Specialty Care (among Physicians 

Participating in Medicaid), 2010 19

Figure 9: Percentage of Children, Ages 0-20 Years, with Private 

and Medicaid Dental Coverage with a Dental Visit, 1996, 

2004, and 2010 22

Figure 10: Adult Professional Service Utilization in Selected 

States, 2010 27

Figure 11: Medicaid Payments Compared with Medicaid Costs for 

Inpatient Hospital Services in One State, for Selected 

Hospitals with the Highest Daily Payments, State Fiscal 

Year 2011 31

Figure 12: Amount of the Nonfederal Share of Medicaid Payments 

from Health Care Providers and Local Governments, 

State Fiscal Years 2008 through 2012 36

Figure 13: Example of How One State’s Use of Non-State 

Sources to Fund Medicaid Payments to Nursing Facilities 

Shifted Medicaid Costs to the Federal Government in 

State Fiscal Year 2012 37

Figure 14: Federal and Non-Federal Entities with Primary 

Oversight Responsibilities for Medicaid Program Integrity 46

Figure 15: Overview of Selected States’ Program Integrity 

Activities and Supporting MMIS and Additional Systems 49

Figure 16: Estimated Prevalence of Private Health Insurance 

among Medicaid Enrollees by Eligibility Category, 2012 51

Figure 17: Percentage Change in Medicaid Enrollment, December 

2007 through December 2009 58

Figure 18: Percentage Change in State Tax Revenue, Fourth 

Quarter 2007 to Fourth Quarter 2009 59
Page iii GAO-15-677 Medicaid Key Issues

Abbreviations

EPOP employment-to-population ratio

CBO Congressional Budget Office

CHIP State Children’s Health Insurance Program

CMS Centers for Medicare & Medicaid Services

DSH disproportionate share hospital

EPSDT Early and Periodic Screening, Diagnostic, and Treatment

FMAP Federal Medical Assistance Percentage 

FPL federal poverty level

HCERA Health Care and Education Reconciliation Act of 2010

HHS Department of Health and Human Services

IT information technology

LTSS long-term services and supports

MACPAC Medicaid and CHIP Payment and Access Commission

MCO managed care organization

MMIS Medicaid Management Information System

MSIS Medicaid Statistical Information System

T-MSIS Transformed Medicaid Statistical Information System

OIG Office of Inspector General

PECOS Provider Enrollment, Chain, and Ownership System

PPACA Patient Protection and Affordable Care Act

UPL upper payment limit

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Page 1 GAO-15-677 Medicaid Key Issues

441 G St. N.W.

Washington, DC 20548

July 30, 2015

Congressional $GGUHVVees

The Medicaid program marks its 50th anniversary on July 30, 2015. Over 

the past half-century, Medicaid has grown to be one of the largest 

sources of health care coverage and financing for a diverse low-income 

and medically needy population. It is the nation’s second largest health 

care program as measured by expenditures, behind only Medicare. 

Medicaid is also a significant component of federal and state budgets, 

with estimated outlays of $529 billion in fiscal year 2015, of which 

$320 billion is expected to be financed by the federal government and 

$209 billion by the states.1 Medicaid was estimated to account for the 

second largest share of state spending that year, exceeded only by state 

spending on elementary and secondary education. An important health 

care safety net, Medicaid covered about 72 million individuals—roughly 

one-fifth of the U.S. population—during fiscal year 2013.2

An already large and complex program, Medicaid is undergoing a period 

of transformative change, as enrollment is growing under the Patient 

Protection and Affordable Care Act (PPACA), and Medicaid spending is 

Medicaid’s 

diverse enrollee population includes children, low-income adults, 

individuals who are elderly, and those who are disabled. The program 

covers a comprehensive set of services, including physician, and 

inpatient and outpatient hospital care, and is also a particularly significant 

source of health care coverage and financing for certain services. For 

example, Medicaid is the nation’s primary payer of long-term services and 

supports (LTSS), including nursing home care and home- and 

community-based services to allow individuals to age in their homes.

 

1

Centers for Medicare & Medicaid Services, Office of the Actuary, 2014 Actuarial Report 

on the Financial Outlook for Medicaid (Washington, D.C.: 2015). 

2

This figure represents the total number of individuals ever enrolled in the program in 

2013. There were about 58 million individuals enrolled in the program at any one point in 

time. See Medicaid and CHIP Payment and Access Commission, Report to the Congress 

on Medicaid and CHIP (Washington, D.C.: March 2014). When presenting statistics 

regarding Medicaid, we have attempted to use the most recent and reliable data available; 

as a result, we present data from different years, for different purposes.

Letter
Page 2 GAO-15-677 Medicaid Key Issues

projected to increase by nearly 60 percent by fiscal year 2023.

3

Medicaid is designed as a federal-state partnership, and both the federal 

government and the states play important roles in ensuring that Medicaid 

is fiscally sustainable over time and effective in meeting the needs of the 

vulnerable populations it serves. Medicaid is financed jointly by the 

federal government and states, administered at the state level, and 

overseen at the federal level by the Centers for Medicare & Medicaid 

Services (CMS), within the Department of Health and Human Services 

(HHS). Medicaid, by design, allows significant flexibility for states to 

design and implement their programs. This has influenced the 

development of the program and has resulted in over 50 distinct statebased programs that vary in how health care is delivered, financed, 

reimbursed, and overseen. While state flexibility is a key element of the 

program, federal oversight is important to help ensure that funds are used 

appropriately and that enrollees can access quality care. However, the 

size, growth, and diversity of the Medicaid program create significant 

challenges for oversight. There is an inherent tension between states’ 

efforts to design programs that best meet their local needs and federal 

efforts to oversee the states’ programs. Attention to the issues facing 

Medicaid and the effectiveness of its federal-state partnership will be 

important for ensuring that Medicaid is both effective for the enrollees 

who rely on it and accountable to the taxpayers.

For 

example, PPACA permitted states to expand their Medicaid programs by 

covering certain low-income adults not historically eligible for Medicaid 

coverage, and more than half of the states have done so. Further, among 

other factors, the aging of the population and new developments with 

technology are both transforming and challenging Medicaid and the rest 

of the U.S. health care system. In addition, changing economic conditions 

have influenced the number and mix of individuals who are eligible for 

Medicaid coverage, and will continue to do so in the future.

We have reported over the years on a number of challenges facing 

Medicaid, as well as on gaps in federal oversight of the program.4

 

3

CMS, 2014 Actuarial Report on the Financial Outlook for Medicaid. 

In this 

report, we describe (1) key issues that face the Medicaid program, based 

on our work; and (2) how the high risk nature of Medicaid—and this 

4

See, for example, GAO, High-Risk Series: An Update, GAO-15-290 (Washington, D.C.: 

Feb. 11, 2015). 
Page 3 GAO-15-677 Medicaid Key Issues

period of transformative change in the program—have implications for 

federal oversight. We prepared this report under the authority of the 

Comptroller General to conduct work at GAO’s initiative to assist 

Congress with its oversight responsibilities.

To conduct this work, we reviewed reports on Medicaid that we issued 

from January 2005—10 years from when we began this review—through 

July 2015, including our most recent high risk update, and identified key 

issues facing the program and factors that have implications for federal 

oversight. We also reviewed documentation from CMS and interviewed 

CMS officials about the status of our prior recommendations, as well as 

current CMS efforts related to Medicaid. The issues we discuss are 

neither inclusive of all the issues facing Medicaid nor all the issues CMS 

faces in its oversight efforts. For a list of related reports, see “Related 

GAO Products” at the end of this report. Please see the scope and 

methodology for each of these reports for details on how we conducted 

that work. In addition, appendix I lists open matters for congressional 

consideration and selected open GAO recommendations regarding 

Medicaid, as of July 2015. (GAO has made more than 80 

recommendations regarding Medicaid since January 2005.)

We conducted this performance audit from January 2015 to July 2015 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

As the Medicaid program marks its 50th year, it faces a range of key 

issues, as indicated by our prior work. (See fig. 1.) Attention to these key 

issues—access to quality care; transparency and oversight; program 

integrity; and federal financing—will be important to ensuring that the 

Medicaid program is both effective for the enrollees who rely on it and 

accountable to the taxpayers.

Results in Brief
Page 4 GAO-15-677 Medicaid Key Issues

Figure 1: Key Issues Facing the Medicaid Program

• First, maintaining and improving access to quality care is critical to 

ensuring that the program is effective for the individuals who rely on it. 

Although Medicaid enrollees report having access to care that is 

generally comparable to that of privately insured individuals, some 

enrollees may face challenges, such as in obtaining specialty care 

(like mental health care) or dental care. CMS has taken steps to help 

ensure enrollees’ access to care and we have recommended 

additional steps that could bolster those efforts. We recommended in 

September 2009, for example, that CMS ensure that states with 

inadequate managed care dental provider networks take action to 

strengthen those networks. CMS has reported taking steps to improve 

these networks, but we believe more can be done in this area. CMS 

also has ongoing efforts to collect data from states to help assess 

Medicaid enrollees’ access to care, and in April 2011 we 

recommended CMS take steps to improve its data. For example, we 

recommended that CMS work with states to explore options for 

reporting on the receipt of services separately for children in managed 

care and fee-for-service delivery models. CMS officials indicated that 

they do not plan to require states to report such information, but we 

continue to believe this information is important for monitoring and 

ensuring access to care.

• Second, efforts to ensure fiscal accountability through increased

transparency and improved oversight can help make certain that 

Medicaid funds are used appropriately. A lack of reliable CMS data 

about program payments to providers and state financing of the nonfederal share of Medicaid hinders oversight, and our work has pointed 
Page 5 GAO-15-677 Medicaid Key Issues

to the need for better data, as well as improved policy and oversight. 

In addition, gaps in HHS’s criteria, process, and policy for approving 

states’ spending on demonstrations—state projects that test new 

ways to deliver Medicaid benefits—raises questions about billions of 

dollars in federal spending. Improvements are needed to ensure that 

demonstrations do not increase federal Medicaid spending, and that 

demonstrations further Medicaid objectives. HHS and CMS have 

taken important steps in recent years to improve transparency, 

oversight, and fiscal accountability, and we have recommended 

additional steps that would build on those efforts. For example, in April 

2015, we recommended that CMS take steps to ensure that states 

report accurate provider-specific payment data and develop a policy 

and process for reviewing payments to individual providers to 

determine whether they are economical and efficient, and HHS 

concurred with our recommendations.

• Third, improving program integrity can help ensure the most 

appropriate use of Medicaid funds. The program’s size and diversity 

make it particularly vulnerable to improper payments, including 

payments made for treatments or services that were not covered by 

the program, that were not medically necessary, or that were billed for 

but never provided. Improper payments are a significant cost to 

Medicaid—totaling an estimated $17.5 billion in fiscal year 2014, 

according to HHS. An effective federal-state partnership is key to 

ensuring the most appropriate use of funds by (1) identifying and 

preventing improper payments in both fee-for-service and managed 

care, (2) setting appropriate payment rates for managed care 

organizations, and (3) ensuring only eligible individuals and providers 

participate in Medicaid. CMS has taken steps to improve program 

integrity, and we have recommended other steps that would bolster 

those efforts. In May 2014, for example, we recommended CMS take 

steps to improve oversight of growing Medicaid managed care 

expenditures; CMS has taken some steps and we believe even more 

can be done in this area.

• Fourth, Medicaid’s federal-state partnership could be improved 

through a revised federal financing approach that better addresses 

variations in states’ financing needs. The federal government currently 

pays a share of Medicaid expenditures according to a statutory 

formula based on each state’s per capita income relative to the 

national average. Automatically providing increased federal financial 

assistance to states affected by national economic downturns—

through temporary changes to the federal funding formula—could help 

provide timely and targeted assistance that is more responsive to 

states’ economic conditions than past federal assistance when 
Page 6 GAO-15-677 Medicaid Key Issues

Congress acted to temporarily increase support to states by 

increasing the share of Medicaid expenditures paid by the federal 

government. We suggested in November 2011 that Congress could 

consider enacting a federal funding formula that provides such 

automatic, targeted and timely assistance. In addition, we have 

described revisions to the current federal funding formula that could 

more equitably allocate Medicaid funds to states by better accounting 

for their ability to fund Medicaid. These improvements could better 

align federal funding with each state’s resources, demand for 

services, and costs; better facilitate state budget planning; and 

provide states with greater fiscal stability during times of economic 

stress. 

Medicaid’s size, complexity, oversight challenges, and ongoing 

transformation highlight the importance of federal monitoring. In 2003, 

GAO designated Medicaid as a high-risk program due to its size, growth, 

diversity of programs, and concerns about gaps in oversight—and more 

than a decade later, those factors remain. In addition, the effects of 

changes brought on by PPACA, as well as the aging of the U.S. 

population, will continue to emerge in the coming years and are likely to 

exacerbate the challenges in federal oversight. Other changes in state 

programs, such as changes to health care delivery and payment 

approaches, will continue to pose challenges to federal oversight. These 

changes have implications for enrollees and for program costs, and 

underscore the importance of ongoing attention to federal oversight 

efforts. We have multiple ongoing studies on Medicaid’s transformation 

and the issues facing the program, and will continue to monitor the 

Medicaid program for the Congress.

HHS reviewed a draft of this report and provided technical comments, 

which we incorporated as appropriate.

Medicaid finances the delivery of health care services for a diverse lowincome and medically needy population. The Social Security Act, which 

Congress amended in 1965 to establish the Medicaid program, provides 

the statutory framework for the program, setting broad parameters for 

states that choose to participate and implement their own Medicaid 

programs. CMS is responsible for overseeing state Medicaid programs to 

ensure compliance with federal requirements.

Background
Page 7 GAO-15-677 Medicaid Key Issues

Historically, Medicaid eligibility has been limited to certain categories of 

low-income individuals—such as children, parents, pregnant women, 

persons with disabilities, and individuals age 65 and older.5 In addition to 

these historical eligibility standards, PPACA permitted states to expand 

their Medicaid programs by covering non-elderly, non-pregnant adults 

with incomes at or below 133 percent of the federal poverty level (FPL).6

Federal law requires state Medicaid programs to cover a wide array of 

mandatory services, and permits states to cover additional services at 

their option.

As of May 2015, 29 states, including the District of Columbia, had 

expanded their Medicaid programs to cover this new adult group, and one 

other state’s proposed expansion was pending federal approval.

7 Consequently, Medicaid generally covers a wide range of 

health care services that can be categorized into broad types of 

coverage, including hospital care; non-hospital acute care, such as 

physician, dental, laboratory, and preventive services; prescription drugs; 

and LTSS in institutions and in the community.8

 

5

Among these traditional enrollees, persons with disabilities and individuals age 65 and 

over may be enrolled in Medicare as well and are referred to as dual-eligible enrollees.

(See figure 2 for an 

overview of Medicaid expenditures by category.)

6

Pub. L. No. 111-148, 124 Stat. 119 (2010), as amended by the Health Care and 

Education Reconciliation Act of 2010 (HCERA), Pub. L. No. 111-152, 124 Stat. 1029 

(2010). For purposes of this report, references to PPACA include the amendments made 

by HCERA. Beginning in 2014, states may cover under their state plan non-elderly, nonpregnant adults with incomes at or below 133 percent of the FPL. PPACA also permitted 

an early expansion option, whereby states could expand eligibility for this population (or a 

subset of this population) starting April 1, 2010. Additionally, PPACA provides for a 5 

percent disregard when calculating income for determining Medicaid eligibility for this 

population, which effectively increases this income level to 138 percent of the FPL. In this 

report, we refer to this population as “expansion enrollees.”

7

Some optional services—including, for example, personal care services for the frail 

elderly and individuals with disabilities who need LTSS, and adult dental care—are 

commonly covered. However, among states that offer a particular benefit, the breadth of 

coverage (i.e., amount, duration, and scope) of that benefit can vary greatly.

8

Non-institutional LTSS include home health and personal care services, among other 

services.

Medicaid Eligibility, 

Enrollment, Services, and 

Expenditures
Page 8 GAO-15-677 Medicaid Key Issues

Figure 2: Medicaid Expenditures by Category, Fiscal Year 2014

Notes: Data are based on MACPAC analysis of CMS-64 data and include both federal and state 

funds for the 50 states and the District of Columbia, but exclude expenditures for administration. 

Medicaid benefit spending figures include federal and state spending for 2014 as of February 25, 

2015, and were subject to change if states revised their expenditure data. The figures for long-term 

services and supports, drugs, non-hospital acute care, and hospital care only include Medicaid 

expenditures for services that are provided through fee-for-service; additional spending on these 

services may be included in the “Managed care and premium assistance” category. Managed care 

payments can affect the distribution of spending across categories because they are not made for 

specific services. Data do not add to 100 due to rounding.

“Managed care and premium assistance” includes payments for comprehensive and limited-benefit 

managed care plans, primary care case management, employer-sponsored premium assistance, and 

other payments.

“Drugs” includes spending on drugs net of rebates received from drug manufacturers.

“Long-term services and supports – home and community-based” includes home health, personal 

care, and other services.

“Long-term services and supports – institutional” includes the services of nursing facilities, 

intermediate care facilities for persons with intellectual disabilities, and mental health facilities.

“Non-hospital acute care” includes services of physicians, dentists, and other practitioners; labs and 

X-rays; hospice; physical, occupational, speech, hearing, or language therapy; rehabilitative services; 

diagnostic screening and preventive services; and other services.

“Hospital care” includes inpatient and outpatient hospital services; disproportionate share hospital 

payments; emergency services; and payments to critical access hospitals.
Page 9 GAO-15-677 Medicaid Key Issues

In recent years, we and others have examined patterns of service 

utilization and expenditures within the Medicaid population and found that 

enrollment and expenditures vary among the different categories of 

enrollees. For example, for fiscal year 2011, children constituted the 

largest category of enrollees (47.4 percent), but accounted for a small 

share of Medicaid expenditures (19 percent). In that same year, enrollees 

with disabilities (14.7 percent of Medicaid enrollees) accounted for the 

largest share of Medicaid expenditures (42.7 percent). (See fig. 3.) In 

addition, we found that, generally, a small subset of Medicaid enrollees—

such as those with institutional care needs or chronic conditions—account 

for a large portion of Medicaid expenditures.9

 

9

We examined expenditures among Medicaid-only enrollees. See GAO, Medicaid: A 

Small Share of Enrollees Consistently Accounted for a Large Share of Expenditures, 

GAO-15-460 (Washington, D.C.: May 8, 2015); and Medicaid: Demographics and Service 

Usage of Certain High Expenditure Beneficiaries, GAO-14-176 (Washington D.C.: 

Feb. 19, 2014).
Page 10 GAO-15-677 Medicaid Key Issues

Figure 3: Medicaid Enrollment and Expenditures, by Eligibility Group, Fiscal Year 

2011

Note: Enrollees include individuals in 50 states and the District of Columbia ever enrolled in Medicaid 

during fiscal year 2011. Expenditures include both federal and state funds for 48 states and the 

District of Columbia, but exclude spending for administration and Disproportionate Share Hospital 

payments. Due to anomalies in the expenditure data, MACPAC excluded Maine and Tennessee from 

the expenditure data.

States have traditionally provided Medicaid benefits using a fee-forservice system, where health care providers are paid for each service 

delivered. However, according to CMS, in the past 15 years, states have 

increasingly implemented managed care systems for delivering Medicaid 

services. In a managed care delivery system, enrollees obtain some 

portion of their Medicaid services from a managed care organization 

(MCO) under contract with the state, and capitation payments to MCOs 

Health Care Delivery 

Models
Page 11 GAO-15-677 Medicaid Key Issues

are typically made on a predetermined, per person per month basis. 

