MEDICAID

Additional Efforts 

Needed to Ensure 

that State Spending is 

Appropriately 

Matched with Federal 

Funds

Report to Congressional Requesters

October 2015

GAO-16-53

United States Government Accountability Office
Highlights of GAO-16-53, a report to 

congressional requesters

October 2015

MEDICAID

Additional Efforts Needed to Ensure that State 

Spending is Appropriately Matched with Federal 

Funds

Why GAO Did This Study

Historically, Medicaid eligibility has 

been limited to certain categories of 

low-income individuals, but PPACA, 

enacted on March 23, 2010, gave 

states the option to expand coverage 

to nearly all adults with incomes at or 

below 133 percent of the federal 

poverty level, beginning January 1, 

2014. States that do so are eligible for 

increased federal matching rates for

enrollees receiving coverage through 

the state option to expand Medicaid 

under PPACA, and where applicable, 

enrollees in states that expanded 

coverage prior to PPACA’s enactment. 

GAO was asked to examine Medicaid 

enrollment and expenditures, and CMS 

oversight of the appropriateness of

federal matching funds. This report 

examines (1) Medicaid enrollment and 

spending in 2014 by different eligibility 

groups; and (2) how CMS ensures 

states are accurately determining 

eligibility, and that expenditures are 

appropriately matched. GAO analyzed 

enrollment and expenditure data for 

enrollee eligibility groups submitted by 

states to CMS, examined relevant 

federal laws and regulations, internal 

control standards, CMS guidance and 

oversight tools, and interviewed CMS 

officials. 

What GAO Recommends

GAO recommends that CMS (1) review 

federal determinations of Medicaid 

eligibility for accuracy, and (2) use the 

information obtained from the eligibility 

reviews to inform the expenditure 

review, and increase assurances that

expenditures for the different eligibility 

groups are correctly reported and 

appropriately matched. In its response, 

the agency generally concurred with 

these recommendations.

What GAO Found

PPACA-expansion and state-expansion enrollees—individuals who were not eligible

under historic Medicaid eligibility rules but are eligible under (1) a state option to 

expand Medicaid under the Patient Protection and Affordable Care Act (PPACA), or 

(2) a state’s qualifying expansion of coverage prior to PPACA’s enactment—

comprised about 14 percent of Medicaid enrollees and about 10 percent of Medicaid 

expenditures at the end of 2014. According to GAO’s analysis of state reported data,

of the approximately 69.8 million individuals recorded as enrolled in Medicaid, about 

60.1 million were traditionally eligible enrollees, comprising about 86 percent of the 

total; about 7.5 million (11 percent of all Medicaid enrollees) were PPACA-expansion 

enrollees, and 2.3 million (3 percent of all Medicaid enrollees) were state-expansion 

enrollees. With regard to expenditures, states had reported $481.77 billion in 

Medicaid expenditures for services in calendar year 2014. Of this total, expenditures 

for traditionally eligible enrollees were $435.91 billion (about 90 percent of total 

expenditures), expenditures for PPACA-expansion enrollees were about $35.28 

billion (7 percent of total expenditures), and expenditures for state-expansion 

enrollees were $10.58 billion (2 percent of total expenditures).

Proportion of Medicaid Enrollees by Eligibility Group, Last Quarter of Calendar Year 

2014 

The Centers for Medicare & Medicaid Services (CMS), which oversees Medicaid, has 

implemented interim measures to review the accuracy of state eligibility 

determinations and examine states’ expenditures for different eligibility groups, for 

which states may receive up to three different federal matching rates. However, CMS 

has excluded from review federal Medicaid eligibility determinations in the states that 

have delegated authority to the federal government to make Medicaid eligibility 

determinations through the federally facilitated exchange. This creates a gap in 

efforts to ensure that only eligible individuals are enrolled into Medicaid and that state

expenditures are correctly matched by the federal government. In addition, CMS 

reviews of states’ expenditures do not use information obtained from the reviews of 

state eligibility determination errors to better target its review of Medicaid 

expenditures for the different eligibility groups. An accurate determination of these 

different eligibility groups is critical to ensuring that only eligible individuals are 

enrolled, that they are enrolled in the correct eligibility group, and that states’ 

expenditures are appropriately matched with federal funds for Medicaid enrollees, 

consistent with federal internal control standards. Consequently, CMS cannot identify 

erroneous expenditures due to incorrect eligibility determinations, which also limits its 

ability to ensure that state expenditures are appropriately matched with federal funds.

View GAO-16-53. For more information, 

contact Carolyn L. Yocom at (202) 512-7114 

or yocomc@gao.gov

United States Government Accountability Office
Letter 1

Background 4

PPACA- and State-Expansion Enrollees Comprised about 14 

Percent of 2014 Medicaid Enrollees and about 10 Percent of 

Expenditures 11

Limitations in Eligibility and Expenditure Reviews Hamper CMS’s 

Ability to Ensure the Appropriateness of Federal Matching 

Funds 14

Conclusions 18

Recommendations for Executive Action 19

Agency Comments and Our Evaluation 19

Appendix I Comments from the Department of Health and Human Services 22

Appendix II Scope and Methodology 26

Appendix III Medicaid Enrollment in 2014 29

Appendix IV Medicaid Expenditures in 2014 30

Appendix V GAO Contact and Staff Acknowledgments 31

Tables

Table 1: Federal Medical Assistance Percentage (FMAP) Rates 

for Different Medicaid Populations, by Fiscal Year 7

Table 2: Medicaid Enrollment Data (in millions), 2014 29

Table 3: Medicaid Expenditures (in billions) by Eligibility Group, 

2014 30

Contents

Page i GAO-16-53 Medicaid Matching Funds 
Figures

Figure 1: Proportion of Medicaid Enrollees by Eligibility Group, 

Last Quarter of Calendar Year 2014 12

Figure 2: Total Medicaid Expenditures for Calendar Year 2014 by 

Enrollee Eligibility Group 13

Abbreviations

CMS Centers for Medicare & Medicaid Services

FFE federally facilitated exchange

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

MBES Medicaid Budget and Expenditure System

MEQC Medicaid Eligibility Quality Control

PCI per capita income

PERM Payment Error Rate Measurement

PPACA Patient Protection and Affordable Care Act

SBE state-based exchange

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Page ii GAO-16-53 Medicaid Matching Funds 
441 G St. N.W.

Washington, DC 20548

October 16, 2015

The Honorable Orrin Hatch

Chairman

Committee on Finance

United States Senate

The Honorable Fred Upton

Chairman

Committee on Energy and Commerce

House of Representatives

States and the federal government share in the financing of the Medicaid 

program—a joint federal-state health care financing program for certain 

low-income and medically needy individuals—with the federal 

government matching most state expenditures for Medicaid services on 

the basis of a statutory formula known as the Federal Medical Assistance 

Percentage (FMAP).1 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. However, under the Patient Protection and Affordable Care Act 

(PPACA), enacted on March 23, 2010, states may opt to expand their 

Medicaid programs by covering nearly all adults with incomes at or below 

133 percent of the federal poverty level (FPL) beginning January 1, 

2014.2 Twenty-six states and the District of Columbia opted to expand 

their Medicaid programs for 2014.3 States that choose to expand their 

1

The FMAP is calculated using a statutory formula based on the state’s per capita income, 

with the federal government paying a larger portion of Medicaid expenditures in states 

with low per capita incomes relative to the national average, and a smaller portion for 

states with higher per capita incomes. 

2

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. PPACA also provides for a 5 percent disregard when calculating income for 

determining Medicaid eligibility, which effectively increases this income level to 138 

percent of the FPL. See 42 U.S.C. § 1396a(a)(10)(A)(i)(VIII), (e)(14)(I).

3

An additional three states—Alaska, Indiana, and Pennsylvania—opted to expand their 

Medicaid programs for 2015. In addition, as of July 2015, Montana’s proposed Medicaid 

expansion is pending federal approval.

Letter

Page 1 GAO-16-53 Medicaid Matching Funds 

 
programs receive an increased federal match for expenditures incurred 

as a result of providing services to individuals whom the state had not 

previously covered. Some of these states may also receive an increased 

federal matching rate for another eligibility group, provided the state 

covered this eligibility group as of December 1, 2009, for example, 

through a state-funded expansion. In order to receive a federal match for 

expenditures, states are required to provide to the Centers for Medicare & 

Medicaid Services (CMS), the agency within the Department of Health 

and Human Services (HHS) that oversees Medicaid, data on Medicaid 

enrollment and expenditures for review. In addition to expanding eligibility 

standards, PPACA also required the establishment of a coordinated 

eligibility and enrollment process for Medicaid and the health insurance 

exchanges to streamline the eligibility determination process.4 These 

changes, which shift the process toward a more automated approach, 

necessitated the adoption of new policies and information technology 

systems by the states 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. During fiscal year 2013, 