Nationally, about 37 percent of Medicaid spending in fiscal year 2014 was 

attributable to Medicaid managed care. Many states are expanding their 

use of managed care to additional geographic areas and Medicaid 

populations. States oversee Medicaid MCOs through contracts and 

reporting requirements.

CMS provides oversight and technical assistance for the Medicaid 

program, but states are primarily responsible for administering their 

respective Medicaid programs’ day-to-day operations—including 

determining eligibility, enrolling individuals and providers, and 

adjudicating claims—within broad federal requirements. Each state has a 

Medicaid state plan that describes how the state will administer its 

Medicaid program consistent with federal requirements. States submit 

these state plans for approval to CMS, but have significant flexibility to 

structure their programs to best suit their needs. In addition, within certain 

parameters, states may innovate outside of many of Medicaid’s otherwise 

applicable requirements through Medicaid demonstrations, with HHS 

approval.10

CMS makes quarterly grant awards to states to cover the federal share of 

Medicaid expenditures based on each state’s estimated expenditures. 

States draw down these funds on a real time basis to make program 

payments. Subsequently, states submit their actual quarterly 

expenditures, and CMS reviews these and reconciles them with the 

estimated expenditures.

For example, states may test ways to obtain savings or 

efficiencies in how services are delivered in order to cover otherwise 

ineligible services or populations.

11

 

10States must submit an application describing the proposed demonstration, and in some 

cases, the potential budgetary effect, for HHS approval.

(See figure 4 for a diagram of the federal-state 

Medicaid partnership framework.)

11States submit their estimated expenditures on Form CMS-37 at least 45 days before the 

beginning of each fiscal quarter. States are to submit their actual expenditures on Form 

CMS-64 30 days after the end of each fiscal quarter.

The Federal-State 

Partnership
Page 12 GAO-15-677 Medicaid Key Issues

Figure 4: Federal-State Medicaid Partnership Framework

Note: If a state wishes to make amendments to its state Medicaid plan, it must seek approval from the 

Centers for Medicare & Medicaid Services (CMS). Similarly, a state that desires to change its 

Medicaid program in ways that deviate from certain federal requirements may seek to do so through a 

Medicaid demonstration, outside of its state Medicaid plan. States must submit an application 

describing the proposed demonstration to the Department of Health and Human Services (HHS) for 

review. HHS will specify the special terms and conditions that encompass the requirements for an 

approved demonstration.

The federal government matches state Medicaid expenditures based on a 

statutory formula—the Federal Medical Assistance Percentage (FMAP). 

Under the FMAP, the federal government pays a share of Medicaid 

expenditures based on each state’s per capita income (PCI) relative to 

the national average. The formula is designed such that the federal 

government pays a larger portion of Medicaid costs in states with lower 

Financing the Medicaid 

Program
Page 13 GAO-15-677 Medicaid Key Issues

per capita incomes relative to the national average. A state’s regular 

FMAP is calculated using the following formula:

State FMAP = 1.00 – 0.45 (State PCI / U.S. PCI)2

Federal law specifies that the regular FMAP will be no lower than 

50 percent and no higher than 83 percent. For fiscal year 2015, regular 

FMAP rates ranged from 50.00 percent to 73.58 percent.

Under PPACA, state Medicaid expenditures for certain Medicaid 

enrollees, newly eligible under the statute, are subject to a higher federal 

match. States that choose to expand their Medicaid programs receive an 

FMAP of 100 percent beginning in 2014 for expenditures for the PPACAexpansion enrollees—those who were not previously eligible for Medicaid 

and are eligible now under PPACA’s expansion of eligibility criteria. The 

FMAP is to gradually diminish to 90 percent by 2020. States also receive 

an FMAP above the state’s regular match (but below the PPACAexpansion FMAP) for their Medicaid expenditures for the state-expansion 

enrollees—those who would not have been eligible for Medicaid prior to 

PPACA except that they were covered under a state’s pre-PPACA 

“expansion” of eligibility through, for example, a Medicaid 

demonstration.12

See figure 5 for the variation across states in the regular FMAP; Medicaid 

spending, enrollment, and managed care enrollment; and whether the 

state had expanded Medicaid coverage to newly eligible adults under 

PPACA as of May 2015. See appendix II for the information in tabular 

form.

This FMAP is to gradually increase and eventually equal 

the FMAP for the PPACA-expansion enrollees beginning in 2019. The 

formula used to calculate the state-expansion FMAP rates is based on a 

state’s regular FMAP rate so the enhanced FMAP rate will vary from state 

to state until 2019.

 

12This state-expansion FMAP falls between a state’s regular FMAP and the PPACAexpansion FMAP.
Figure 5: Regular Federal Medical Assistance Percentage (FMAP); Medicaid Enrollment, Spending, and Managed Care; and 

Medicaid Expansion under the Patient Protection and Affordable Care Act (PPACA), by State

Interactivity instructions: Roll over on each state to see Medicaid data. See appendix II for the non-interactive, printer-friendly version. 

FL

LA

MS GA AL

SC AR

TX

NC TN

NM

AZ OK

KY

VA

MD

DC

DE

KS MO

CO WV

IN OH NV

UT

CA

RI

CT

PA

IL

MA

NE IA

WY

NY

VT

NH

MI

SD

OR

WI

ND ME

ID

MT

WA

MN

Yes

No

Pending federal approvalg

Whether the state expanded Medicaid 

to newly eligible adults under PPACA 

(as of May 2015)

Sources: GAO based on information from the Medicaid and CHIP Payment and Access Commission (MACPAC) (enrollment and spending data); Office of the Assistant Secretary for Planning and 

Evaluation, Department of Health and Human Services (regular FMAPs); and The Henry J. Kaiser Family Foundation (Medicaid expansion status) (data); Map Resources (map). | GAO-15-677

Hawaii

AK

NJ

Page 14 GAO-15-677 Key Issues Facing Medicaid

a

Medicaid enrollment figures reflect full-year equivalent enrollment, which is the sum of monthly enrollment totals, divided by 12.

b

Medicaid benefit spending figures include federal and state spending for 2014 as of Feb. 25, 2015, and were subject to change if states revised their expenditure data.

c

The federal government matches state Medicaid expenditures based on a statutory formula—the FMAP. The regular FMAP differs from the FMAP that may apply to certain individuals, such as those 

newly eligible for Medicaid under PPACA.

d

Comprehensive risk-based managed care plans do not include limited-benefit plans or primary care case management programs.

e

State had a change in total enrollment of 10 percent or more over the prior year, which may reflect data anomalies and may be updated in the future.

f

MACPAC did not report managed care information for Maine, Tennessee, or Vermont due to data anomalies.

g

State enacted legislation expanding Medicaid; federal approval of the expansion is required before it can be implemented.
Page 15 GAO-15-677 Medicaid Key Issues

Medicaid enrollees report access to medical care that is generally 

comparable to that of privately insured individuals. However, some 

enrollees may face access challenges, such as in obtaining specialty care 

or dental care. CMS has taken steps to help ensure enrollees’ access to 

care and additional steps could bolster those efforts. CMS also has 

ongoing efforts to collect data from states to help assess Medicaid 

enrollees’ access to care, but better data are needed.

We have found that Medicaid enrollees report experiencing access to 

medical care that is generally comparable to that of privately insured 

individuals. For example, according to national survey data, few enrollees 

covered by Medicaid for a full year—less than 4 percent—reported 

difficulty obtaining necessary medical care or prescription medicine in 

2008 and 2009, similar to privately insured individuals.13 (See fig. 6.) 

Regarding children, respondents with children covered by Medicaid 

reported positive responses to most questions about their ability to obtain 

care, and at levels generally comparable to those with private insurance, 

from 2007 through 2010.14

 

13See GAO, Medicaid: States Made Multiple Program Changes, and Beneficiaries 

Generally Reported Access Comparable to Private Insurance, GAO-13-55 (Washington, 

D.C.: Nov. 15, 2012).

14See GAO, Children’s Health Insurance: Information on Coverage of Services, Costs to 

Consumers, and Access to Care in CHIP and Other Sources of Insurance, GAO-14-40

(Washington, D.C.: Nov. 21, 2013).

Key Issues Facing 

the Medicaid Program

Maintaining and Improving 

Access to Quality Care

• Medicaid enrollees report access to care 

that is generally comparable to the 

privately insured, but some face particular 

access challenges.

• Better data needed to help assess and 

improve Medicaid enrollees’ access to 

care.

Source: GAO. | GAO-15-677

Medicaid Enrollees Report 

Access to Care that is 

Generally Comparable to the 

Privately Insured, but Some 

Face Particular Access 

Challenges
Page 16 GAO-15-677 Medicaid Key Issues

Figure 6: Percentage of Medicaid-Covered Individuals Who Reported Difficulties 

Obtaining Necessary Care or Services, by Full-Year Insurance Status, Calendar 

Years 2008-2009

Note: This figure includes only those individuals who reported coverage or lack of coverage for the 

entire year (2008 or 2009, or both). These Medicaid data include children enrolled in the State 

Children’s Health Insurance Program.

Although few Medicaid enrollees report difficulty obtaining necessary care 

in general, our work indicates that particular populations can face 

particular challenges obtaining care. For example, about 7.8 percent of 

working-age adults with full-year Medicaid reported difficulty obtaining 

care compared with 3.3 percent of similar adults with private insurance—

a statistically significant difference. Some enrollees face particular 

challenges, such as accessing services. For example, Medicaid enrollees 

were more likely than individuals with private insurance to report factors 

such as lack of transportation and long wait times as reasons for delaying 

medical care.15

 

15See 

(See fig. 7.) We have also found that Medicaid-covered 

GAO-13-55. 
Page 17 GAO-15-677 Medicaid Key Issues

adults may be more likely to have certain health conditions that can be 

identified and managed through preventive services, such as obesity and 

diabetes, than individuals with private insurance. However, states’ 

Medicaid coverage of certain preventive services for adults has varied, 

which has resulted in different levels of coverage across states.16

Figure 7: Percentage of Individuals Who Cited Specific Reasons for Delaying Medical Care in Calendar Year 2009, by 

Insurance Status

Note: This figure reflects individuals who reported their insurance status at the time the survey was 

administered. There was not a statistically significant difference between individuals with Medicaid 

and private insurance citing cost as a reason for delayed medical care, or reporting that a provider 

was not open when he or she could get there.

 

16Federal law historically has not required states to cover preventive services for adults in 

Medicaid and coverage of these services and access to them has varied across the 

states. PPACA required states to cover certain recommended preventive services for 

newly eligible adults in states that expand coverage under the law; preventive services for 

adults in Medicaid continue to be an optional benefit otherwise, but PPACA provides 

incentives for states to cover them. See GAO, Medicaid Preventive Services: Concerted 

Efforts Needed to Ensure Beneficiaries Receive Services, GAO-09-578 (Washington, 

D.C.: Aug. 14, 2009); and High-Risk Series: An Update, GAO-15-290 (Washington, D.C: 

Feb. 11, 2015).
Page 18 GAO-15-677 Medicaid Key Issues

Specialty care, such as mental health care and dental care, may be 

particularly difficult for some Medicaid enrollees to obtain.

Access to Specialty Care, Including Mental Health Care

National surveys of enrollees and our own surveys of state Medicaid 

officials and physicians have consistently indicated that Medicaid 

enrollees may have difficulty obtaining specialty care, such as mental 

health care. In our survey of state Medicaid officials in 2012,17 for 

example, officials in about half of the states reported challenges ensuring 

enough participating specialty providers for Medicaid enrollees, such as in 

obstetrics and gynecology, surgical specialties, and pediatric services. In 

addition, we found that about 21 percent of respondents with Medicaidcovered children reported that it was only sometimes or never easy to see 

a specialist, compared to about 13 percent of respondents with privately 

insured children, from 2008 through 2010.18 Our 2010 national survey of 

physicians found that specialty physicians were generally more willing to 

accept privately insured children as new patients than Medicaid-covered 

children; similarly, more physicians reported having difficulty referring 

Medicaid-covered children to specialty providers than reported having 

difficulty referring privately insured children.19

 

17We surveyed officials in 2012 and asked about their experiences from 2008 through 

2011. See 

(See fig. 8.)

GAO-13-55. 

18See GAO-14-40. For other findings about children’s health care, see GAO, Medicaid 

and CHIP: Reports for Monitoring Children’s Health Care Services Need Improvement, 

GAO-11-293R (Washington, D.C.: April 5, 2011).

19Our survey asked physicians about both children covered by Medicaid and the State 

Children’s Health Insurance Program (CHIP), a joint federal-state program that provides 

health coverage to certain low-income children. In reporting our results, we did not report 

separate information for Medicaid- and CHIP-covered children. For the purposes of this 

report, we refer to those survey findings as applying to Medicaid-covered children, who 

account for the majority of all children who are covered by either program. See GAO, 

Medicaid and CHIP: Most Physicians Serve Covered Children but Have Difficulty 

Referring Them for Specialty Care, GAO-11-624 (Washington, D.C.: June 30, 2011).
Page 19 GAO-15-677 Medicaid Key Issues

Figure 8: Specialty Physicians’ Acceptance of Children as New Patients, and Physicians’ Level of Difficulty Referring Children 

for Specialty Care (among Physicians Participating in Medicaid), 2010

Notes: Participating physicians are those enrolled as Medicaid and State Children’s Health Insurance 

Program (CHIP) providers. Our survey asked physicians about both Medicaid- and CHIP-covered 

children, and in reporting our results we did not report separate information for these two populations. 

For the purposes of this report, we refer to these survey findings as applying to Medicaid-covered 

children, who account for the majority of all children who are covered by either program. Numbers 

may not sum to 100 percent because of rounding.

We have also found that both Medicaid-covered adults and children may 

face challenges obtaining mental health care. Research has shown that 

Medicaid enrollees experience a higher rate of mental health conditions 

than those with private insurance.20 Officials we interviewed from six 

states that expanded Medicaid under PPACA generally reported that 

Medicaid expansion had increased the availability of mental health 

treatment for newly eligible adults, but cited access concerns for new 

Medicaid enrollees due to shortages of Medicaid-participating 

psychiatrists and psychiatric drug prescribers.21

 

20See Substance Abuse and Mental Health Services Administration, Results from the 

2013 National Survey on Drug Use and Health: Mental Health Findings, NSDUH Series H49, HHS Publication No. (SMA) 14-4887. (Rockville, Md.: November 2014).

In our 2012 national 

survey, state officials reported problems ensuring sufficient psychiatry 

21GAO, Behavioral Health: Options for Low-Income Adults to Receive Treatment in 

Selected States, GAO-15-449 (Washington, D.C.: June 19, 2015).
Page 20 GAO-15-677 Medicaid Key Issues

providers for Medicaid enrollees.22 Among Medicaid-covered children, 

national survey data from 2007 through 2009 indicated that 14 percent of 

noninstitutionalized Medicaid-covered children had a potential need for 

mental health services, but most of these children did not receive mental 

health services.23 In addition, many Medicaid-covered children who took 

psychotropic medications (medications that affect mood, thought, or 

behavior) did not receive other mental health services during the same 

year.24

HHS and CMS have taken steps to improve Medicaid enrollees’ access to 

quality mental health services. CMS has, for example, provided guidance 

to states about resources available to meet the needs of children with 

mental health problems. In addition, HHS has issued guidance and 

provided technical assistance for states regarding oversight of 

psychotropic medication prescribing for children in foster care.25

 

22See 

Because 

HHS’s guidance does not specifically address oversight of foster children 

receiving medications through managed care organizations, we 

recommended in 2014 that HHS issue additional guidance about 

oversight of prescribing medications for those children. HHS agreed with 

GAO-13-55. 

23For example, over 80 percent did not receive any psychosocial therapy and 70 percent 

did not have any mental health office visits. While this was also true for privately-insured 

children, the percentage of such children who had a potential need for mental health 

services was lower than among Medicaid-covered children (9 percent versus 14 percent). 

See GAO, Children’s Mental Health: Concerns Remain about Appropriate Services for

Children in Medicaid and Foster Care, GAO-13-15 (Washington, D.C.: Dec. 10, 2012).

24Nearly two-thirds of Medicaid-covered children who took psychotropic medication did not 

receive psychosocial therapy or counseling, and one-fourth did not have any mental 

health-related office visit, suggesting they did not have a medication-management followup visit, which pediatric provider organizations recommend. While not all children would 

necessarily benefit from both medication and therapy, the American Academy of Child & 

Adolescent Psychiatry has stated that medication alone is rarely adequate treatment for 

children with complex mental health needs. 

25In December 2011, we reported that Medicaid-covered children in foster care in selected 

states were prescribed psychotropic medications at higher rates than nonfoster children in 

Medicaid during 2008. In 2012, HHS’s Administration for Children and Families issued 

guidance to state agencies seeking to improve their monitoring and oversight practices for 

psychotropic medications. See GAO, Foster Children: Additional Federal Guidance Could 

Help States Better Plan for Oversight of Psychotropic Medications Administered by 

Managed-Care Organizations, GAO-14-362 (Washington, D.C.: April 28, 2014); and 

Foster Children: HHS Guidance Could Help States Improve Oversight of Psychotropic 

Prescriptions, GAO-12-201 (Washington, D.C.: Dec. 14, 2011).
Page 21 GAO-15-677 Medicaid Key Issues

our recommendation in comments on our draft report.26

Access to Dental Care

In May 2015, 

CMS indicated that it no longer agreed that additional guidance was 

necessary, stating that its existing guidance applied to managed care 

settings. We continue to believe that our recommendation is valid. We 

found that many states were, or were transitioning to, managed care 

organizations to administer prescription-drug benefits, and that selected 

states had taken only limited steps to plan for the oversight of drug 

prescribing for foster children receiving care through these 

organizations—creating a risk that controls instituted under fee-for-service 

may not remain once states move to managed care. As we reported, 

additional HHS guidance that helps states prepare and implement 

monitoring efforts within the context of a managed-care environment 

could help ensure appropriate oversight of psychotropic medications to 

children in foster care.

In recent years, Medicaid enrollees’ use of dental services increased, but 

some access problems persist. We found that while the percentage of 

individuals with Medicaid dental coverage who had a dental visit 

increased from 28 percent in 1996 to 34 percent in 2010, individuals with 

Medicaid dental coverage were still much less likely than privately insured 

individuals to have visited the dentist. About two-thirds of Medicaidcovered children, for example, did not visit the dentist at all in 2010, while 

most privately insured children did.27 (See fig. 9.) This difference in use of 

dental services persisted despite the fact that Medicaid-covered children 

may have a greater need for dental care than privately insured children. 

We have found that Medicaid-covered children are almost twice as likely 

to have untreated tooth decay as privately insured children.28 In addition, 

states have found it particularly challenging to ensure a sufficient number 

of dental providers for Medicaid enrollees.29

 

26See GAO-14-362. 

27See GAO, Dental Services: Information on Coverage, Payments, and Fee Variation, 

GAO-13-754 (Washington, D.C.: Sept. 6, 2013).

28See GAO, Extent of Dental Disease in Children Has Not Decreased, and Millions Are 

Estimated to Have Untreated Tooth Decay, GAO-08-1121 (Washington, D.C.: Sept. 23, 

2008).

29See GAO-13-55. 
Page 22 GAO-15-677 Medicaid Key Issues

Figure 9: Percentage of Children, Ages 0-20 Years, with Private and Medicaid Dental 

Coverage with a Dental Visit, 1996, 2004, and 2010

Notes: For 2004 and 2010, Medicaid includes children enrolled in the State Children’s Health 

Insurance Program.

CMS has taken some steps to address access to dental care, and other 

steps could build on those efforts. In 2010, for example, the agency 

launched a Children’s Oral Health Initiative that aimed to, among other 

things, increase the proportion of Medicaid and State Children’s Health 

Insurance Program (CHIP) children who receive a preventive dental 

service. In response to our prior recommendations, CMS also took steps 

to ensure that states gather information on the provision of Medicaid 

dental services by managed care programs, and to improve the accuracy 

of the data on HHS’s Insure Kids Now website, which provides statereported information on dentists who serve children enrolled in Medicaid 
Page 23 GAO-15-677 Medicaid Key Issues

and CHIP.30 We recommended that CMS require states to verify that 

dentists listed on the Insure Kids Now website have not been excluded 

from Medicaid by HHS, and periodically verify that excluded providers are 

not included on the lists of dentists posted by the states.31 However, CMS 

has said that it relies on states to provide accurate lists of eligible dentists 

and that data issues prevent the agency from independently verifying that 

excluded providers are not included on the website.32 We continue to 

believe that CMS should require states to ensure that excluded providers 

are not listed on the website, so that it does not present inaccurate 

information about providers available to serve Medicaid-covered children. 

We also recommended that for states that provide Medicaid dental 

services through managed care organizations, CMS ensure that states 

with inadequate managed care dental provider networks take action to 

strengthen these networks.33

CMS has ongoing efforts to collect data from states to help assess 

Medicaid enrollees’ access to care and identify areas for improvement. 

States are required to submit certain types of data to CMS, and they can 

opt to submit other types of data. For example, states are required to 

CMS has reported taking steps to improve 

these networks, including meeting with national dental associations, but 

we believe more can be done to identify inadequate networks and, once 

inadequate networks are identified, to work with states to strengthen them 

to help ensure that they meet the needs of Medicaid enrollees.

 

30See GAO, Oral Health: Efforts Under Way to Improve Children’s Access to Dental 

Services, but Sustained Attention Needed to Address Ongoing Concerns, GAO-11-96

(Washington, D.C.: Nov. 30, 2010); and Medicaid: State and Federal Actions Have Been 

Taken to Improve Children’s Access to Dental Services, but Gaps Remain, GAO-09-723

(Washington, D.C.: Sept. 30, 2009).

31HHS is required to exclude individuals and entities convicted of certain criminal 

offenses, including Medicare or Medicaid fraud. HHS may also exclude individuals and 

entities for certain offenses, including license revocation or default on Health Education 

Assistance Loans. The HHS Office of Inspector General (OIG) administers the HHS 

exclusion program. See GAO-11-96. 

32CMS officials noted in March 2015 that it is not possible for them to reliably determine 

whether providers listed on the HHS OIG’s list of excluded providers match any of the 

dentists submitted by states to the Insure Kids Now website because the website data 

does not include provider identification numbers, only provider names. CMS officials noted 

that, during oral health-related meetings with states, agency officials would ask whether 

states are removing excluded providers when they submit updated information for the 

Insure Kids Now website.

33See GAO-09-723. 

Better Data Needed to Help 

Assess and Improve Medicaid 

Enrollees’ Access to Care
Page 24 GAO-15-677 Medicaid Key Issues

submit reports on the provision of certain services for eligible children, as 

part of the Early and Periodic Screening, Diagnostic, and Treatment 

(EPSDT) benefit.

34 These reports, known as CMS 416 reports, include 

such information as the number of children receiving well-child checkups 

and the number of children referred for treatment services for conditions 

identified during well-child checkups. CMS has used these reports to 

identify states with low reported rates of service provision, to help identify 

state Medicaid programs needing improvements.35 In addition, states 

voluntarily report Child Core Set measures, which assess the quality of 

care provided through Medicaid and CHIP, and include, for example, 

measures of access to primary care and the receipt of follow-up care for 

children prescribed attention deficit hyperactivity disorder medication. 

Also, states that use managed care plans to deliver services for Medicaid 

and CHIP enrollees are required to annually review these plans to 

evaluate the quality, timeliness, and access to services that the plans 

provide—and submit their “external quality review” reports to CMS.

36

In 2011, we reported on problems and gaps in the required CMS 416 

reports. We found that states sometimes made reporting errors, and in 

some cases those errors overstated the extent to which children received 

well-child checkups.37

 

34Under federal law, the EPSDT benefit generally entitles children in Medicaid to receive 

coverage of periodic screening services—often termed well-child checkups—that include 

a comprehensive health and developmental history, a comprehensive physical exam, 

appropriate immunizations, laboratory tests, and health education.

In addition, states did not always report required 

data on how many Medicaid-covered children were referred for additional 

services to address conditions identified through check-ups. Finally, we 

found that CMS did not require states to report information on whether 

Medicaid-covered children actually received services for which they were 

35For example, CMS uses these reports to monitor states’ progress in meeting the 

agency’s annual goal that states provide a well-child check-up to at least 80 percent of the 

children eligible to receive one. We have previously found that a significant number of 

children in Medicaid may not be receiving basic preventive care. For example, we found in 

2009 that, on the basis of parents’ reports in national surveys conducted by HHS from 

2003 through 2006, about 40 percent of children in Medicaid and CHIP had not had a 

well-child checkup over a 2-year period. See GAO-09-578.

36See GAO, Children’s Health Insurance Program: Effects on Coverage and Access, and 

Considerations for Extending Funding, GAO-15-348 (Washington, D.C.: Feb. 27, 2015).

37Few states met CMS’s goal of providing a well-child checkup to at least 80 percent of 

children eligible to receive one. See GAO-11-293R. 
Page 25 GAO-15-677 Medicaid Key Issues

referred—or to report information separately for children in managed care 

versus those in fee-for-service systems.

CMS has since taken steps to improve the CMS 416 data, and we believe 

more can be done, as discussed below.

• In response to our recommendation that CMS establish a plan to 

review the accuracy and completeness of the CMS 416 data and 

ensure that problems are corrected, CMS has established an 

automated quality assurance process to identify obvious reporting 

errors and as of March 2015 was developing training for state staff 

responsible for the data.

• We also recommended that CMS work with states to explore options 

for capturing information on children’s receipt of services for which 

they were referred. The agency has issued guidance to states about 

how to report referrals for health care services, but has not required 

states to report whether children receive services for which they are 

referred. CMS officials noted that data collection tools other than the 

CMS 416 reports, such as the Child Core Set measures, provide CMS 

with information on whether children are receiving needed care—and 

that HHS was developing additional measures to help fill gaps in 

assessing children’s care. While these are positive steps, we have 

noted that CMS’s ability to monitor children’s access to services is 

dependent on consistent, reliable, complete, and sufficiently detailed 

data from each state.38 The Child Core Set measures, for example, 

are voluntarily reported by states, and we have reported that although 

the number of states reporting measures has increased in recent 

years, that states have varied considerably in the number of 

measures they reported.39

• We also recommended that CMS work with states to explore options 

for reporting on the receipt of services separately for children in 

managed care and fee-for-service delivery models. However, CMS 

officials indicated that they do not plan to require states to report such 

information, in part, to limit the reporting burden for states. CMS 

officials added that the states report information on children’s access 

We continue to believe that information on 

whether children receive services for which they are referred is 

important for monitoring and ensuring their access to care.

 

38See GAO-11-293R. 

39See GAO-15-348. 
Page 26 GAO-15-677 Medicaid Key Issues

to care through their managed care external quality review reports. 

While this is a positive step, these reports do not represent a 

consistent set of measures used by all states that CMS can use for 

oversight purposes. We continue to believe that having accurate and 

complete information on children’s access to health services, by 

delivery model, is an important element of monitoring and ensuring 

access to care and that CMS should fully implement this 

recommendation.

Our 2015 report on managed care services used by Medicaid enrollees in

19 states highlighted the importance of having reliable data to help 

understand patterns of managed care utilization and the impact that 

managed care delivery models may have on enrollees’ access to care.40

We found that the number of managed care services used by adult and 

child enrollees varied by state, population, type of service, and whether 

enrollees were enrolled in comprehensive managed care plans for all or 

part of the year. For example, the number of services per enrollee per 

year for adults ranged from about 13 to 55 services per enrollee per year, 

across the 19 states.41

GAO-15-481

(See fig. 10.) With regard to children, in almost 

every selected state, the total service utilization was higher for children 

who were enrolled in comprehensive managed care for less than the full 

year, when compared with those enrolled for a full year. This type of 

information can be useful for understanding access to care among 

enrollees in Medicaid managed care plans. A detailed, interactive display 

of the data used to support our findings is available at 

http://www.gao.gov/products/ . 

 

40Although states have submitted data on managed care utilization—also known as 

encounter data—to CMS since 1999, these encounter data have historically been 

relatively incomplete and unreliable. Recent evidence suggests that the quality of 

Medicaid encounter data may be improving. See GAO, Medicaid: Service Utilization 

Patterns for Beneficiaries in Managed Care, GAO-15-481 (Washington, D.C.: May 29, 

2015).

41See http://www.gao.gov/products/GAO-15-481 for the percentage of adult enrollees in 

each state who used at least one professional service and for the number of services they 

used.
Page 27 GAO-15-677 Medicaid Key Issues

Figure 10: Adult Professional Service Utilization in Selected States, 2010

Note: Enrollees included in our analysis were eligible to receive full Medicaid benefits and were 

enrolled in a comprehensive managed care plan in at least one month during calendar year 2010. We 

excluded enrollees who were enrolled in a comprehensive managed care plan if during the calendar 

year of our analysis they had other sources of health coverage in addition to Medicaid. We focused 

our analysis on professional services and excluded dental and behavioral health services and any 

services paid on a fee-for-service basis.
Page 28 GAO-15-677 Medicaid Key Issues

Given Medicaid’s size, complexity, and diversity, transparency in how 

funds are used is critical to ensuring fiscal accountability. However, a lack 

of reliable CMS data about program payments and state financing of the 

non-federal share of Medicaid hinders oversight, and our work has 

pointed to the need for better data, as well as improved policy and 

oversight, to ensure that funds are being used appropriately and 

efficiently. In addition, gaps in HHS’s criteria, process, and policy for 

approving states’ demonstration spending raise questions about billions 

of dollars in federal spending. While HHS and CMS have taken important 

steps in recent years to improve transparency, oversight, and fiscal 

accountability, more can be done to build on those efforts.

Data limitations hinder the transparency of program payments and state 

financing sources, and hinder federal oversight.

Federal Data on Program Payments

CMS does not have the complete and reliable data needed to understand 

the payments states make to individual providers, nor does it have a 

transparent policy and standard process for assessing whether those 

payments are appropriate. States have considerable flexibility in setting 

payment rates that providers, such as hospitals, receive for services 

rendered to individual Medicaid enrollees. In addition to these regular 

claims-based payments, states may make (and obtain federal matching 

funds for) payments to certain providers that are not specifically linked to 

services Medicaid enrollees receive. These payments can help offset any 

remaining costs of care for Medicaid patients,42

 

42States’ regular Medicaid payments are not required to fully cover the costs of providing 

Medicaid services.

and in some cases can 

be used to offset costs incurred treating uninsured patients. These types 

of payments are known as supplemental payments, which include 

disproportionate share hospital (DSH) payments and other payments, 

such as those known as Medicaid upper payment limit (UPL) 

Ensuring Fiscal 

Accountability through

Increased Transparency 

and Improved Oversight

• Data limitations hinder oversight.

• Improving HHS’s review and approval 

process for demonstration spending may

prevent unnecessary federal spending.

Source: GAO. | GAO-15-677

Data Limitations Hinder 

Oversight
Page 29 GAO-15-677 Medicaid Key Issues

supplemental payments.43 States have some flexibility in how they 

distribute supplemental payments to individual providers. However, 

Medicaid payments to providers should not be excessive, as the law 

states that they must be “economical and efficient.”44

We have had longstanding concerns about federal oversight of 

supplemental payments, which our work has found to be a significant and 

growing component of Medicaid spending, totaling at least $43 billion in 

fiscal year 2011.45 CMS oversight of provider supplemental payments is 

limited because the agency does not require states to report providerspecific data on these payments, nor does it have a policy and standard 

process for determining whether Medicaid payments to individual 

providers are economical and efficient. States may have incentives to 

make excessive Medicaid payments to certain institutional providers, 

such as local government hospitals needing or receiving financial support 

from the state. Absent a process to review these payments—and absent 

data on total payments individual providers receive—the agency may not 

identify potentially excessive payments to providers, and the federal 

government could be paying states hundreds of millions—or billions—of 

dollars more than what is appropriate, as shown in the examples below.46

 

43States are required by federal law to make DSH payments to certain hospitals. These 

payments are designed to help offset these hospitals’ uncompensated care costs for 

serving large numbers of Medicaid and uninsured individuals. Under Medicaid rules, 

states can obtain federal matching funds for payments made under the UPL, which is 

based on the amount Medicare would pay for comparable services as applied to all 

providers within specified ownership classes. Medicaid UPL supplemental payments, 

which are above the regular Medicaid payments but within the UPL, are not limited to an 

individual provider’s cost of providing Medicaid services. States may also make 

supplemental payments to hospitals, nursing facilities, and other providers under Medicaid 

demonstrations.

44Under federal law, to receive federal matching funds, payments generally (1) must be 

made for covered Medicaid items and services; (2) must be consistent with economy, 

efficiency, and quality of care; and (3) must not exceed the Medicaid UPL.

45In recent years, states have reported increasing amounts of Medicaid UPL supplemental 

payments, which first exceeded DSH payments in fiscal year 2011, when Medicaid UPL 

supplemental payments totaled nearly $26 billion compared to over $17 billion for DSH 

payments. See GAO, Medicaid: States Reported Billions More in Supplemental Payments 

in Recent Years, GAO-12-694 (Washington, D.C.: July 20, 2012); and Medicaid: More 

Transparency of and Accountability for Supplemental Payments Are Needed, GAO-13-48

(Washington, D.C.: Nov. 26, 2012).

46See GAO, Medicaid: CMS Oversight of Provider Payments Is Hampered by Limited 

Data and Unclear Policy, GAO-15-322 (Washington, D.C.: April 10, 2015).
Page 30 GAO-15-677 Medicaid Key Issues

States are not required to limit Medicaid payments to a provider’s costs of 

delivering Medicaid services, but Medicaid payments that greatly exceed 

a provider’s Medicaid costs—and in some cases the providers’ total 

operating costs—raise questions about whether those payments are 

economical and efficient, and are actually used for Medicaid purposes.

• Based on our analysis of the limited hospital-specific information that 

was available, we reported in 2012 that 39 states had made certain 

types of Medicaid supplemental payments to 505 hospitals that, along 

with their regular Medicaid payments, exceeded those hospitals’ total 

costs of providing Medicaid-funded care by $2.7 billion.47

• Our recent analysis of CMS and state data we were able to obtain and 

analyze on provider payments to individual hospitals in two states 

found that average daily payment amounts—which reflect both regular 

payments and supplemental payments—varied widely among both 

government and private hospitals.48 We again identified hospitals for 

which Medicaid payments received exceeded their Medicaid costs, 

and also found a few cases where states made payments to local 

government hospitals that exceeded the hospitals’ total operating 

costs.49

 

47Of the 505 hospitals, 310 received a supplemental payment that, when added to the 

regular Medicaid payments the hospital received, resulted in total Medicaid payments 

exceeding Medicaid costs by about $1.9 billion. The remaining 195 hospitals received 

regular Medicaid payments that exceeded Medicaid costs before they received a 

supplemental payment, and total payments exceeded costs by about $900 million. See 

(See figure 11 for Medicaid payments compared with 

Medicaid costs in selected hospitals in one state.)

GAO-13-48. 

48Average daily payments to government hospitals were comparable to those made to 

private hospitals in one state, and somewhat higher for government providers in a second 

state, but these averages masked wide variation in the daily payment amounts that the 

two states were paying individual providers. See GAO-15-322. 

49See GAO-15-322. 
Page 31 GAO-15-677 Medicaid Key Issues

Figure 11: Medicaid Payments Compared with Medicaid Costs for Inpatient Hospital Services in One State, for Selected 

Hospitals with the Highest Daily Payments, State Fiscal Year 2011

Notes: These hospitals were selected based on having the highest daily payments for regular 

payments that were adjusted to account for differences in the conditions of the patients treated at the 

hospitals, commonly referred to as “case-mix” adjustment, and upper payment limit (UPL) 

supplemental payments in each provider ownership group—local government, state government, and 

private. We selected a total of nine hospitals—three local government hospitals, three state 

government hospitals, and three private hospitals. In determining total Medicaid payments for 

inpatient services to compare to costs, we included nonadjusted regular payments and UPL 

supplemental payments. That is, we used the actual regular payments and did not adjust for the 

severity of the patients’ illnesses.
Page 32 GAO-15-677 Medicaid Key Issues

The lack of reliable provider-specific payment information is part of a 

broader challenge in assessing trends and patterns in program spending. 

Robust information on program spending, such as on aggregate spending 

trends and per-enrollee spending growth, is needed to ensure fiscal 

accountability, facilitate efforts to manage costs, and inform federal 

decision-making. CMS’s two primary data sets that capture and report 

Medicaid expenditures—the CMS-64, which aggregates states’ 

expenditures, and the Medicaid Statistical Information System (MSIS), 

which is designed to report individual beneficiary claims data—have the 

potential to offer a robust view of Medicaid spending.50 However, their 

usefulness is limited because of issues with the completeness, accuracy, 

timeliness, and consistency of their data.51

CMS has taken a number of steps to improve the transparency and 

oversight of program payments and the data available to assess trends in 

program spending, as shown in the following examples.

The MSIS data set, for 

example, does not contain complete information on supplemental 

payments. In addition, states have not consistently submitted timely MSIS 

information. Although CMS requires states to report data in MSIS within 

45 days after a quarter has ended, states have often been late reporting 

MSIS data, and in some cases have delayed reporting for as long as 

3 years. Also, total Medicaid expenditures—nationally and by state—often 

differ widely between the MSIS and CMS-64 data sets, even after 

accounting for differences between the data sets and the types of 

information provided.

 

50For the CMS-64 data set, states are required to submit their aggregate total quarterly 

Medicaid expenditures via a form CMS-64, which CMS uses to determine the amount of 

federal matching funds to provide to states for these expenditures. CMS reviews the 

states’ submissions, and the data are the most-reliable accounting of total Medicaid 

expenditures. However, CMS-64 data exclude enrollee-specific data and thus are of 

limited use for examining program spending. MSIS was established as a national eligibility 

and claims data set, and can provide CMS a summary of expenditures linked to specific 

enrollees on the basis of their medical claims for care. For MSIS, states are required to 

submit to CMS quarterly electronic files that contain (1) information on people covered by 

Medicaid, and (2) adjudicated claims for medical services reimbursed by Medicaid. CMS 

reviews these data for reliability, and uses these data for policy analysis, program 

utilization, and forecasting expenditures. However, these data exclude other aspects of 

the Medicaid program that are not tied to specific enrollees.