Medicaid covered about 72 million individuals at a cost of approximately 

$431.1 billion, with the federal share of $247.7 billion comprising 57 

percent of costs, and the state share of $183.4 billion comprising 43 

percent.5 Given the significant effect these eligibility, funding, and process 

changes could have on Medicaid enrollment and expenditures, you asked 

us to review 2014 Medicaid enrollment and expenditures, and CMS’s 

oversight of the appropriateness of federal matching funds. This report 

examines

1. the enrollment and spending for individuals who enrolled in Medicaid 

in 2014 by different eligibility groups; and

2. CMS efforts to ensure the accuracy of Medicaid eligibility 

determinations, and that state expenditures for Medicaid enrollees in 

different eligibility groups are appropriately matched.

4

PPACA required the establishment of health insurance exchanges in each state by 

January 1, 2014, to allow individuals in that state to compare and purchase health 

insurance coverage using a single, streamlined form that may be used to apply for 

Medicaid. 

5

The number of enrollees 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. Medicaid and CHIP Payment and Access Commission (MACPAC), 

MACStats: Medicaid and CHIP Program Statistics, March 2014.

Page 2 GAO-16-53 Medicaid Matching Funds 

 
To determine the enrollment and expenditures for individuals who 

enrolled in Medicaid in 2014 by different eligibility groups, we examined 

data submitted to CMS by states as part of their enrollment and 

expenditure reporting.6 These data included information from new 

enrollment forms developed by CMS and used by states to report the 

number of enrollees by eligibility group, as well as expenditure data. 

States submitted these data to CMS by means of the Quarterly Medicaid 

Statement of Expenditures for the Medical Assistance Program—also 

known as the form CMS-64—within the Medicaid Budget and Expenditure 

System (MBES). We reviewed data for each quarter in calendar year 

2014.7 We also interviewed knowledgeable CMS officials in the Center for 

Medicaid and CHIP Services about data available on Medicaid enrollment 

and expenditures, as well as steps they take to ensure data reliability. 

Based on our interviews, we determined that these data were sufficiently 

reliable for our purposes. (See appendix II for more details about our 

methodology for the first objective.)

To examine CMS efforts to ensure that states are accurately verifying 

eligibility, and that expenditures for Medicaid enrollees in different 

eligibility groups are appropriately matched by federal funds, we 

examined (1) relevant laws and federal regulations and CMS policy 

documents describing the different eligibility groups; (2) guidance to 

states on eligibility and expenditure reviews; and (3) instructions for 

eligibility and expenditure reviews conducted by states and CMS. We also 

reviewed the results of CMS’s CMS-64 expenditure reviews, state 

6

This report focuses on the 50 states and the District of Columbia, although the U.S. 

territories also receive federal funds for Medicaid. For the purposes of this report, we 

include the District of Columbia as a state.

7

CMS-64 data are comprised of data collected from several different forms. CMS 

implemented a new form within CMS-64 to collect enrollment data—called the “CMS64.Enroll” form—by eligibility type beginning January 1, 2014. We extracted enrollment 

data from this form, and expenditure data from the CMS-64 net expenditures financial 

management report, from MBES on June 2, 2015. These expenditure data may be subject 

to adjustment by states or by CMS and may not have been reviewed by CMS. CMS data 

are reported at a state aggregate level. Therefore, these data do not tie expenditures to 

services provided to particular individuals during the reporting period.

Page 3 GAO-16-53 Medicaid Matching Funds 

 
eligibility reviews, and regional office reports for nine selected states.8 In 

evaluating this information, we considered GAO’s Standards for Internal

Control in the Federal Government, which provide guidance to federal 

agencies on ensuring accountability.9 In addition, we interviewed CMS 

officials about CMS’s eligibility and expenditure reviews.

We conducted this performance audit from October 2014 to October 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.

Both the federal government and the states share responsibility for 

administering the Medicaid program. At the federal level, CMS is 

responsible for overseeing states’ design and operation of their Medicaid 

programs, and ensuring that federal funds are appropriately spent. The 

federal government sets broad federal requirements for Medicaid—such 

as requiring that state Medicaid programs cover certain populations and 

benefits—while states administer their respective Medicaid programs’

day-to-day operations under their state plans.10 State responsibilities 

include, among other things, determining eligibility, enrolling beneficiaries, 

and adjudicating claims.