51See GAO, Medicaid: Data Sets Provide Inconsistent Picture of Expenditures, 

GAO-13-47 (Washington, D.C.: Oct. 29, 2012). 
Page 33 GAO-15-677 Medicaid Key Issues

• In 2008, CMS issued a final rule to implement additional reporting and 

audit requirements regarding DSH supplemental payments, which 

identified areas where states’ payments were not consistent with 

federal requirements.52

• The agency is developing an enhanced Medicaid claims data 

system—called the Transformed Medicaid Statistical Information 

System (T-MSIS)—which agency officials expect will address many 

identified data issues and better facilitate oversight. CMS will require 

states to report information not currently collected in MSIS on certain 

Medicaid payments, such as provider-specific supplemental 

payments. States will also be required to report data more 

frequently.53 It is uncertain when all states will be capable of reporting 

information via T-MSIS. As of December 2014, 18 states were in the 

final phases of testing, but it was uncertain when they would be ready 

for full implementation.54

• In 2014, CMS contracted for a study to, among other things, analyze 

documentation on supplemental payments to help identify 

opportunities to improve agency oversight.55

Additional steps are needed to improve the transparency and oversight of 

program payments. In 2012, CMS said that expanding reporting and audit 

requirements for Medicaid UPL and other non-DSH supplemental 

payments would require legislation, and we have suggested that 

Congress consider requiring CMS to take similar steps to improve the 

transparency and accountability of these payments, including requiring 

annual reporting and independent auditing of supplemental payments 

states make to individual facilities.

In March 2015, CMS 

officials reported that the results of the analysis were not yet available.

56

 

52These requirements, which were mandated by statute, include a provision requiring 

states to include in their annual DSH reports facility-specific information on the costs of 

serving Medicaid and uninsured patients and payments received from or on behalf of 

these patients.

While CMS’s T-MSIS initiative could 

53See GAO-15-322 and GAO, Medicaid Financing: States’ Increased Reliance on Funds 

from Health Care Providers and Local Governments Warrants Improved CMS Data 

Collection, GAO-14-627 (Washington, D.C.: July 29, 2014).

54See GAO-15-322. 

55See GAO-15-322. 

56See GAO-13-48. 
Page 34 GAO-15-677 Medicaid Key Issues

yield additional information on provider payments, data limitations and 

challenges will continue to limit CMS’s ability to oversee these payments 

unless they are addressed.57 We recommended that CMS improve its 

oversight by taking steps to ensure that states report accurate providerspecific payment data, and by developing a policy and process for 

reviewing payments to individual providers to determine whether they are 

economical and efficient, and HHS concurred with our 

recommendations.58

Data on State Financing Sources

The Medicaid program involves significant and growing expenditures for 

the federal government and the states, and states have used various 

sources of funds to help finance the nonfederal share of the program.59

 

57See 

These sources include funds from hospitals and other providers who 

serve Medicaid enrollees, such as through provider taxes, and funds from 

local governments and the health care entities they operate, such as local 

government hospitals or county nursing homes. States have considerable 

flexibility in determining which sources of funds to use to finance their 

nonfederal share. However, federal law does impose certain limits on the 

financing of overall Medicaid expenditures and sets parameters for 

certain funding sources, such as provider taxes. For example, under 

federal law, states must use state funds to finance at least 40 percent of 

GAO-15-322 and GAO-14-627. 

58See GAO-15-322. In addition, in 2008, we recommended that CMS develop a strategy 

to identify all of the supplemental payment programs established in states’ Medicaid plans 

and to review those programs that had not been subject to review under a related CMS 

initiative. See GAO, Medicaid: CMS Needs More Information on the Billions of Dollars 

Spent on Supplemental Payments, GAO-08-614 (Washington, D.C.: May 30, 2008). In 

2012, CMS stated that it was undertaking a comprehensive review of all approved state 

plan amendments to scrutinize supplemental payment methodologies. CMS reported that, 

as part of this effort, it would identify states that are failing to report supplemental 

payments as required, and would address methodologies that do not comply with the 

Medicaid statute and federal regulation. This analysis would assist CMS in determining 

the need for more guidance or definitions of formulas, data sources, validation, and 

updates related to state UPL calculations and payments. See GAO-13-48. In March 2015, 

CMS officials said the agency was studying the results of this review.

59States finance their share of Medicaid, in large part, through state general funds, and 

are allowed to use other funding sources, such as taxes on health care providers and 

funds transfers from local governments, to finance the remainder.
Page 35 GAO-15-677 Medicaid Key Issues

the nonfederal share of total Medicaid expenditures each year.60 In 

addition, when levying a provider tax, states must not hold providers 

harmless (e.g., must not provide a direct or indirect guarantee that 

providers will receive their money back).61

Trends toward increasing reliance on Medicaid providers and other nonstate sources to fund the nonfederal share of Medicaid payments can 

effectively shift costs to the federal government. In 2014, we found that 

states are increasingly relying on providers and local governments to 

help fund Medicaid. For example, in state fiscal year 2012, funds from 

providers and local governments accounted for 26 percent (or over 

$46 billion) of the approximately $180 billion in the total nonfederal 

share of Medicaid payments that year—an increase from 21 percent 

($31 billion) in state fiscal year 2008.62

 

60The requirement to finance at least 40 percent of the nonfederal share is applied in the 

aggregate and not for specific payments or payment arrangements.

(See fig. 12.)

61See GAO-14-627. 

62The percentage and amount of funds from health care providers and local governments 

that states used to finance the nonfederal share of Medicaid payments varied significantly 

among states in state fiscal year 2012. For example, in the 48 states that reported using 

funds from health care providers and local governments, the percentage of funds from 

providers and local governments ranged from less than 1 percent in South Dakota and 

Virginia to 53 percent in Missouri. See GAO-14-627. 
Page 36 GAO-15-677 Medicaid Key Issues

Figure 12: Amount of the Nonfederal Share of Medicaid Payments from Health Care Providers and Local Governments, State 

Fiscal Years 2008 through 2012

a

For this graphic, we use the term provider tax to refer to health care provider taxes, fees, or 

assessments. The amounts of provider taxes reported include provider donations. Provider 

donations totaled $17 million in 2008, $16 million in 2009, $78 million in 2010, $69 million in 2011, 

and $72 million in 2012.

Our work illustrates how this increased reliance on non-state sources of 

funds can shift costs from states to the federal government, changing the 

nature of the federal-state partnership. For example, we reported in 2014 

that in one state a $220 million payment increase for nursing facilities 

(which was funded by a tax on nursing facilities) resulted in an estimated 

$110 million increase in federal matching funds; no increase in state 
Page 37 GAO-15-677 Medicaid Key Issues

general funds; and a net payment increase to the facilities, after paying 

the taxes, of $105 million.63

Figure 13: Example of How One State’s Use of Non-State Sources to Fund Medicaid 

Payments to Nursing Facilities Shifted Medicaid Costs to the Federal Government 

in State Fiscal Year 2012

(See fig. 13.)

Note: This figure illustrates the estimated effect of a new provider tax and increased Medicaid 

payments on the state and federal share of total regular Medicaid payments to nursing facilities, and 

on net Medicaid payments to nursing facilities in one state in state fiscal year 2012. For the analysis, 

we compared actual payments in that year to what payments would have been without the provider 

tax and increased Medicaid payments to nursing facilities.

a

The state used state general funds to finance most of the nonfederal share of Medicaid, but we 

estimated that the provider tax resulted in the state needing to use $5 million less in state general 

funds to finance its share of Medicaid.

Due to data limitations, CMS is not well-positioned to either identify 

states’ Medicaid financing sources or assess their impact. Apart from data 

on provider taxes, CMS generally does not require (or otherwise collect) 

information from states on the funds they use to finance Medicaid, nor 

ensure that the data that it does collect are accurate and complete. The 

lack of transparency in states’ sources of funds and financing 

arrangements hinders CMS’s and federal policymakers’ efforts to oversee 

Medicaid. Further, it is difficult to determine whether a state’s increased 

 

63See GAO-14-627. 
Page 38 GAO-15-677 Medicaid Key Issues

reliance on funds from providers and local governments primarily serves 

to (1) provide fiscal relief to the state by increasing federal funding, or 

(2) increase payments to providers that in turn help improve beneficiary 

access. 

CMS has recognized the need for better data from states on how they 

finance their share of Medicaid, and taken steps to collect some data, but 

additional steps are needed. We recommended in July 2014 that CMS 

take steps to ensure that states report accurate and complete information 

on all sources of funds used to finance the nonfederal share of Medicaid, 

and offered suggestions for doing so. HHS did not concur with our 

recommendation or suggestions, stating that its current efforts were 

adequate; however, HHS acknowledged that additional data were needed 

to ensure that states comply with federal requirements regarding how 

much local governments may contribute to the nonfederal share, and 

stated that it would examine efforts to improve data collection for 

oversight.64

Another important element of ensuring Medicaid’s fiscal accountability is 

improving HHS’s policy, process, and criteria for approving state 

spending on demonstrations to ensure that (1) demonstrations will 

not significantly increase federal spending for Medicaid, and 

(2) demonstration spending furthers Medicaid objectives. The Secretary 

of HHS has broad authority under section 1115 of the Social Security Act 

to waive certain federal Medicaid requirements and allow costs that would 

not otherwise be eligible for federal matching funds for experimental, pilot, 

Given states’ increased reliance on non-state sources to fund 

the nonfederal share of Medicaid, which can result in costs shifting to the 

federal government, we continue to believe that improved data are 

needed to improve transparency and oversight, such as to understand 

how increased federal costs may affect beneficiaries and the providers 

who serve them.

 

64HHS acknowledged that it does not have adequate data on state financing methods for 

overseeing compliance with a certain federal requirement related to the nonfederal 

share—the 60 percent limit on contributions from local governments to finance the 

nonfederal share—and stated that it will examine efforts to improve data collection toward 

this end. HHS also stated that it is working to identify needs for improvement in current 

payment and financing review processes. However, HHS did not concur with two options 

our recommendation suggested for short- and long-term ways of improving agency data 

collection. Specifically, HHS disagreed with suggestions that facility-specific data are 

needed for oversight, and that T-MSIS may be an appropriate means for collecting 

financing data. HHS believes that its current financing reviews are sufficiently reviewing 

provider-level data. See GAO-14-627. 

Improving HHS’s Review and 

Approval Process for 

Demonstration Spending May 

Prevent Unnecessary Federal 

Spending
Page 39 GAO-15-677 Medicaid Key Issues

or demonstration projects that, in the Secretary’s judgment, are likely to 

assist in promoting Medicaid objectives.65 These demonstrations account 

for a significant and growing proportion of federal Medicaid expenditures, 

accounting for close to one-third of total Medicaid expenditures in fiscal

year 2014.66

Improvements to Transparency and Oversight to Ensure Budget 

Neutrality

Over the years, we have highlighted the need for improvement in HHS’s 

criteria, policy, and process for approving states’ demonstration spending 

limits. HHS policy requires that section 1115 demonstrations be budgetneutral to the federal government—that is, that demonstrations should not 

increase federal spending over what it would have been if the state’s 

existing Medicaid program had continued.67 However, HHS has approved 

demonstration spending limits that we estimate were billions of dollars 

higher than what federal spending would have been if the states’ existing 

Medicaid programs had continued.68

• In 2013, we reported that HHS’s approval documentation for 4 of 10 

demonstrations we reviewed lacked evidence to justify proposed 

We found that HHS has allowed 

states to use questionable methods and assumptions for their spending 

baselines and growth rates without providing adequate documentation to 

support them.

 

6542 U.S.C. § 1315(a).

66Calculation is based on expenditures for medical assistance payments only, which for 

fiscal year 2014 were $146.8 billion for section 1115 demonstrations and $466.5 billion for 

total Medicaid expenditures, as reported in the Medicaid Budget and Expenditure System, 

as of January 2015.

67HHS’s budget neutrality policy requires states to show that their demonstrations will be 

budget neutral as part of their application to HHS. HHS has implemented a budget 

neutrality policy for section 1115 demonstrations since the 1980’s. The most recent 

version of this policy was published in 2001.

68See, for example, GAO, Medicaid Demonstrations: HHS’s Approval Process for 

Arkansas’s Medicaid Expansion Waiver Raises Cost Concerns, GAO-14-689R

(Washington, D.C.: Aug. 8, 2014); Medicaid Demonstration Waivers: Approval Process 

Raises Cost Concerns and Lacks Transparency, GAO-13-384 (Washington, D.C.: 

June 25, 2013); Medicaid Demonstration Waivers: Recent HHS Approvals Continue to 

Raise Cost and Oversight Concerns, GAO-08-87 (Washington, D.C.: Jan. 31, 2008); and 

Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver Projects Raise 

Concerns, GAO-02-817 (Washington, D.C.: July 12, 2002).
Page 40 GAO-15-677 Medicaid Key Issues

spending limits that were based on spending baselines and growth 

rates that greatly deviated from HHS’s benchmarks.69 For example, 

HHS approved a state’s spending limit that included hypothetical 

costs rather than actual expenditures in the spending baseline.70

• Our 2014 review of HHS’s process for approving Arkansas’s Medicaid 

expansion demonstration spending limit found that HHS approved a 

spending limit for the demonstration that was based, in part, on 

hypothetical costs.

If 

HHS had held spending limits in the 4 demonstrations to levels 

suggested by its budget neutrality policy, we estimated that the 

spending limits would have been $32 billion—$21 billion in federal 

funds—lower over the 5-year term of the demonstrations.

71

Arkansas was the first state HHS approved to test whether providing 

premium assistance to purchase private coverage offered on the health 

The hypothetical costs assumed that the state 

would make significantly higher payment amounts to providers if it 

expanded coverage under its traditional Medicaid program—and HHS 

did not request any data to support the state’s assumptions. We 

estimated that the 3-year, nearly $4 billion spending limit that HHS 

approved for the Arkansas demonstration was approximately 

$778 million more than what the spending limit would have been if it 

were based on the state’s actual payment rates for services provided 

to adult enrollees under the traditional Medicaid program. 

 

69According to HHS’s policy, a state’s demonstration spending limit should be based on 

the projected cost of continuing the state’s existing Medicaid program without the 

proposed demonstration, as determined by two factors: (1) the spending baseline for the 

population covered by the demonstration, and (2) a spending growth rate. HHS has 

guidelines and benchmarks for spending baselines and growth rates. For example, 

spending baselines must exclude certain expenditures, and growth rates must be based 

on the lower of: (1) the state’s historical growth for Medicaid in recent years, or (2) the 

President’s budget Medicaid trend rate projected for the nation. Some types of section 

1115 demonstrations, such as those that redirect a state’s DSH funding, are not required 

to follow this process for determining spending limits. For details on HHS’s policy and the 

process for determining budget neutrality, see GAO-13-384. 

70In this state, the spending baseline included hypothetical costs that represented higher 

payments that the state could have paid for inpatient hospital services, rather than the 

actual amount of payments the state made. HHS also allowed one state to include 

projected costs rather than actual expenditures in its spending baseline. In addition, for 4 

of 10 demonstrations we reviewed, HHS approved spending limits that were based on 

assumptions of cost growth that were higher than those reflected by the state’s historical 

spending and the President’s budget. See GAO-13-384. 

71See GAO-14-689R. 
Page 41 GAO-15-677 Medicaid Key Issues

insurance exchange would improve access for newly eligible Medicaid 

enrollees. HHS also authorized Arkansas and 11 other states to seek 

additional federal dollars beyond their approved spending limits should 

their actual costs prove higher than expected. This set another precedent, 

further eroding the integrity of HHS’s process and increasing the risk of 

increased costs to the federal government.72

We have also found that HHS’s policy was inconsistent with its actual 

practices and was not adequately documented. For example, while HHS 

policy requires that states submit 5 years of historical data in developing 

spending limits, the agency’s current processes allowed states to use 

data based on the state’s estimate of spending or enrollment. Officials 

indicated that if estimates are used instead of actual data, the state must 

explain any adjustments. But HHS officials did not have documentation 

for the current process or policy on when estimates are allowed, or the 

type of documentation of adjustments that is required.73

In recent years, both Congress and HHS have taken significant steps to 

improve the demonstration review and approval process by establishing a 

public input process at the federal level before demonstrations are 

approved,74

 

72The 11 states other than Arkansas are Arizona, California, Iowa, Massachusetts, 

Michigan, New Jersey, New Mexico, New York, Oregon, Rhode Island, and Vermont. See 

and we believe more can be done. We have made a number 

of recommendations to HHS to improve the budget neutrality process by 

improving its review criteria and methods, and by documenting and 

making clear the basis for approved spending limits. In 2008, because 

HHS disagreed that our recommended changes were needed—

maintaining that its review and approval process were sufficient—we 

suggested that Congress consider requiring the Secretary of HHS to 

improve the process by, for example, better ensuring that valid methods 

are used to demonstrate budget neutrality, and documenting and making 

GAO-14-689R. 

73See GAO-13-384. 

74PPACA required the Secretary of HHS to issue regulations for section 1115 applications 

and extensions that address certain topics including a state and federal public notice and 

comment process, submission of reports on implementation by states, and periodic 

evaluation by HHS. In response, on February 27, 2012, HHS published final regulations 

establishing these requirements for new section 1115 Medicaid demonstration 

applications and extensions. Pub. L. No. 111-148, § 10201, 124 Stat.119, 922 (2010); 

77 Fed. Reg. 11,678 (Feb. 27, 2012). 
Page 42 GAO-15-677 Medicaid Key Issues

public the basis for such approvals. In 2013, we further recommended 

that HHS update its written budget neutrality policy to reflect the actual 

criteria and processes used to develop and approve demonstration 

spending limits, and ensure the policy is readily available to state 

Medicaid directors and others. HHS acknowledged that it had not always 

communicated its budget neutrality policy broadly or clearly, but stated it 

had applied its policy consistently. HHS disagreed with our 

recommendation and noted that it had taken steps to improve 

transparency, such as by releasing in 2012 a demonstration application 

template that provided guidance on some of the data elements commonly 

used to demonstrate budget neutrality. We reported, however, that the 

application template was optional for states, did not address how HHS 

reviews the applications or the criteria used to set spending limits, and fell 

short of clarifying HHS’s budget neutrality policy. HHS also disagreed with 

our 2013 and 2014 findings that it had approved demonstrations that may 

not be budget neutral, maintaining that its approvals were consistent with 

its policy and based on the best available data. However, given our 

findings and the variation and levels of federal spending in 

demonstrations that we reviewed, we continue to believe that HHS must 

take actions to improve the transparency and accountability of its 

demonstration approvals and should fully implement our 

recommendations.

Improvements to Criteria for and Documentation of How 

Demonstration Spending Furthers Medicaid Objectives

Our 2015 review of HHS’s demonstration approvals found that HHS has 

not issued explicit criteria explaining how it determines that demonstration 

spending furthers Medicaid objectives, and that HHS’s approval 

documents are not always clear as to what, precisely, approved 

expenditures are for and how they will promote these objectives.75

 

75See GAO, Medicaid Demonstrations: Approval Criteria and Documentation Need to 

Show How Spending Furthers Medicaid Objectives, 

Based 

on our review of all 25 states’ approval documents for new, extended, or 

amended section 1115 demonstrations approved by HHS between June 

2012 and October 2013, we found that HHS approved expenditure 

authorities for a broad range of purposes beyond Medicaid coverage, 

some of which appeared only tangentially related to improving health 

coverage for low-income individuals. For example, in five states, HHS 

GAO-15-239 (Washington, D.C.: 

April 13, 2015). 
Page 43 GAO-15-677 Medicaid Key Issues

approved expenditure authorities allowing the states to claim $9.5 billion 

in federal Medicaid funding for costs under about 150 state programs that 

would not otherwise have been eligible for federal Medicaid funding.76

Without clear criteria for assessing how states’ proposed expenditure 

authorities will promote Medicaid objectives, and without clear 

documentation of the application of those criteria, the bases for HHS’s 

decisions involving tens of billions of Medicaid dollars are not transparent 

to Congress, the states, or the public. We recommended that HHS issue 

criteria for assessing whether section 1115 expenditure authorities are 

likely to promote Medicaid objectives. HHS partially concurred with the 

recommendation on issuing criteria, saying that all section 1115 

demonstrations are reviewed against “general criteria” to determine 

whether Medicaid objectives are met, including whether the 

demonstration will increase and strengthen coverage of low-income 

individuals. However, HHS has not issued these general criteria in writing, 

and we maintain that written and more-specific guidance is needed to 

improve transparency. In addition, we recommended that HHS ensure 

that the use of these criteria is documented in its approvals of 

demonstrations, and also take steps to ensure that its approval 

documentation consistently provide assurances that states will avoid 

duplicative spending (duplication between federal Medicaid funds for 

demonstrations and other federal funds available to states for the same or 

similar purposes). HHS concurred with both of these recommendations 

and committed to taking additional steps to require that demonstration 

approval documents more clearly articulate how section 1115 authority is 

being used to help states address evolving trends or needs in their 

These programs were operated or funded by a wide range of state 

agencies, such as state departments of mental health, aging, or 

developmental disabilities that may also be receiving non-Medicaid 

federal grants and funds. Taken together, these actions committed the 

federal government to tens of billions in spending for costs not otherwise 

eligible for Medicaid.

 

76The state programs were wide-ranging in nature and included those providing health 

services, insurance subsidies, and workforce training. For example, one program 

constructs supportive housing for the homeless and another program recruits and aims to 

retain health care workers.
Page 44 GAO-15-677 Medicaid Key Issues

Medicaid programs, as well as provide assurances that states will avoid 

duplication of federal spending.77

The federal government and the states both play important roles in 

ensuring that Medicaid payments made to health care providers and 

managed care organizations are correct and appropriate. The size and 

diversity of the Medicaid program make it particularly vulnerable to 

improper payments—including payments made for treatments or services 

that were not covered by program rules, that were not medically 

necessary, or that were billed for but never provided. Medicaid improper 

payments are a significant cost to Medicaid—totaling an estimated 

$17.5 billion in fiscal year 2014, according to HHS. Due to our concerns 

about Medicaid’s improper payment rate and the sufficiency of federal 

and state oversight, we added Medicaid to our list of high-risk programs in 

2003.78

Responsibility for program integrity activities is spread across multiple 

state and federal entities, resulting in fragmented efforts, creating the 

potential for unnecessary duplication, which we have previously identified 

in some areas, as well as program areas not being covered. The 

combined federal and state efforts have recovered only a small portion of 

the estimated improper payments in Medicaid, and the Medicaid improper 

payment rate has recently increased.

An effective federal-state partnership is key to ensuring the most 

appropriate use of funds by (1) identifying and preventing improper 

payments in both fee-for-service and managed care, (2) setting 

appropriate payment rates for managed care organizations, and 

(3) ensuring only eligible individuals and providers participate in Medicaid.

79

 

77See 

These factors, coupled with recent 

and projected increases in Medicaid spending, heighten the importance of 

GAO-15-239. 

78See GAO-15-290. 

79CMS reported that the Medicaid improper payment rate increased from 5.8 percent for 

fiscal year 2013 to 6.7 percent for fiscal year 2014. The improper payment rate is a 

composite of different types of improper payment rates, including fee-for-service and 

managed care payments, and both active and negative eligibility determinations—that 

is, both individuals who were determined to be eligible and those determined to be 

ineligible and thus denied enrollment. For fiscal year 2014, CMS reported an error rate 

of 5.1 percent for fee-for-service payments, 0.2 percent for managed care payments, and 

3.1 percent for eligibility determinations. Within the Medicaid eligibility case error rate, the 

active case error rate is 2.8 percent and the negative case error rate is 4.8 percent.

Improving Program 

Integrity

• Additional actions needed to identify and 

prevent improper payments.

• Ongoing efforts to improve oversight of 

managed care payment rates are 

important for ensuring rates are 

appropriate.

• Efforts to ensure only eligible individuals 

and providers participate in Medicaid can 

be improved.

Source: GAO. | GAO-15-677

Additional Actions Needed to 

Identify and Prevent Improper 

Payments
Page 45 GAO-15-677 Medicaid Key Issues

coordinated and cost-effective program integrity efforts. CMS has taken 

many important steps in recent years to help improve program integrity—

including some in response to our recommendations—and we believe 

even more can be done in this area.

Coordinating to Minimize Duplication and Ensure Coverage

Our work has highlighted how careful coordination of federal and state 

efforts is necessary to both avoid duplication and ensure maximum 

program coverage. Given the number of entities involved in program 

integrity efforts, coordination among entities is critical. (See fig. 14.) 

Without careful coordination, the involvement of multiple state and federal 

entities in Medicaid program integrity results in fragmented efforts, 

possibly leaving some program areas insufficiently covered.
Page 46 GAO-15-677 Medicaid Key Issues

Figure 14: Federal and Non-Federal Entities with Primary Oversight Responsibilities for Medicaid Program Integrity
Page 47 GAO-15-677 Medicaid Key Issues

In 2014, we reported a gap in oversight of the growing expenditures on 

Medicaid managed care, which constituted over a quarter of federal 

Medicaid expenditures in 2011. In particular, we found that the federal 

government and the states were not well positioned to identify improper 

payments made to—or by—managed care organizations.80

1. require states to conduct audits of payments to and by managed care 

organizations;

We found that 

CMS had largely delegated managed care program integrity oversight 

activities to the states, but states generally focused their efforts on feefor-service claims. We concluded that further federal and state oversight, 

coupled with additional federal guidance and support to states, could help 

ensure that managed care organizations are taking appropriate actions to 

identify and prevent improper payments. Specifically, we recommended 

that CMS 

2. update CMS’s Medicaid managed care guidance on program integrity 

practices and effective handling of recoveries by managed care plans; 

and

3. provide states with additional support in overseeing Medicaid 

managed care program integrity, such as the option to obtain audit 

assistance from existing Medicaid integrity contractors.

CMS generally agreed with our recommendations, and has taken steps to 

provide states with additional guidance. In October 2014, CMS made 

available on its website the managed care plan compliance toolkit to 

provide further guidance to states and managed care plans on identifying 

improper payments to providers. In addition, agency officials told us that, 

as of December 2014, at least six states were using their audit 

contractors to audit managed care claims. While CMS has taken steps to 

improve oversight of Medicaid managed care, the lack of a 

comprehensive program integrity strategy for managed care leaves a 

growing portion of Medicaid funds at risk. In our view, CMS actions to 

require states to conduct audits of payments to and by managed care 

organizations, and to update guidance on Medicaid managed care 

program integrity practices and recoveries, are crucial to improving 

program integrity, and we will continue to follow CMS’s actions in this 

area. (Appendix I includes our open recommendations regarding 

 

80See GAO, Medicaid Program Integrity: Increased Oversight Needed to Ensure Integrity 

of Growing Managed Care Expenditures, GAO-14-341 (Washington, D.C.: May 19, 2014).
Page 48 GAO-15-677 Medicaid Key Issues

Medicaid improper payments, which we believe could help reduce 

improper payments if implemented.)

On June 1, 2015, the agency issued a proposed rule to revise program 

integrity policies, including policy measures that we have 

recommended.81

Identifying Cost-Effective Efforts

Among other measures, if finalized, the rule would 

require states to conduct audits of managed care organizations’ 

encounter and financial data every three years. Additionally, the proposed 

rule would standardize the treatment of recovered overpayments by 

plans.

Our work has highlighted the importance of focusing state and federal 

resources on cost-effective efforts to identify improper payments. States’ 

information systems are a key component of program integrity activities, 

and states’ program integrity efforts include

• enrolling providers;

• receiving, reviewing, and paying Medicaid claims; and

• auditing claims payments after the fact.

Consistent with the requirements defined by CMS, states use Medicaid 

Management Information Systems (MMIS) provider and claims 

processing subsystems to perform program integrity activities related to 

provider enrollment and prepayment review. (See fig. 15.)

 

8180 Fed. Reg. 31098 (June 1, 2015).
Page 49 GAO-15-677 Medicaid Key Issues

Figure 15: Overview of Selected States’ Program Integrity Activities and Supporting MMIS and Additional Systems

Our work has shown that the effectiveness of states’ information systems 

used for program integrity purposes is uncertain.82

 

82See GAO, Medicaid Information Technology: CMS Supports Use of Program Integrity 

Systems but Should Require States to Determine Effectiveness, 

In 2015, we reviewed 

10 states’ use of information technology systems to support efforts aimed 

at preventing and detecting improper payments. These states’ information 

systems ranged in age and capability, with 3 of the 10 states’ operating 

systems being more than 20 years old. However, the effectiveness of the 

states’ use of the systems for program integrity purposes is not known, 

and we recommended that CMS require states to measure and report 

quantifiable benefits of program integrity systems when requesting federal 

funds, and to reflect their approach for doing so. CMS concurred with 

these recommendations.

GAO-15-207

(Washington, D.C.: Jan. 30, 2015).
Page 50 GAO-15-677 Medicaid Key Issues

In our past work, we also recommended—and CMS acted on—other 

measures to streamline program integrity efforts, as shown in the 

following examples.83

• CMS’s hiring of separate review and audit contractors for its program 

integrity efforts was inefficient and led to duplication because key 

functions—such as assessing whether payments were improper and 

learning states’ Medicaid policies—were performed by both 

contractors. We recommended that CMS eliminate duplication 

between the separate contractors, which CMS did in conjunction with 

the agency’s redesign of its Medicaid Integrity Program. This redesign 

eliminated the review contractor function and included a more 

collaborative and coordinated audit approach that leverages state 

expertise to identify potential audit targets, and relies on more 

complete and up-to-date state Medicaid claims data.

• Two CMS oversight tools—the state comprehensive reviews and the 

state program integrity assessments—were duplicative because both 

tools were used to collect similar information from the states. 

Furthermore, we found that the state program integrity assessments 

contained unverified and inaccurate data. We recommended that 

CMS eliminate this duplication, and CMS subsequently discontinued 

the state program integrity assessments.

• CMS’s comprehensive reviews of states’ program integrity efforts 

contained important information about all aspects of states’ program 

integrity capabilities.84 However, we found no apparent connection 

between the reviews’ findings and CMS’s selection of states for 

audits. We recommended that CMS use the knowledge gained from 

the comprehensive reviews as a criterion for focusing audit resources 

toward states with structural or data-analysis vulnerabilities. CMS 

agreed and, among other steps, in 2013 redesigned the reviews to 

streamline the process, reduce the burden on states, and refocus the 

reviews on risk-assessment. 

 

83See GAO, Medicaid Integrity Program: CMS Should Take Steps to Eliminate Duplication 

and Improve Efficiency, GAO-13-50 (Washington, D.C.: Nov. 13, 2012).

84See GAO-13-50. 
Page 51 GAO-15-677 Medicaid Key Issues

Ensuring Medicaid Remains a Payer of Last Resort

CMS and the states must ensure that if Medicaid enrollees have another 

source of health care coverage, that source should pay, to the extent of 

its liability, before Medicaid does. Medicaid enrollees may have health 

care coverage through third parties—such as private health insurers—for 

a number of reasons. For example, some adults may be covered by 

employer-sponsored insurance even though they qualify for Medicaid. 

Similarly, children may be eligible for Medicaid while being covered under 

a parent’s health plan. Figure 16 shows the estimated prevalence of 

private health insurance among Medicaid enrollees.

Figure 16: Estimated Prevalence of Private Health Insurance among Medicaid 

Enrollees by Eligibility Category, 2012

In 2015, we found that states had adopted various approaches to identify 

enrollees with other insurance than Medicaid, and states were working to 

ensure that these third parties paid for health care services to the extent 

of their liability before Medicaid. However, these states needed additional 
Page 52 GAO-15-677 Medicaid Key Issues

CMS guidance and support in these efforts.85

1. routinely monitor and share across all states information regarding 

key third-party liability efforts and challenges, and

We recommended that

CMS play a more active leadership role in monitoring, supporting, and 

promoting state third-party liability efforts. Specifically, we recommended 

that CMS

2. provide guidance to states on their oversight of third-party liability 

efforts conducted by Medicaid managed care plans.

CMS concurred with our recommendations, and stated that it would 

continue to look at ways to provide guidance to states to allow for sharing 

of effective practices and to increase awareness of initiatives under 

development in states. CMS also stated that it would explore the need for 

additional guidance regarding state oversight of third-party liability efforts 

conducted by Medicaid managed care plans. In the preamble to the 

June 1, 2015, proposed rule, the agency indicated it plans to issue 

guidance, which would require managed care plans to include information 

on third-party liability amounts in the encounter data submitted to states. 

We will continue to follow CMS’s actions in this area.

Managed care is designed to ensure the provision of appropriate health 

care services in a cost-efficient manner. However, the design of capitation 

payments, which are made prospectively to health plans to provide or 

arrange for services for Medicaid enrollees, can create incentives that 

adversely affect program integrity and patient care. For example, these 

payments may create an incentive to underserve or deny access to 

needed care. Thus, appropriate safeguards are needed to ensure access 

to care and appropriate payment in Medicaid managed care.86

 

85See GAO, Medicaid: Additional Federal Action Needed to Further ImproveThird-Party 

Liability Efforts, GAO-15-208 (Washington, D.C.: Jan. 28, 2015).

86One such safeguard included in federal law is the requirement that states’ capitation 

rates be actuarially sound. CMS regulations issued in 2002 define actuarially sound 

rates as those that are (1) developed in accordance with generally accepted actuarial 

principles and practices; (2) appropriate for the populations to be covered and the 

services to be furnished; and (3) certified as meeting applicable regulatory requirements 

by qualified actuaries. The regulations also specify the documentation states are required 

to submit to CMS to demonstrate compliance with the requirements, including a 

description of their rate-setting methodology and the data used to set rates. See 42 C.F.R. 

§ 438.6(c)(1)(i)(2014).

Ongoing Efforts to Improve 

Oversight of Managed Care 

Payment Rates Are Important 

for Ensuring Rates Are 

Appropriate
Page 53 GAO-15-677 Medicaid Key Issues

In 2010, we found that CMS’s oversight of states’ Medicaid managed care 

rate setting methodologies was not consistent across its regional offices, 

and that in assessing the quality of the data used to set rates, the agency 

primarily relied on state and health plan assurances, thereby placing 

billions of federal and state dollars at risk.87

1. implement a mechanism to track state compliance with requirements,

We found significant gaps in 

CMS’s oversight. For example, in one instance, the agency had not 

reviewed one state’s rate setting for multiple years, resulting in the state 

receiving approximately $5 billion a year in federal funds for three years 

without having had its rates reviewed by CMS. We also found that 

regional offices varied in their interpretations of how extensive a review of 

states’ rate setting was needed and the sufficiency of evidence for 

meeting actuarial soundness requirements, among other things. We 

recommended that CMS

2. clarify guidance on rate-setting reviews, and

3. make use of information on data quality in determining the 

appropriateness of managed care capitation rates.

As a result of our work, CMS implemented a detailed checklist to 

standardize the regional offices’ reviews. CMS has also taken a number 

of other steps to improve its oversight of states’ rate setting.

• In 2014, CMS completed its development of a database to track 

contracts, including rate-setting reviews. According to agency officials, 

as of March 2015, 57 rate submissions had been submitted to the 

database and were undergoing review by CMS’s Office of the Actuary 

and the Division of Managed Care Plans.

• CMS officials reported that the agency had developed a managed 

care program review manual, which included modules on financial 

oversight, and had updated rate setting and contract review tools.

• In 2014, the agency released its 2015 Managed Care Rate Setting 

Consultation Guide, which clarified the agency’s requirements relating 

to the information states must submit in developing their rate 

certifications, including a description of the type, sources, and quality 

of the data used by the state in setting its rates.

 

87See GAO, Medicaid Managed Care: CMS’s Oversight of States’ Rate Setting Needs 

Improvement, GAO-10-810 (Washington, D.C.: Aug. 4, 2010).
Page 54 GAO-15-677 Medicaid Key Issues

• On June 1, 2015, the agency issued a proposed rule that, if finalized, 

would make changes to Medicaid managed care rate setting, such as 

requiring more consistent and transparent documentation of the rate 

setting process to allow for more effective reviews of states’ rate 

certification submissions. We will continue to follow CMS’s actions in 

this area.

Both CMS and the states play an important role in ensuring that only 

eligible individuals receive Medicaid coverage and that only eligible 

providers receive payment. Our work has highlighted several issues 

facing CMS and the states in their efforts to minimize fraud in Medicaid 

eligibility among both enrollees and providers.

To be eligible for Medicaid coverage, applicants must meet financial and 

nonfinancial requirements, such as federal and state requirements 

regarding residency, immigration status, and documentation of U.S. 

citizenship. Similarly, to participate in Medicaid, providers must enroll and 

submit information about their ownership interests and criminal 

background. States must screen potential Medicaid providers, search 

exclusion and debarment lists, and take action to exclude those providers 

who appear on those lists.88 Using 2011 data, we recently identified 

indications of potentially fraudulent or improper payments related to 

certain Medicaid enrollees and paid to some providers, as shown in our 

review of approximately 9 million enrollees in four states and summarized 

below.89 While these cases indicate only potentially improper payments, 

they raise questions about the effectiveness of beneficiary and provider 

enrollment screening controls.90

 

88The federal government can exclude health care providers from participating in the 

Medicaid program for several reasons, including criminal convictions related to Medicare 

or state health programs, or other major problems related to health care (e.g., patient 

abuse or neglect). Excluded providers can be placed on one or both of the following 

exclusion lists, which Medicaid officials must check before paying for a claim: the List of 

Excluded Individuals/Entities, managed by HHS, and the System for Award Management, 

managed by the General Services Administration.

89See GAO, Medicaid: Additional Actions Needed to Help Improve Provider and 

Beneficiary Fraud Controls, GAO-15-313 (Washington, D.C.: May 14, 2015).

90For example, individuals’ Medicaid applications may have inaccuracies due to simple 

errors, such as inaccurate data entry, making it difficult to determine whether these cases 

involve improper payments or fraud through data matching alone. In addition, there may 

be situations where an individual does not have a Social Security number (for example, a 

newborn child).

Efforts to Ensure Only Eligible 

Individuals and Providers 

Participate in Medicaid Can Be 

Improved
Page 55 GAO-15-677 Medicaid Key Issues

• We identified about 8,600 enrollees who had payments made on their 

behalf concurrently by two or more of our selected states.91

• We identified about 200 deceased enrollees in the four states who 

appear to have received Medicaid benefits totaling at least 

$9.6 million. Specifically, our analysis matching Medicaid data to the 

Social Security Administration’s data on date of death found these 

individuals were deceased before the Medicaid service was provided.

Medicaid 

approved benefits of at least $18.3 million for these enrollees in these 

states.

• We found that about 50 medical providers in the four states we 

examined had been excluded from federal health care programs, 

including Medicaid; these providers were excluded from these 

programs when they provided and billed for Medicaid services during 

fiscal year 2011. The selected states approved the claims at a cost of 

about $60,000.

• We found that the identities of over 50 deceased providers in the four 

states we examined were used to receive Medicaid payments. Our 

analysis matching Medicaid eligibility and claims data to the Social 

Security Administration’s full death file found these individuals were 

deceased before the Medicaid service was provided. The Medicaid 

benefits involved with these deceased providers totaled at least 

$240,000 for fiscal year 2011.