Medicaid is funded jointly by the federal government and states. The 

federal government’s share of most Medicaid expenditures is based on a 

statutory formula—the FMAP. Under the FMAP, the federal government 

8

We selected states to review based on their expansion status; size of the program as 

indicated by recent enrollment and expenditure reports; whether the state established its 

own state-based exchange (SBE), as authorized by PPACA, or used an exchange 

established by HHS, known as a federally facilitated exchange (FFE), and geographic 

diversity. The states we selected were California, Hawaii, Kentucky, Minnesota, New 

Mexico, New York, North Dakota, Ohio, and West Virginia.

9

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). Internal control is synonymous with management 

control and comprises the plans, methods, and procedures used to meet missions, goals, 

and objectives. 

10Each state develops its Medicaid state plan, describing how it will administer its 

Medicaid program, and submits the plan to CMS for approval.

Background

Medicaid Funding

Page 4 GAO-16-53 Medicaid Matching Funds 

 
pays a share of Medicaid expenditures based on each state’s per capita 

income 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 per capita incomes (PCI) relative to the national 

average.11 Regular FMAP rates have a statutory minimum of 50 percent 

and a statutory maximum of 83 percent. For fiscal year 2014, regular 

FMAP rates ranged from 50.00 percent to 73.05 percent. Under PPACA, 

state Medicaid expenditures for certain Medicaid enrollees are subject to 

higher federal matching percentages.

States generally must meet certain minimum requirements for 

establishing Medicaid eligibility for individuals. Historically, eligibility has 

been based on a variety of categorical and financial requirements. In 

particular, prior to PPACA, Medicaid eligibility was limited to certain 

categories of low income individuals, such as pregnant women, parents 

and children, individuals who are aged, and individuals with disabilities.12

States could use their own funds to expand Medicaid coverage to other 

populations—such as childless adults—but they could not claim federal 

matching funds except under the authority of a Medicaid demonstration 

under section 1115 of the Social Security Act.

13 As of December 1, 2009, 

about four months before PPACA’s enactment on March 23, 2010, 11 

states had expanded Medicaid coverage through state-funded programs 

or demonstrations to include parents and nonpregnant childless adults 

with incomes of at least 100 percent of the FPL.

14 This population was 

11A state’s FMAP is calculated using the following formula: State FMAP = 1.00 – 0.45 

(State PCI / U.S. PCI)2. We refer to FMAPs that are calculated using this formula as 

regular FMAP rates.

12In addition to meeting categorical and financial requirements, applicants must also meet 

immigration and residency requirements.

13Section 1115 of the Social Security Act authorizes the Secretary of HHS to waive certain

federal Medicaid requirements and allow costs that would not otherwise be eligible for 

federal matching funds for experimental, pilot, or demonstration projects that, in the 

Secretary’s judgment, are likely to assist in promoting Medicaid objectives. 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.

14See 42 U.S.C. § 1396d(z)(3). The 11 states were Arizona, Delaware, Hawaii, Maine, 

Massachusetts, Minnesota, New York, Pennsylvania, Vermont, Washington, and the 

District of Columbia. For the purposes of this report, we include the District of Columbia as 

a state. There were additional states that had expanded Medicaid coverage prior to 

PPACA but did not meet the criteria outlined in § 1396d(z)(3).

Medicaid Funding for 

Different Eligibility Groups

Page 5 GAO-16-53 Medicaid Matching Funds 

 
subsequently deemed eligible under PPACA if the state opted to expand 

Medicaid under PPACA.

The 2014 Medicaid enrollees consist of:

1. Traditionally eligible enrollees—individuals who are eligible under 

historic eligibility standards; states receive their regular FMAP for 

incurring expenditures related to this population.

2. PPACA-expansion enrollees—individuals who would not have been 

eligible under the rules in effect on December 1, 2009, and whose 

coverage began after their state opted to expand Medicaid as 

authorized by PPACA,15 and

3. State-expansion enrollees—individuals who were not traditionally 

eligible, but were covered by Medicaid under a state-funded program 

or pre-existing state demonstration as of December 1, 2009, in states 

that subsequently opted to expand Medicaid as authorized under 

PPACA.