• We found nearly 26,600 providers with addresses that did not match 

any U.S. Postal Service records. These unknown addresses may 

have errors due to inaccurate data entry or differences in the ages of 

MMIS and U.S. Postal Service address-management tool data, 

making it difficult to determine whether these cases involve fraud 

through data matching alone.

CMS has taken steps since 2011 to strengthen the Medicaid beneficiary 

and provider enrollment-screening controls in ways that may address the 

issues we identified, and we believe that additional CMS guidance could 

bolster those efforts.92

 

91Under federal regulations, enrollees are not to have payments made on their behalf by 

two or more states concurrently. In some instances, an enrollee may obtain services in a 

different state, but his or her resident state should pay for the eligible services.

In 2013, CMS issued federal regulations, in 

response to PPACA, to establish a more rigorous approach to verify the 

92See GAO-15-313. 
Page 56 GAO-15-677 Medicaid Key Issues

information needed to determine Medicaid eligibility. Under these 

regulations, states are required to use electronic data maintained by the 

federal government to the extent that such information may be useful in 

verifying eligibility. CMS created a tool called the Data Services Hub, 

implemented in fiscal year 2014, to help verify some of the information 

used to determine eligibility for Medicaid and other health programs. 

States are to use the hub to both verify an individual’s eligibility when they 

receive an application, and to reverify eligibility on at least an annual 

basis thereafter, unless the state has an alternative mechanism approved 

by HHS.93 In addition, in February 2011, CMS and HHS’s Office of 

Inspector General issued regulations establishing a new risk-based 

screening process for providers with enhanced verification measures, 

such as unscheduled or unannounced site visits and fingerprint-based 

criminal background checks. If properly implemented by CMS, the hub 

and the additional provider screening measures could help mitigate some 

of the potential improper payment issues that we identified. However, we 

identified gaps in state practices for identifying deceased enrollees, as 

well as state challenges in screening providers effectively and 

efficiently,94

1. identify enrollees who are deceased, and

and recommended that CMS provide guidance to states to 

better

2. screen providers by using automated information available through 

Medicare’s enrollment database.

HHS concurred with our recommendations and stated it would work with 

states to determine additional approaches to better identify deceased 

enrollees, and that it would continue to educate states about the 

 

93The Data Services Hub verifies application information using various external data 

sources, such as the Social Security Administration and the Department of Homeland 

Security. According to CMS, the hub can verify key application information, including 

household income, state residency, and incarceration status. 

94Officials at the four states we examined said that they periodically check the state vital 

records to determine whether a potential Medicaid beneficiary has died, but that they did 

not use a more-comprehensive Social Security Administration data source to perform this 

check outside of the initial enrollment or annual revalidation period. As a result, states may 

not be able to detect individuals who have moved to and died in other states. We also 

found that none of the four states were using a Medicare enrollment database to screen 

their entire provider population, and that additional CMS guidance to the states on 

requesting automated information through this database could help states improve 

efficiency of provider screening.
Page 57 GAO-15-677 Medicaid Key Issues

availability of provider information and how to use that information to help 

screen Medicaid providers more effectively and efficiently. We will 

continue to monitor HHS’s efforts in this area.

Medicaid’s federal-state partnership could be improved through a revised 

federal financing approach that better addresses variations in states’ 

financing needs. First, automatically providing increased federal financial 

assistance to states affected by national economic downturns—through 

an increased FMAP—could help provide timely and targeted assistance 

that is more responsive to states’ economic conditions. Second, revisions 

to the current FMAP formula could more equitably allocate Medicaid 

funds to states by better accounting for their ability to fund Medicaid. 

These improvements could better align federal funding with each state’s 

resources, demand for services, and costs; better facilitate state budget 

planning; and provide states with greater fiscal stability during times of 

economic stress.

Economic downturns can hamper states’ ability to fund their Medicaid 

programs. During economic downturns, states’ employment and tax 

revenues typically fall, while enrollment in the Medicaid program tends to 

increase as the number of individuals with incomes low enough to qualify 

for Medicaid coverage rises. We have reported that each state, however, 

can experience different economic circumstances—and thus different 

levels of change in Medicaid enrollment and state revenues during a 

downturn.95

 

95See GAO, Medicaid: Improving Responsiveness of Federal Assistance to States during 

Economic Downturns, 

Figures 17 and 18 show the percentage change in Medicaid 

enrollment and state tax revenue, by state, respectively.

GAO-11-395 (Washington, D.C.: March 31, 2011).

Addressing Variations in 

States’ Financing Needs 

through Revised Federal 

Financing Approach

• More timely and targeted federal 

assistance would better aid states during 

economic downturns.

• More equitable funding formula would 

better reflect states’ varying ability to fund 

Medicaid.

Source: GAO. | GAO-15-677

More Timely and Targeted 

Federal Assistance Would 

Better Aid States during 

Economic Downturns
Page 58 GAO-15-677 Medicaid Key Issues

Figure 17: Percentage Change in Medicaid Enrollment, December 2007 through December 2009

Notes: Percentages are based on GAO analysis of Medicaid enrollment data from December 2007 

through December 2009 as reported by state Medicaid directors.

For the purpose of this figure, “states” includes the District of Columbia.
Page 59 GAO-15-677 Medicaid Key Issues

Figure 18: Percentage Change in State Tax Revenue, Fourth Quarter 2007 to Fourth Quarter 2009

Notes: Map shows the total percent change in quarterly tax revenue for each state from the fourth 

quarter 2007 to the fourth quarter 2009.

For the purpose of this figure, “states” includes the District of Columbia.
Page 60 GAO-15-677 Medicaid Key Issues

In response to the two most recent recessions, Congress acted to 

temporarily increase support to states by increasing the federal share of 

Medicaid funding provided by the FMAP formula.

• Following the 2001 recession, the Jobs and Growth Tax Relief 

Reconciliation Act of 2003 provided states $10 billion in temporary 

assistance through an increased FMAP.96

• In response to the 2007 recession, the American Recovery and 

Reinvestment Act of 2009 (Recovery Act) provided states with 

$89 billion through a temporarily increased FMAP. Under the 

Recovery Act, the level of funding was intended to help both maintain 

state Medicaid programs so enrollees would be assured continuity of 

services—and to assist states with fiscal needs beyond Medicaid.97

Our prior work, however, found that these efforts to provide states with 

temporary increases in the FMAP were not as responsive to states’ 

economic conditions as they could have been.98 Improving the 

responsiveness of federal assistance to states during economic 

downturns would facilitate state budget planning, provide states with 

greater fiscal stability, and better align federal assistance with the 

magnitude of the economic downturn’s effects on individual states. We 

have identified opportunities to improve the timing, amount, and duration 

of assistance provided,99

• Automatic and timely trigger for starting assistance. To be 

effective at stabilizing state funding of Medicaid programs, assistance 

as detailed below.

 

96Pub. L. No. 108-27, § 401(a), 117 Stat. 752, 764 (2003). States were protected against 

decreases in their regular FMAP and could be eligible for an increased FMAP from April 1, 

2003, through June 30, 2004.

97Pub. L. No. 111-5, Div. B, Tit. V, § 5001, 123 Stat. 115, 496 (2009). Congress 

subsequently extended this funding, which resulted in states receiving an estimated 

$16.1 billion in additional FMAP assistance. See Pub. L. No. 111-226, Tit. II, Subtit. A, 

§ 201, 124 Stat. 2389, 2393 (2010).

98See GAO-11-395 and GAO, State and Local Governments: Knowledge of Past 

Recessions Can Inform Future Federal Fiscal Assistance, GAO-11-401 (Washington, 

D.C.: March 31, 2011); and Federal Assistance: Temporary State Fiscal Relief, 

GAO-04-736R (Washington, D.C.: May 7, 2004).

99See GAO-11-395 and GAO Medicaid: Prototype Formula Would Provide Automatic, 

Targeted Assistance to States during Economic Downturns; GAO-12-38 (Washington, 

D.C.: Nov. 10, 2011).
Page 61 GAO-15-677 Medicaid Key Issues

should be provided close to the beginning of a downturn. An 

automatically activated, prearranged mechanism for triggering federal 

assistance could use readily available economic data to begin 

assistance rather than rely on legislative action at the time of a future 

national economic downturn.

• Targeted assistance based on state needs. States’ efforts to fund 

Medicaid during economic downturns face two main challenges: 

(1) financing increased enrollment, and (2) replacing lost revenue. We 

found that better targeting of assistance based on each state’s level of 

need could help ensure that federal assistance is aligned with the 

magnitude of an economic downturn’s effect on individual states.

• Timely and tapered end of assistance. Determining when and how 

to end increased FMAP assistance to states is complicated.100

The Recovery Act included a provision for GAO to provide 

recommendations for modifying the increased FMAP formula to make it 

more responsive to state Medicaid needs during future economic 

downturns. In response to the provision, we presented a prototype 

formula that offers an option for temporary FMAP increases that would 

provide automatic, timely, and targeted state assistance.

We 

found that more gradually reducing the percentage of increased 

FMAP provided to states could help mitigate the effects of a slower 

recovery. Such tapered assistance would avoid abrupt changes and 

allow states to plan their transitions back to greater reliance on their 

own revenues.

101 Our prototype 

formula would use labor market data—specifically, the employment-topopulation (EPOP) ratio—as an automatic trigger to start and end the 

increased FMAP assistance.102

 

100For example, we found that after the 2001 and 2007 recessions ended, Medicaid 

enrollment remained high or increased in most states, even as revenues continued to 

decrease or remain below their prerecession levels. Congress later provided an extension 

to phase out the increased FMAPs from January through June 2011, which eased states’ 

transition back to their regular FMAPs.

Table 1 highlights design elements of our 

prototype formula, as well as related considerations for policymakers. The 

level of funding and other design elements—such as the choice of 

thresholds for starting, ending, and targeting assistance—are variables 

101See GAO-12-38. 

102The employment-to-population ratio compares the number of employed persons in a 

state to the working age population aged 16 and older.
Page 62 GAO-15-677 Medicaid Key Issues

that policymakers could adjust depending on circumstances, such as 

competing budget demands and other state fiscal needs beyond 

Medicaid.

Table 1: Key Design Choices Contained in GAO Prototype Formula and Policy Considerations

Design element GAO prototype formula Policy considerations

Starting assistance Assistance automatically begins when 

26 states have declining employment-topopulation (EPOP) ratios over two 

consecutive months.

Choices need to balance offering prompt assistance against 

triggering assistance when there is greater assurance that a 

national recession has begun.

Adjustments could be made to the

• threshold number of states, and

• number of months with a declining EPOP ratio.

Targeting assistance Targeting is based on a state’s minimum 

unemployment rate and maximum wage 

and salary quarter, as identified over the 

past eight quarters.

The look-back period for calculating changes in 

unemployment, and changes in wages and salaries could be 

changed, with trade-offs between overall program cost and 

timeliness of assistance.

Determining level of state 

need

Full funding for state Medicaid needs 

related to increased enrollment and 

decreased revenues.

Proportional scaling of the assistance could be implemented, 

scaling up to address broader state budget needs, or down to 

reduce program costs.

Ending assistance Temporary assistance ends when fewer 

than 26 states show declining EPOPs over 

two consecutive months.

Choices need to balance premature shut-down of the 

assistance period against the costs of the assistance. 

Adjustments could be made to the threshold number of 

states and number of months with a declining EPOP.

Using a phased reduction 

to end assistance

Assistance ends with a phased reduction 

of FMAP increases, using a floating lookback period of eight quarters. After the first 

eight quarters of assistance, the look-back 

period is constrained to not exceed eight 

quarters.

To ensure that no state experiences a sharp decline in their 

temporary increased FMAP at the end of the period, a phaseout rule could constrain the quarterly drop in FMAP.

Source: GAO. | GAO-15-677

We compared this prototype formula with assistance provided during the 

Recovery Act. Under our prototype formula, assistance would have begun 

in January 2008 rather than in October 2008, as was the case under the 

Recovery Act; the end of assistance would have been triggered in April 

2011, and assistance would have been phased out by September 2011, 

rather than in June 2011 under the Recovery Act and its extension.

Based on our work, we noted that Congress could consider enacting an 

FMAP formula that is targeted for variable state Medicaid needs and 

provides automatic, timely, and temporary increased FMAP assistance in 

response to national economic downturns. As of July 2015, Congress has 

not enacted such a formula. In commenting on drafts of our 2011 reports, 

HHS agreed with the analysis and goals of the reports, emphasized the 

importance of aligning changes to the FMAP formula with individual state 
Page 63 GAO-15-677 Medicaid Key Issues

circumstances, and offered several considerations to guide policy choices 

regarding appropriate thresholds for timing and targeting of increased 

FMAP funds.

In prior work spanning more than three decades, we have emphasized 

that in federal-state programs such as Medicaid, funds should be 

allocated to states in a manner that is equitable from the perspective of 

both enrollees and taxpayers.103

• To be equitable from the perspective of enrollees, and thereby allow 

states to provide a comparable level of services to each person in 

need, a funding allocation mechanism should take into account the 

demand for services in each state—which depends on both the 

number of people needing services and their level of need—and 

geographic cost differences among states.

• To be equitable from the perspective of taxpayers, an allocation 

mechanism should ensure that taxpayers in poorer states are not 

more heavily burdened than those in wealthier ones. To account for 

states’ relative wealth, a mechanism must take into account each 

state’s ability to finance its share of program costs from its own 

resources, which should account for all potentially taxable income, 

including personal income of state residents and corporate income.

Our prior work has found that the current FMAP formula does not 

adequately address variation in the demand for services in each state, 

geographic cost differences, and state resources.104 The FMAP formula 

uses per capita income as the basis for calculating each state’s federal 

matching rate. However, per capita income is a poor proxy for the size of 

a state’s population in need of Medicaid services, as two states with 

similar per capita incomes can have substantially different numbers of 

low-income residents.105

 

103See, for example, GAO, Older Americans Act: Options to Better Target Need and 

Improve Equity, 

Per capita income also does not include any 

GAO-13-74 (Washington, D.C.: Nov. 30, 2012); and Changing Medicaid 

Formula Can Improve Distribution of Funds to States, GAO/GGD-83-27 (Washington, 

D.C.: March 9, 1983).

104See, for example, GAO, Medicaid Formula: Differences in Funding Ability among 

States Often Are Widened, GAO-03-620 (Washington, D.C.: July 10, 2003).

105We reported in 2003 that, for example, the District of Columbia and Connecticut had 

similar per capita incomes, but the share of the District’s population in poverty was more 

than twice Connecticut’s. See GAO-03-620. 

More Equitable Funding 

Formula Would Better Reflect 

States’ Varying Ability to Fund 

Medicaid
Page 64 GAO-15-677 Medicaid Key Issues

measure of geographic differences in the costs of providing health care 

services, which can vary widely. Finally, although per capita income 

measures the income received by state residents—such as wages, rents, 

and interest income—it does not include other components of a state’s 

resources that affect its ability to finance Medicaid, such as corporate 

income produced within the state, but not received by state residents.

In 2013, we identified multiple alternative data sources that could be used 

to develop measures of the demand for Medicaid services, geographic 

cost differences, and state resources.106

Table 2: Alternative Data Sources that Could Improve Equity across States

These measures could be 

combined in various ways to provide a basis for allocating Medicaid funds 

more equitably among states. (See table 2.)

Measure

Examples of possible data 

sources How measures could improve equity across states

Demand for 

services

U.S. Census Bureau’s American 

Community Survey and Current 

Population Survey

• Directly estimate the number of persons in each state with incomes 

low enough to qualify for Medicaid.

• Estimates can be adjusted to reflect variation in health service needs 

within this population.

Geographic cost 

differences

Bureau of Labor Statistics’ 

Occupational Employment 

Statistics Survey

• Account for components of health care costs and their variation 

across states.

• Data source accounts for the cost of personnel who provide health 

care services (the greatest share of costs).

State resources Department of Treasury’s Total 

Taxable Resources

• Includes all types of income and is unaffected by an individual state’s 

taxing authorities or policies.

• In addition to per capita income, adds other sources of taxable 

income, such as income produced within a state, but received by 

individuals who reside out-of-state.

Source: GAO analysis. | GAO-15-677

 

106See GAO, Medicaid: Alternative Measures Could Be Used to Allocate Funding More 

Equitably, GAO-13-434 (Washington, D.C.: May 10, 2013).
Page 65 GAO-15-677 Medicaid Key Issues

We have reported over the years on challenges facing the Medicaid 

program and concerns about the adequacy of federal oversight. As 

previously discussed, in 2003, we designated Medicaid as a high-risk 

program due to its size, growth, diversity of programs, and concerns 

about gaps in oversight.107 More than a decade later, those factors 

remain relevant for federal oversight. In addition, state Medicaid programs 

are changing rapidly. PPACA has led to unprecedented programmatic 

changes, and more are anticipated as states continue to pursue new 

options available under the law to expand eligibility and restructure 

payment and health care delivery systems. The effects of changes 

brought on by PPACA, as well as the aging of the U.S. population, will 

continue to emerge in the coming years and are likely to exacerbate the 

challenges that already exist in federal oversight and management of the 

Medicaid program.108

Emerging changes brought on by PPACA will transform states’ enrollment 

processes, as well as increase enrollment and program spending. 

Oversight to monitor access and use of services will be critical.

In addition, other changes in states’ health care 

delivery and payment approaches, as well as new technologies, will 

continue to pose challenges to federal oversight and management. These 

changes have implications for enrollees and for program costs, and 

underscore the importance of ongoing attention to federal oversight 

efforts.

• Enrollment processes. PPACA required the establishment of a 

coordinated eligibility and enrollment process for Medicaid, CHIP, and 

the health insurance exchanges.109

 

107See GAO, High-Risk Series: An Update.

To implement this process—

referred to as the “no wrong door” policy—states were required to 

develop IT systems that allow for the exchange of data to ensure that 

applicants are enrolled in the program for which they are eligible, 

regardless of the program for which they applied. We found that some 

GAO-03-119 (Washington, D.C.: Jan. 1, 

2003).

108See GAO-15-290. 

109PPACA required the establishment of health insurance exchanges in each state by 

January 1, 2014, to allow consumers to compare individual health insurance options 

available in that state and enroll in coverage. In states electing not to operate their own 

state-based exchange, PPACA requires the federal government to establish and operate 

an exchange in the state, referred to as the federally facilitated exchange. State-based 

exchanges and federally facilitated exchanges are also referred to as marketplaces.

Medicaid’s Ongoing 

Transformation 

Highlights the 

Importance of Federal 

Oversight
Page 66 GAO-15-677 Medicaid Key Issues

states struggled with meeting the requirement to transfer—send and 

receive—applications with the federally facilitated exchange.110

• Increased enrollment. Enrollment is expected to increase 

significantly, even in states that do not implement the expansion, as 

streamlined processes and publicity about the expansion encourage 

enrollment among previously eligible but unenrolled adults and 

children. The sheer number of additional enrollees—about 10 million 

by 2020, according to Congressional Budget Office (CBO) 

estimates—may stretch health care resources and exacerbate 

challenges to ensuring access to care.111

• Increased spending. Over the next 5 years, Medicaid expenditures 

are expected to increase more rapidly than in the prior 10 years, rising 

from an estimated $529 billion in combined federal and state spending 

in 2015 to about $700 billion in 2020, due, in part, to the continuing 

implementation of PPACA.112

The expected increase in Medicaid enrollment and spending underscores 

the importance of addressing problems we have previously identified in 

ensuring fiscal accountability, program integrity, and access. For 

example, the large and growing number of Medicaid enrollees, coupled 

with previous challenges we have identified in monitoring and ensuring 

enrollees’ access to care, underscore the importance of effective federal 

oversight efforts in this area. In addition, better data on Medicaid 

The federal share of expenditures, 

which has historically averaged about 57 percent, is projected to 

increase as well, to about 60 percent, largely because of the 

enhanced federal match required under PPACA for newly eligible 

enrollees.

 

110Along with the “no wrong door” policy, CMS envisioned streamlined enrollment 

processes that include the real-time transfer of applications between state Medicaid 

agencies and the federally facilitated exchange, and immediate eligibility determinations. 

While a CMS official acknowledged that real time application transfers continued to be a 

goal, he did not anticipate this occurring until 2015 or 2016, given variability in states’ 

abilities. See GAO-15-169. 

111In March 2015, CBO projected that the number of individuals ever enrolled in Medicaid 

during the year would increase from 83 million in 2015 to 93 million in 2020. CBO, 

Medicaid-Baseline Projections: March 2015 Baseline (Washington, D.C.: March 9, 2015).

112While expenditures grew at an average annual rate of 5.3 percent between 2005 and 

2015, the CMS Office of the Actuary has projected that the rate of increase will rise to 

5.8 percent between 2015 and 2020. See CMS, 2014 Actuarial Report on the Financial 

Outlook for Medicaid. 
Page 67 GAO-15-677 Medicaid Key Issues

spending, including supplemental payments that states often make to 

institutional providers, would help to ensure the fiscal accountability and 

integrity of the program, facilitate efforts to manage program costs, and 

provide information needed for policy making.113

Continued increases in states’ demonstration spending, changes in 

states’ delivery systems and payment approaches, as well as the aging of 

the population and the introduction of new technologies also will continue 

to pose challenges to federal oversight.

Lastly, improved federal 

program integrity efforts will be critical to ensuring the appropriate use of 

program funds.

• Increased demonstration spending. Medicaid spending governed 

by the terms and conditions of Medicaid demonstrations, rather than 

traditional Medicaid state plan requirements, accounted for close to 

one-third of federal Medicaid spending in 2014—up from one-fourth of 

federal Medicaid spending in 2013 and one-fifth in 2011.114 The trend 

among states to seek flexibilities under the demonstration authority 

has implications for enrollees’ access and program spending. For 

example, enrollees may lose protections—such as those to limit costsharing or to provide certain mandatory benefits—under the traditional 

Medicaid program. The federal government will need to oversee 

increasingly diverse Medicaid programs not subject to traditional 

Medicaid requirements. As of February 2015, HHS had approved 

demonstration proposals from two states—Arkansas and Iowa—

allowing them to provide coverage to some or all of their expansion 

populations through premium assistance to purchase private health 

insurance on exchanges established under PPACA.115

• Changes in states’ delivery systems. Growth of managed care and 

states’ exploration of new models of health care delivery systems, 

particularly for long-term services and supports, will further heighten 

the need for program oversight.

• Enrollment of Medicaid populations in managed care 

arrangements continues to grow, with attendant challenges for 

 

113See GAO-15-290. 

114See GAO-15-239, GAO-14-689R, and GAO-13-384. 

115The Iowa demonstration provides some—but not all—Medicaid required benefits that 

are not covered by private health insurance.
Page 68 GAO-15-677 Medicaid Key Issues

program oversight. Over the next 5 years, expenditures for 

capitation payments and premiums are projected to grow more 

rapidly than total Medicaid expenditures. We have found 

weaknesses in CMS and state oversight of managed care.116 The 

HHS Office of Inspector General has also documented 

weaknesses in state standards, as well as significant issues with 

the availability of providers, and called for CMS to work with states 

to improve oversight of managed care plans.117

• Recent state efforts to explore new health care models have 

implications for federal oversight of enrollees’ care and program 

costs. In July 2012, CMS announced a major initiative to support 

state design and testing of innovative health care payment and 

service delivery models intended to enhance quality of care and 

lower costs for enrollees in Medicaid, CHIP, and Medicare, as well 

as other state residents. Beginning in 2017, states may embark on 

even more ambitious efforts to reshape their payment and delivery 

systems.118

• The past two decades have seen a marked shift in where and how 

long term care services are delivered to disabled and aged 

enrollees, with care increasingly being provided in home- and 

community-based settings rather than in institutions such as 

nursing homes. In fiscal year 2011, about 45 percent of long term 

care spending was for home- and community-based services, up 

from 32 percent in 2002. As the population ages—and particularly 

as the number of people over age 85 increases—Medicaid 

expenditures on these services are predicted to grow.

• New technology. New developments in technology, such as 

innovations in health care treatments and telemedicine, are likely to 

influence how state Medicaid programs deliver and pay for care—

raising implications for federal oversight of access to care and costs.

 

116See GAO-14-341. 

117HHS OIG, State Standards for Access to Care in Medicaid Managed Care, OEI-02-11-

00320 (Washington, D.C., September 2014); and Access to Care: Provider Availability in 

Medicaid Managed Care, OEI-02-13-00670 (Washington, D.C.: December 2014).

118Under section 1332 of PPACA, states will be able to apply for federal waivers of certain 

health insurance exchange requirements established under PPACA, and obtain from the 

federal government the amount of tax credits and cost-sharing reductions that would have 

been paid to state residents in the absence of a waiver. 42 U.S.C. § 18052.
Page 69 GAO-15-677 Medicaid Key Issues

• In 2008, CBO concluded from its review of the economic literature 

that roughly half of the increase in health care spending during the 

past several decades was associated with the expanded 

capabilities of medicine brought about by technological advances, 

including new drugs, devices, or services, as well as new clinical 

applications of existing technologies.119

• The potential for new technologies to contribute significantly to 

long-term health care spending growth poses particular 

challenges for the Medicaid program. State Medicaid directors 

have highlighted as a critical concern the emergence of high-cost, 

cutting-edge pharmaceuticals, in light of the requirement that state 

Medicaid programs that cover outpatient drugs must cover nearly 

all Food and Drug Administration-approved prescription drugs of 

manufacturers that participate in the Medicaid drug rebate 

program.120

These changes underscore the importance of addressing problems we 

have identified in ensuring fiscal accountability, program integrity, and 

access. For example, as additional states submit demonstration 

proposals—and as the demonstrations HHS has already approved come 

up for renewal—the concerns and recommendations that we have raised 

about HHS approving demonstrations without assurances that they will 

not increase federal expenditures are likely to persist or increase. The 

potential for sweeping changes in state Medicaid programs’ payment and 

service delivery systems has implications for enrollees’ access to and 

quality of care, and for program costs. Increasing enrollment in managed 

care arrangements may heighten concerns about access to care and 

program integrity within these arrangements. We have made 

recommendations to HHS that could help address concerns we have 

raised in these areas.

Attention to Medicaid’s transformation and the key issues facing the 

program will be important to ensuring that Medicaid is both effective for 

the enrollees who rely on it and accountable to the taxpayers. GAO has 

 

119CBO, Technological Change and the Growth of Health Care Spending (Washington, 

D.C.: January 2008), 12.

120Federal law requires manufacturers to pay rebates to state Medicaid agencies for drugs 

dispensed to Medicaid enrollees. 42 U.S.C. § 1396r-8. See GAO, Prescription Drugs: 

Comparison of DOD, Medicaid, and Medicare Part D Retail Reimbursement Prices, 

GAO-14-578 (Washington, D.C.: June 30, 2014).
Page 70 GAO-15-677 Medicaid Key Issues

multiple ongoing studies in these areas and will continue to monitor the 

Medicaid program for the Congress.

We provided a draft of this report to HHS for review. HHS provided 

technical comments, which we incorporated as appropriate.

We are sending copies of this report to the Secretary of Health and 

Human Services, Administrator of CMS, and other interested parties. In 

addition, the report will be available at no charge on the GAO website at 

http://www.gao.gov. 

If you or your staff have any questions about this report, please 

contact Katherine M. Iritani at (202) 512-7114 or iritanik@gao.gov or 

Carolyn L. Yocom at (202) 512-7114 or yocomc@gao.gov. Contact 

points for our Offices of Congressional Relations and Public Affairs 

may be found on the last page of this report. GAO staff who made 

key contributions to this report are listed in appendix III.

Katherine M. Iritani

Director, Health Care

Carolyn L. Yocom

Director, Health Care

Agency Comments
Page 71 GAO-15-677 Medicaid Key Issues

List of Congressional $GGUHVVees

The Honorable Orrin G. Hatch

Chairman

Committee on Finance

United States Senate

The Honorable Ron Johnson

Chairman

The Honorable Thomas R. Carper

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Fred Upton

Chairman

Committee on Energy and Commerce

House of Representatives

The Honorable Jason Chaffetz

Chairman

The Honorable Elijah E. Cummings

Ranking Member

Committee on Oversight and Government Reform

House of Representatives
Appendix I: Medicaid-Related Matters for 

Congressional Consideration and Agency 

Recommendations

Page 72 GAO-15-677 Medicaid Key Issues

The following table lists Medicaid-related matters for congressional 

consideration GAO has published that are classified as open because 

Congress has either not taken or has not completed steps to implement 

the matter. The matters are listed by key issue and report.

Table 3: Open Medicaid-Related Matters for Congressional Consideration, by Key Issue, as of July 2015

GAO Report Open Matters for Congressional Consideration

Ensuring Fiscal Accountability Through Increased Transparency and Oversight

Medicaid: More Transparency of and 

Accountability for Supplemental 

Payments Are Needed. GAO-13-48, 

November 26, 2012

Congress should consider requiring the Centers for Medicare & Medicaid Services to

1. improve state reporting of non-disproportionate share hospital (DSH) supplemental 

payments, including requiring annual reporting of payments made to individual 

facilities and other information that the agency determines is necessary to oversee 

non-DSH supplemental payments;

2. clarify permissible methods for calculating non-DSH supplemental payments; and

3. require states to submit an annual independent certified audit verifying state 

compliance with permissible methods for calculating non-DSH supplemental 

payments.

Medicaid Demonstration Waivers: Recent 

HHS Approvals Continue to Raise Cost 

and Oversight Concerns. GAO-08-87, 

January 31, 2008 

Congress may wish to consider requiring increased attention to fiscal responsibility in the 

approval of Section 1115 Medicaid demonstrations by requiring the Department of Health 

and Human Services (HHS) to improve the demonstration review process through steps 

such as clarifying criteria for reviewing and approving states’ proposed spending limits; 

better ensuring that valid methods are used to demonstrate budget neutrality; and 

documenting and making public material explaining the basis for any approvals.

Addressing Variations in States’ Financing Needs through Revised Federal Financing Approach

Medicaid: Prototype Formula Would 

Provide Automatic, Targeted Assistance 

to States during Economic Downturns. 

GAO-12-38, November 10, 2011

Congress could consider enacting a Federal Medical Assistance Percentage (FMAP) 

formula that is targeted for variable state Medicaid needs and provides automatic, timely, 

and temporary increased FMAP assistance in response to national economic downturns.

Source: GAO. | GAO-15-677

The following table lists selected Medicaid-related recommendations 

GAO has made to the Department of Health and Human Services that are 

classified as open because the agency has either not taken or has not 

completed steps to implement the recommendation. The 

recommendations are listed by key issue and report.

Appendix I: Medicaid-Related Matters for 

Congressional Consideration and Agency 

Recommendations
Appendix I: Medicaid-Related Matters for 

Congressional Consideration and Agency 

Recommendations

Page 73 GAO-15-677 Medicaid Key Issues

Table 4: Selected Open Medicaid-Related Recommendations, by Key Issue, as of July 2015

GAO Report Open Recommendation

Maintaining and Improving Access to Quality Care

Foster Children: Additional Federal Guidance 

Could Help States Better Plan for Oversight of 

Psychotropic Medications Administered by 

Managed-Care Organizations. GAO-14-362, 

April 28, 2014

The Department of Health and Human Services (HHS) should issue guidance 

to state Medicaid, child-welfare, and mental-health officials regarding 

prescription-drug monitoring and oversight for children in foster care receiving 

psychotropic medications through managed care organizations (MCO).

Medicaid and CHIP: Reports for Monitoring 

Children’s Health Care Services Need Improvement. 

GAO-11-293R, April 5, 2011

The Centers for Medicare & Medicaid Services (CMS) should work with states 

to identify additional improvements that could be made to the CMS 416 annual 

reports, including options for reporting on the receipt of services separately for 

children in managed care and fee-for-service delivery models, while minimizing 

reporting burden, and for capturing information on the CMS 416 relating to 

children’s receipt of treatment services for which they are referred.

Oral Health: Efforts Under Way to Improve 

Children’s Access to Dental Services, but Sustained 

Attention Needed to Address Ongoing Concerns. 

GAO-11-96, November 30, 2010

HHS should

1. establish a process to periodically verify that the dentist lists posted by 

states on the Insure Kids Now website are complete, usable, and accurate, 

and ensure that states and participating dentists have a common 

understanding of what it means for a dentist to indicate he or she can treat 

children with special needs; and

2. require states to verify that dentists listed on the Insure Kids Now website 

have not been excluded from Medicaid and the State Children’s Health 

Insurance Program by the HHS Office of Inspector General, and 

periodically verify that excluded providers are not included on the lists 

posted by the states.

Medicaid: State and Federal Actions Have Been 

Taken to Improve Children’s Access to Dental 

Services, but Gaps Remain. GAO-09-723, 

September 30, 2009

CMS should ensure that states found to have inadequate MCO dental provider 

networks take action to strengthen these networks. 

Ensuring Fiscal Accountability through Increased Transparency and Improved Oversight

Medicaid Demonstrations: Approval Criteria and 

Documentation Need to Show How Spending 

Furthers Medicaid Objectives. GAO-15-239, 

April 13, 2015

HHS should

1. issue criteria for assessing whether section 1115 expenditure authorities 

are likely to promote Medicaid objectives;

2. ensure the application of these criteria is documented in all HHS’s 

approvals of section 1115 demonstrations, including those approving new 

or extending or modifying existing expenditure authorities, to inform internal 

and external stakeholders—including states, the public, and Congress—of 

the basis for the agency’s determinations that approved expenditure 

authorities are likely to promote Medicaid objectives;

3. take steps to ensure that Medicaid demonstration approval documentation 

consistently provides assurances—such as through claiming protocols or 

the application template—that states will avoid duplicative spending by 

offsetting as appropriate all other federal revenues received when claiming 

federal Medicaid matching funds.
Appendix I: Medicaid-Related Matters for 

Congressional Consideration and Agency 

Recommendations

Page 74 GAO-15-677 Medicaid Key Issues

GAO Report Open Recommendation

Medicaid: CMS Oversight of Provider Payments 

Is Hampered by Limited Data and Unclear Policy. 

GAO-15-322, April 10, 2015

CMS should

1. take steps to ensure that states report accurate provider specific payment 

data that include accurate unique national provider identifiers;

2. develop a policy establishing criteria for when such payments at the 

provider level are economical and efficient; and

3. once criteria are developed, develop a process for identifying and 

reviewing payments to individual providers in order to determine whether 

they are economical and efficient.

Medicaid Financing: States’ Increased Reliance on 

Funds from Health Care Providers and Local 

Governments Warrants Improved CMS Data 

Collection. GAO-14-627, July 29, 2014

CMS should develop a data collection strategy that ensures that states report 

accurate and complete data on all sources of funds used to finance the 

nonfederal share of Medicaid payments.

Medicaid Demonstration Waivers: Approval Process 

Raises Cost Concerns and Lacks Transparency. 

GAO-13-384, June 25, 2013

HHS should update the agency’s written budget neutrality policy to reflect actual 

criteria and processes used to develop and approve demonstration spending 

limits, and ensure the policy is readily available to state Medicaid directors and 

others.

Medicaid: CMS Needs More Information on the 

Billions of Dollars Spent on Supplemental Payments. 

GAO-08-614, May 30, 2008

CMS should develop a strategy to identify all of the supplemental payment 

programs established in states’ Medicaid plans, and to review those programs 

that have not been subject to review under CMS’s August 2003 initiative.

Medicaid Financing: Federal Oversight Initiative 

Is Consistent with Medicaid Payment Principles 

but Needs Greater Transparency. GAO-07-214, 

March 30, 2007

CMS should provide each state CMS reviews under its initiative to end 

inappropriate state financing arrangements with specific and written 

explanations regarding agency determinations on the allowability of various 

arrangements for financing the nonfederal share of Medicaid payments, and 

make these determinations available to all states and interested parties.

Improving Program Integrity

Medicaid: Additional Actions Needed to Help 

Improve Provider and Beneficiary Fraud Controls. 

GAO-15-313, May 14, 2015

CMS should

1. issue guidance to states to better identify beneficiaries who are deceased; 

and

2. provide guidance to states on the availability of automated information 

through Medicare’s enrollment database—the Provider Enrollment, Chain, 

and Ownership System (PECOS)—and full access to all pertinent PECOS 

information, such as ownership information, to help screen Medicaid 

providers more efficiently and effectively.

Medicaid Information Technology: CMS Supports 

Use of Program Integrity Systems but Should 

Require States to Determine Effectiveness. 

GAO-15-207, January 30, 2015

HHS should direct CMS to require states to measure quantifiable benefits, such 

as cost reductions or avoidance, achieved as a result of operating information 

systems to help prevent and detect improper payments.

Medicaid: Additional Federal Action Needed to 

Further Improve Third-Party Liability Efforts. 

GAO-15-208, January 28, 2015

HHS should direct CMS to

1. routinely monitor and share across all states information regarding key 

third-party liability efforts and challenges; and

2. provide guidance to states on their oversight of third-party liability efforts 

conducted by Medicaid managed care plans.
Appendix I: Medicaid-Related Matters for 

Congressional Consideration and Agency 

Recommendations

Page 75 GAO-15-677 Medicaid Key Issues

GAO Report Open Recommendation

Medicaid Program Integrity: Increased Oversight

Needed to Ensure Integrity of Growing Managed 

Care Expenditures. GAO-14-341, May 19, 2014

CMS should

1. hold states accountable for Medicaid managed care program integrity by 

requiring states to conduct audits of payments to and by managed care 

organizations; and

2. update CMS’s Medicaid managed care guidance on program integrity 

practices and effective handling of MCO recoveries.

Medicaid Integrity Program: CMS Should Take 

Steps to Eliminate Duplication and Improve 

Efficiency. GAO-13-50, November 13, 2012

CMS should reevaluate the agency’s methodology for calculating a return on 

investment for the Medicaid Integrity Program and share its methodology with 

Congress and the states.

Fraud Detection Systems: Centers for Medicare 

and Medicaid Services Needs to Ensure More 

Widespread Use. GAO-11-475, June 30, 2011

CMS should implement and manage plans for incorporating data into the 

Integrated Data Repository to meet schedule milestones.