16

In states that choose to expand their Medicaid programs as authorized by 

PPACA, the federal government will provide an FMAP of 100 percent 

beginning in 2014 to cover expenditures for the PPACA-expansion 

enrollees. The increased FMAP will gradually diminish to 90 percent by 

2020. States will also receive an FMAP above the state’s regular match 

for their Medicaid expenditures for the state-expansion enrollees, ranging 

from 75-92 percent in 2014. This FMAP will gradually increase and will 

eventually equal the FMAP for the PPACA-expansion enrollees beginning 

in 2019.17 (See table 1.) Consequently, a state that chooses to expand its 

15This group is referred to in CMS data as the newly eligible enrollees. This group also 

includes individuals who would have been eligible for Medicaid coverage under a state 

demonstration as of December 1, 2009, but could not be enrolled for such coverage due 

to limited or capped enrollment.

16This group is referred to in CMS data as the not newly eligible enrollees. 

17The 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, and 

will be between a state’s regular and PPACA-expansion FMAPs.

Page 6 GAO-16-53 Medicaid Matching Funds 

 
Medicaid program could potentially receive three different FMAPs for its 

different types of Medicaid enrollees.18

Table 1: Federal Medical Assistance Percentage (FMAP) Rates for Different Medicaid Populations, by Fiscal Year

Population 2014 2015 2016 2017 2018 2019 2020+

Traditionally eligible enrollees 50%-83% 50%-83% 50%-83% 50%-83% 50%-83% 50%-83% 50%-83% 

PPACA-expansion enrollees 100% 100% 100% 95% 94% 93% 90%

State-expansion enrollees 75%-

92%

80%-

93%

85%-

95%

86%-

93%

90%-

93%

93% 90%

Source: GAO analysis of Congressional Research Service information. | GAO-16-53

Notes: Traditionally eligible enrollees are eligible for Medicaid under historic eligibility standards. 

Patient Protection and Affordable Care Act (PPACA)-expansion enrollees are individuals whose 

coverage began after their state opted to expand Medicaid as authorized by PPACA. State-expansion 

enrollees are individuals who were not traditionally eligible but were covered by Medicaid under a 

state-funded program or state demonstration as of December 1, 2009 in states that subsequently 

opted to expand Medicaid as authorized by PPACA.

Expenditures for traditionally eligible enrollees receive the federal match calculated using the 

traditional FMAP formula, which we refer to as the regular FMAP. It can range from 50 percent (the 

statutory minimum) to 83 percent (the statutory maximum). The FMAP rate is published annually, and 

for fiscal year 2014 it ranged from 50.00 percent to 73.05 percent; for fiscal year 2015 it ranged from 

50.00 percent to 73.58 percent; and for fiscal year 2016 it ranged from 50.00 percent to 74.17 

percent. The FMAP rates for fiscal year 2017 and beyond had not yet been published at the time of 

our work.

States are primarily responsible for verifying eligibility and enrolling 

Medicaid beneficiaries. These responsibilities include verifying and 

validating individuals’ eligibility at the time of application and periodically 

thereafter, and promptly disenrolling individuals who are not eligible.19

Although states have the flexibility to use different sources of information 

and processes to verify eligibility factors, CMS guidelines call upon states 

to maximize automation and real-time adjudication of Medicaid 

applications through the use of electronic verification policies and the use 

18During 2014 and 2015, an alternative FMAP rate increase of 2.2 percentage points is 

available for states that previously expanded Medicaid coverage if the Secretary of HHS 

determines the state will not receive any FMAP rate increase for its state-expansion 

enrollees and the state has not been approved to use Medicaid disproportionate share 

hospital (DSH) funds to pay for the cost of health coverage under a demonstration in 

effect as of July 2009. One state, Vermont, is eligible to receive an additional “expansion”

FMAP of 2.2 percent in 2014 and 2015. 

19Factors that states verify include, among others, citizenship, immigration status, age 

(date of birth), Social Security number, income, residency and household composition. 

Medicaid Enrollment

Page 7 GAO-16-53 Medicaid Matching Funds 

 
of multiple application channels, including health insurance exchanges—

whether federally facilitated exchanges (FFE) or state-based exchanges 

(SBE)—to implement PPACA’s coordinated eligibility determination 

process.20 Under this process, individuals can apply for health coverage 

through their state’s Medicaid agency or its health insurance exchange,

whether an FFE or an SBE, and regardless of which route they choose, 

their eligibility will be determined for coverage under the appropriate 

program. Consequently, FFEs and SBEs are designed to make 

assessments of Medicaid eligibility. As of November 6, 2014, 17 states 

had SBEs and 34 states had FFEs. Of these 34 FFE states, 10 had 

delegated authority to the FFEs to make Medicaid eligibility 

determinations for individuals applying through the exchanges.21 In the 

remaining states, an FFE’s assessment that an applicant may be eligible 

for Medicaid is subject to a final eligibility determination by the state 

Medicaid agency, which is also the process followed in the SBE states.