Source: GAO. | GAO-15-677
Appendix II: Selected Characteristics of States’ 

Medicaid Programs

Page 76 GAO-15-677 Medicaid Key Issues

State 

Regular FMAP 

rate in 2015a

Medicaid 

enrollment 

in 2012b Medicaid benefit spending in 2014c

Percentage of 

enrollees in 

comprehensive 

risk-based managed 

care in 2011d

Whether the state had 

expanded Medicaid 

coverage to newly 

eligible adults under 

PPACA as of May 2015

Alabama 68.99 942,550 $5,213,247,879 3.1 No

Alaska 50.00 110,460 $1,412,407,094 0 No

Arizona 68.46 1,362,557e $9,184,808,597 86.3 Yes

Arkansas 70.88 594,105 $4,840,075,746 Less than 0.05 Yes

California 50.00 9,474,835 $63,383,947,702 40.8 Yes

Colorado 51.01 650,857 $5,919,113,049 12.7 Yes

Connecticut 50.00 694,673 $6,820,658,024 59.2 Yes

Delaware 53.63 209,225 $1,691,771,386 78.5 Yes

District of Columbia 70.00 104,495 $2,367,792,161 72.4 Yes

Florida 59.72 3,248,265 $20,303,199,078 71.0 No

Georgia 66.94 1,243,109e $9,396,958,654 68.8 No

Hawaii 52.23 249,392 $1,949,895,249 95.3 Yes

Idaho 71.75 222,767 $1,585,631,105 0 No

Illinois 50.76 2,672,129 $16,616,392,364 7.7 Yes

Indiana 66.52 1,007,151 $9,094,042,848 71.2 Yes

Iowa 55.54 498,659 $3,921,556,276 Less than 0.05 Yes

Kansas 56.63 349,499 $2,727,710,336 57.0 No

Kentucky 69.94 769,622 $7,792,776,771 17.7 Yes

Louisiana 62.05 1,113,642 $7,055,593,669 Less than 0.05 No

Maine 61.88 370,562 $2,365,417,230 f No

Maryland 50.00 926,611 $9,210,329,395 73.4 Yes

Massachusetts 50.00 1,080,050 $14,250,839,665 50.2 Yes

Michigan 65.54 1,885,402 $13,502,617,518 71.7 Yes

Minnesota 50.00 889,011 $9,917,891,767 68.4 Yes

Mississippi 73.58 654,811 $4,865,309,235 9.2 No

Missouri 63.45 931,450 $8,828,757,766 44.5 No

Montana 65.90 108,081 $1,072,160,721 0 Pending federal approvalg

Nebraska 53.27 207,856 $1,771,909,070 45.0 No

Nevada 64.36 305,627 $2,281,105,301 57.6 Yes

New Hampshire 50.00 136,710 $1,322,700,772 0 Yes

New Jersey 50.00 971,261 $12,470,313,962 67.9 Yes

New Mexico 69.65 557,184 $4,168,980,357 67.0 Yes

New York 50.00 4,951,302 $51,806,022,238 66.9 Yes

Appendix II: Selected Characteristics of 

States’ Medicaid Programs
Appendix II: Selected Characteristics of States’ 

Medicaid Programs

Page 77 GAO-15-677 Medicaid Key Issues

State 

Regular FMAP 

rate in 2015a

Medicaid 

enrollment 

in 2012b Medicaid benefit spending in 2014c

Percentage of 

enrollees in 

comprehensive 

risk-based managed 

care in 2011d

Whether the state had 

expanded Medicaid 

coverage to newly 

eligible adults under 

PPACA as of May 2015

North Carolina 65.88 1,619,903 $11,992,545,816 Less than 0.05 No

North Dakota 50.00 64,752 $401,980,406 2.3 Yes

Ohio 62.64 2,105,533 $19,439,277,855 76.2 Yes

Oklahoma 62.30 723,119 $4,666,284,967 Less than 0.05 No

Oregon 64.06 617,726 $6,784,093,341 76.8 Yes

Pennsylvania 51.82 2,144,709 $23,461,728,946 60.0 Yes

Rhode Island 50.00 161,542 $2,436,946,880 60.0 Yes

South Carolina 70.64 852,904 $5,321,038,897 52.1 No

South Dakota 51.64 107,408 $778,125,953 0 No

Tennessee 64.99 1,321,683 $9,205,069,609 f No

Texas 58.05 2,030,403e $31,385,332,042 52.9 No

Utah 70.56 280,952 $2,064,362,848 3.4 No

Vermont 54.01 167,773 $1,526,126,311 f Yes

Virginia 50.00 897,942 $7,547,405,238 60.5 No

Washington 50.03 1,157,897 $10,249,772,687 84.0 Yes

West Virginia 71.35 355,138 $3,331,020,307 52.8 Yes

Wisconsin 58.27 1,062,278 $7,396,295,700 80.4 No

Wyoming 50.00 68,458 $539,403,281 0 No

Source: GAO based on information from the Medicaid and CHIP Payment and Access Commission (MACPAC) (enrollment and spending data); Office of the Assistant Secretary for Planning and 

Evaluation, Department of Health and Human Services (regular FMAPs); and The Henry J. Kaiser Family Foundation (Medicaid expansion status). | GAO-15-677 

a

The federal government matches state Medicaid expenditures based on a statutory formula—the 

FMAP. The regular FMAP differs from the FMAP that may apply to certain individuals, such as those 

newly eligible for Medicaid under PPACA.

b

Medicaid enrollment figures reflect full-year equivalent enrollment, which is the sum of monthly 

enrollment totals, divided by 12.

c

Medicaid benefit spending figures include federal and state spending for 2014 as of February 25, 

2015, and were subject to change if states revised their expenditure data.

d

Comprehensive risk-based managed care plans do not include limited-benefit plans or primary care 

case management programs.

e

State had a change in total enrollment of 10 percent or more over the prior year, which may reflect 

data anomalies and may be updated in the future.

f

MACPAC did not report managed care information for Maine, Tennessee, or Vermont due to data 

issues.

g

State enacted legislation expanding Medicaid; federal approval of the expansion is required before it 

can be implemented.
Appendix III: GAO Contacts and Staff 

Acknowledgments

Page 78 GAO-15-677 Medicaid Key Issues

Katherine M. Iritani, (202) 512-7114 or iritanik@gao.gov

Carolyn L. Yocom, (202) 512-7114 or yocomc@gao.gov

In addition to the contacts named above, Robert Copeland, Assistant 

Director; Robin Burke; Nancy Fasciano; Sandra George; Drew Long; 

Jasleen Modi; Giao N. Nguyen; Vikki Porter; and Emily Wilson made key 

contributions to this report.

Appendix III: GAO Contacts and Staff 

Acknowledgments

GAO Contacts

Staff 

Acknowledgements
Related GAO Products

Page 79 GAO-15-677 Medicaid Key Issues

The following are selected GAO products pertinent to the key issues 

discussed in this report. Other products may be found at GAO’s web site 

at www.gao.gov. 

Behavioral Health: Options for Low-Income Adults to Receive Treatment 

in Selected States. GAO-15-449. Washington, D.C.: June 19, 2015.

Medicaid: Service Utilization Patterns for Beneficiaries in Managed Care. 

GAO-15-481. Washington, D.C.: May 29, 2015.

Children’s Health Insurance Program: Effects on Coverage and Access, 

and Considerations for Extending Funding. GAO-15-348. Washington, 

D.C.: February 27, 2015.

Foster Children: Additional Federal Guidance Could Help States Better 

Plan for Oversight of Psychotropic Medications Administered by 

Managed-Care Organizations. GAO-14-362. Washington, D.C.: 

April 28, 2014.

Children’s Health Insurance: Information on Coverage of Services, Costs 

to Consumers, and Access to Care in CHIP and Other Sources of 

Insurance. GAO-14-40. Washington, D.C.: November 21, 2013.

Dental Services: Information on Coverage, Payments, and Fee Variation. 

GAO-13-754. Washington, D.C.: September 6, 2013.

Children’s Mental Health: Concerns Remain about Appropriate Services 

for Children in Medicaid and Foster Care. GAO-13-15. Washington, D.C.: 

December 10, 2012.

Medicaid: States Made Multiple Program Changes, and Beneficiaries 

Generally Reported Access Comparable to Private Insurance. 

GAO-13-55. Washington, D.C.: November 15, 2012.

Foster Children: HHS Guidance Could Help States Improve Oversight 

of Psychotropic Prescriptions. GAO-12-201. Washington, D.C.: 

December 14, 2011.

Medicaid and CHIP: Most Physicians Serve Covered Children but Have 

Difficulty Referring Them for Specialty Care. GAO-11-624. Washington, 

D.C.: June 30, 2011.

Related GAO Products

Maintaining and Improving 

Access to Quality Care
Related GAO Products

Page 80 GAO-15-677 Medicaid Key Issues

Medicaid and CHIP: Reports for Monitoring Children’s Health Care 

Services Need Improvement. GAO-11-293R. Washington, D.C.: 

April 5, 2011.

Medicaid and CHIP: Given the Association between Parent and Child 

Insurance Status, New Expansions May Benefit Families. GAO-11-264. 

Washington, D.C.: February 4, 2011.

Oral Health: Efforts Under Way to Improve Children’s Access to Dental 

Services, but Sustained Attention Needed to Address Ongoing Concerns. 

GAO-11-96. Washington, D.C.: November 30, 2010.

Medicaid: State and Federal Actions Have Been Taken to Improve 

Children’s Access to Dental Services, but Gaps Remain. GAO-09-723. 

Washington, D.C.: September 30, 2009.

Medicaid Preventive Services: Concerted Efforts Needed to Ensure 

Beneficiaries Receive Services. GAO-09-578. Washington, D.C.: 

August 14, 2009.

Medicaid: Extent of Dental Disease in Children Has Not Decreased, and 

Millions Are Estimated to Have Untreated Tooth Decay. GAO-08-1121. 

Washington, D.C.: September 23, 2008.

Medicaid: Concerns Remain about Sufficiency of Data for Oversight 

of Children’s Dental Services. GAO-07-826T. Washington, D.C.: 

May 2, 2007.

Medicaid Demonstrations: More Transparency and Accountability for 

Approved Spending Are Needed. GAO-15-715T. Washington, D.C.: 

June 24, 2015.

Medicaid Demonstrations: Approval Criteria and Documentation Need to 

Show How Spending Furthers Medicaid Objectives. GAO-15-239. 

Washington, D.C.: April 13, 2015.

Medicaid: CMS Oversight of Provider Payments Is Hampered by Limited 

Data and Unclear Policy. GAO-15-322. Washington, D.C.: April 10, 2015.

Medicaid Financing: Questionnaire Data on States’ Methods for Financing 

Medicaid Payments from 2008 through 2012. GAO-15-227SP. 

Washington, D.C.: March 13, 2015, an e-supplement to GAO-14-627. 

Ensuring Fiscal 

Accountability Through 

Increased Transparency

and Improved Oversight
Related GAO Products

Page 81 GAO-15-677 Medicaid Key Issues

Medicaid Demonstrations: HHS’s Approval Process for Arkansas’s 

Medicaid Expansion Waiver Raises Cost Concerns. GAO-14-689R. 

Washington, D.C.: August 8, 2014.

Medicaid: Completed and Preliminary Work Indicate that Transparency 

around State Financing Methods and Payments to Providers Is Still 

Needed for Oversight. GAO-14-817T. Washington, D.C.: July 29, 2014.

Medicaid Financing: States’ Increased Reliance on Funds from Health 

Care Providers and Local Governments Warrants Improved CMS Data 

Collection. GAO-14-627. Washington, D.C.: July 29, 2014.

Medicaid Demonstration Waivers: Approval Process Raises Cost 

Concerns and Lacks Transparency. GAO-13-384. Washington, D.C.: 

June 25, 2013.

Medicaid: More Transparency of and Accountability for Supplemental 

Payments Are Needed. GAO-13-48. Washington, D.C.: November 26, 

2012.

Medicaid: Data Sets Provide Inconsistent Picture of Expenditures. 

GAO-13-47. Washington, D.C.: October 29, 2012.

Medicaid: States Reported Billions More in Supplemental Payments in 

Recent Years. GAO-12-694. Washington, D.C.: July 20, 2012.

Medicaid: Ongoing Federal Oversight of Payments to Offset 

Uncompensated Hospital Care Costs Is Warranted. GAO-10-69. 

Washington, D.C.: November 20, 2009.

Medicaid: CMS Needs More Information on the Billions of Dollars 

Spent on Supplemental Payments. GAO-08-614. Washington, D.C.: 

May 30, 2008.

Medicaid Financing: Long-standing Concerns about Inappropriate 

State Arrangements Support Need for Improved Federal Oversight. 

GAO-08-650T. Washington, D.C.: April 3, 2008.

Medicaid Demonstration Waivers: Recent HHS Approvals Continue to 

Raise Cost and Oversight Concerns. GAO-08-87. Washington, D.C.: 

January 31, 2008.
Related GAO Products

Page 82 GAO-15-677 Medicaid Key Issues

Medicaid Financing: Long-Standing Concerns about Inappropriate 

State Arrangements Support Need for Improved Federal Oversight. 

GAO-08-255T. Washington, D.C.: November 1, 2007.

Medicaid Demonstration Waivers: Lack of Opportunity for Public Input 

during Federal Approval Process Still a Concern. GAO-07-694R. 

Washington, D.C.: July 24, 2007.

Medicaid Financing: Federal Oversight Initiative Is Consistent with 

Medicaid Payment Principles but Needs Greater Transparency. 

GAO-07-214. Washington, D.C.: March 30, 2007.

Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver 

Projects Raise Concerns. GAO-02-817. Washington, D.C.: July 12, 2002.

Medicaid: Additional Actions Needed to Help Improve Provider and 

Beneficiary Fraud Controls. GAO-15-313. Washington, D.C.: May 14, 

2015.

Medicaid Information Technology: CMS Supports Use of Program 

Integrity Systems but Should Require States to Determine Effectiveness. 

GAO-15-207. Washington, D.C.: January 30, 2015. 

Medicaid: Additional Federal Action Needed to Further Improve ThirdParty Liability Efforts. GAO-15-208. Washington, D.C.: January 28, 2015.

Medicaid Program Integrity: Increased Oversight Needed to Ensure 

Integrity of Growing Managed Care Expenditures. GAO-14-341. 

Washington, D.C.: May 19, 2014.

Medicaid: CMS Should Ensure That States Clearly Report 

Overpayments. GAO-14-25. Washington, D.C.: December 6, 2013.

Medicaid: Enhancements Needed for Improper Payments Reporting and 

Related Corrective Action Monitoring. GAO-13-229. Washington, D.C.: 

March 29, 2013.

Medicaid Integrity Program: CMS Should Take Steps to Eliminate 

Duplication and Improve Efficiency. GAO-13-50. Washington, D.C.: 

November 13, 2012.

Improving Program 

Integrity
Related GAO Products

Page 83 GAO-15-677 Medicaid Key Issues

National Medicaid Audit Program: CMS Should Improve Reporting and 

Focus on Audit Collaboration with States. GAO-12-814T. Washington, 

D.C.: June, 14, 2012.

Program Integrity: Further Action Needed to Address Vulnerabilities in 

Medicaid and Medicare Programs. GAO-12-803T. Washington, D.C.: 

June 7, 2012.

Medicaid: Federal Oversight of Payments and Program Integrity Needs 

Improvement. GAO-12-674T. Washington, D.C.: April 25, 2012.

Medicaid Program Integrity: Expanded Federal Role Presents Challenges 

to and Opportunities for Assisting States. GAO-12-288T. Washington, 

D.C.: December 7, 2011.

Fraud Detection Systems: Centers for Medicare and Medicaid Services 

Needs to Expand Efforts to Support Program Integrity Initiatives. 

GAO-12-292T. Washington, D.C.: December 7, 2011.

Fraud Detection Systems: Centers for Medicare and Medicaid Services 

Needs to Ensure More Widespread Use. GAO-11-475. Washington, D.C.: 

June 30, 2011.

Medicare and Medicaid Fraud, Waste, and Abuse: Effective 

Implementation of Recent Laws and Agency Actions Could Help Reduce 

Improper Payments. GAO-11-409T. Washington, D.C.: March 9, 2011.

Medicaid Managed Care: CMS’s Oversight of States’ Rate Setting Needs 

Improvement. GAO-10-810. Washington, D.C.: August 4, 2010.

Medicaid: Alternative Measures Could Be Used to Allocate Funding More 

Equitably. GAO-13-434. Washington, D.C.: May 10, 2013.

Medicaid: Prototype Formula Would Provide Automatic, Targeted 

Assistance to States during Economic Downturns. GAO-12-38. 

Washington, D.C.: November 10, 2011.

Medicaid: Improving Responsiveness of Federal Assistance to States 

during Economic Downturns. GAO-11-395. Washington, D.C.: March 31, 

2011.

Addressing Variations in 

States’ Financing Needs 

Through Revised Federal 

Financing Approach
Related GAO Products

Page 84 GAO-15-677 Medicaid Key Issues

State and Local Governments: Knowledge of Past Recessions Can 

Inform Future Federal Fiscal Assistance. GAO-11-401. Washington, D.C.: 

March 31, 2011.

Recovery Act: Increased Medicaid Funds Aided Enrollment Growth, and 

Most States Reported Taking Steps to Sustain Their Programs. 

GAO-11-58. Washington, D.C.: October 8, 2010.

Medicaid: Strategies to Help States Address Increased Expenditures 

during Economic Downturns. GAO-07-97. Washington, D.C.: October 18, 

2006.

Federal Assistance: Temporary State Fiscal Relief. GAO-04-736R. 

Washington, D.C.: May 7, 2004.

Medicaid Formula: Differences in Funding Ability among States Often Are 

Widened. GAO-03-620. Washington, D.C.: July 10, 2003.

Medicaid: Overview of Key Issues Facing the Program. GAO-15-746T. 

Washington, D.C.: July 8, 2015.

Medicaid: A Small Share of Enrollees Consistently Accounted for a Large 

Share of Expenditures. GAO-15-460. Washington, D.C.: May 8, 2015

2015 Annual Report: Additional Opportunities to Reduce Fragmentation, 

Overlap, and Duplication and Achieve Other Financial Benefits. 

GAO-15-404SP. Washington, D.C.: April 14, 2015.

High-Risk Series: An Update. GAO-15-290. Washington, D.C.: 

February 11, 2015.

Medicaid: Federal Funds Aid Eligibility IT System Changes, but 

Implementation Challenges Persist. GAO-15-169. Washington, D.C.: 

December, 12, 2014.

Medicaid Payment: Comparisons of Selected Services under Fee-forService, Managed Care, and Private Insurance. GAO-14-533. 

Washington, D.C.: July 15, 2014. 

Prescription Drugs: Comparison of DOD, Medicaid, and Medicare Part D 

Retail Reimbursement Prices. GAO-14-578. Washington, D.C.: June 30, 

2014.

Other GAO Products
Related GAO Products

Page 85 GAO-15-677 Medicaid Key Issues

Medicaid: Assessment of Variation among States in Per-Enrollee 

Spending. GAO-14-456. Washington, D.C.: June 16, 2014.

Medicaid: Demographics and Service Usage of Certain High-Expenditure 

Beneficiaries. GAO-14-176. Washington, D.C.: February 19, 2014.

Medicaid: Use of Claims Data for Analysis of Provider Payment Rates. 

GAO-14-56R. Washington, D.C.: January 6, 2014.

Medicaid Managed Care: Use of Limited Benefit Plans to Provide Mental 

Health Services and Efforts to Coordinate Care. GAO-13-780. 

Washington, D.C.: September 30, 2013.

Medicaid: States’ Use of Managed Care. GAO-12-872R. Washington, 

D.C.: August, 17, 2012.

Medicaid: States’ Plans to Pursue New and Revised Options for Homeand Community-Based Services. GAO-12-649. Washington, D.C.: 

June 13, 2012.

Medicaid and CHIP: Enrollment, Benefits, Expenditures, and Other 

Characteristics of State Premium Assistance Programs. GAO-10-258R. 

Washington, D.C.: January 19, 2010.

(291248)
Related GAO Products

Page 86 GAO-15-677 Medicaid Key Issues

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