Moreover, PPACA required states to use third party sources of data to 

verify eligibility to the extent practicable. Consequently, states have had 

to make changes to their eligibility systems including implementing 

electronic systems for eligibility determination and coordinating systems 

to share information.22 In addition, states have had to make changes to 

reflect new sources of documentation and income used for verification. 

Federal regulations require states to develop and submit their Medicaid 

eligibility verification plans to CMS for approval.23

20If a state elected not to create and operate its own exchange, or SBE, PPACA directed 

HHS to establish and operate an exchange, or FFE in the state. Currently, 17 states, 

including the District of Columbia, have established SBEs. 

21See http://www.medicaid.gov/medicaid-chip-program-information/programinformation/medicaid-and-chip-and-the-marketplace/medicaid-chip-marketplaceinteractions.html, accessed July 7, 2015. Within these 10 states, the state Medicaid 

agencies continue to determine eligibility for individuals who applied through the state 

Medicaid program, as is the case in all states. 

22For additional information on states’ changes to their eligibility systems, see GAO, 

Medicaid: Federal Funds Aid Eligibility IT System Changes, but Implementation 

Challenges Persist, GAO-15-169, (Washington, D.C.: Dec. 12, 2014). 

2342 C.F.R. § 435.945(j).

Page 8 GAO-16-53 Medicaid Matching Funds 

 
As part of its oversight role, CMS oversees state enrollment of 

beneficiaries and reporting of expenditures. In addition to reviewing state 

verification plans for assessing Medicaid eligibility, CMS requires states to 

conduct certain reviews to assess the accuracy of states’ Medicaid 

eligibility determination processes through its Medicaid Eligibility Quality 

Control (MEQC) and Payment Error Rate Measurement (PERM) 

programs.

• MEQC is overseen by CMS and requires states to report to CMS 

every six months on the accuracy of their Medicaid eligibility 

determination processes. States can choose to participate in 

traditional MEQC or MEQC pilots, with the majority of states choosing 

to participate in the MEQC pilots. While the traditional MEQC requires

states to report error rates for 6 month periods, MEQC pilots can be 

for a year and—for the annual pilots— states are required to report on 

an annual basis by August 1st of each year. Pilots that are less than a 

year have 60 days from the end of the pilot to report findings.

• CMS implemented the PERM to measure improper payments in 

Medicaid—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—in response to 

the requirements of the Improper Payments Information Act of 2002, 

as amended.24 Under the PERM, CMS measures and reports to 

Congress improper payment rates in three component areas: (1) feefor-service claims, (2) managed care, and (3) eligibility. To assess 

improper payments attributable to erroneous eligibility determinations, 

the PERM includes state-conducted eligibility reviews that are 

reported to CMS.

Under the MEQC and PERM, state Medicaid staff were required to review 

all the documentation for a sample of both positive and negative eligibility 

cases—that is, both individuals who were determined to be eligible, and 

24Pub. L. No. 107-300, 116 Stat. 2350 (2002), as amended by the Improper Payments 

Elimination and Recovery Act of 2010, Pub. L. No. 111-204, 124 Stat. 2224 (2010) and 

the Improper Payments Elimination and Recovery Improvement Act of 2012, Pub. L. No. 

112-248, 126 Stat. 2390 (2013) (codified, as amended, at 31 U.S.C. § 3321 note). 

CMS Oversight of 

Medicaid Enrollment and

Expenditures

Page 9 GAO-16-53 Medicaid Matching Funds 

 
those determined to be ineligible and thus denied enrollment—and 

identify any improper payments for services.25

In light of the changes to Medicaid eligibility standards and state eligibility 

systems necessitated by PPACA, CMS announced that the agency has 

suspended the MEQC program and the eligibility portion of the PERM 

until fiscal year 2018. During this period, according to CMS, PERM 

managed care and fee-for-service payment reviews will continue 

uninterrupted, and CMS will continue to report Medicaid improper 

payment rates based on that data. In addition, CMS will report an 

estimated improper payment rate for the eligibility component based on 

historical data.

As a temporary replacement to the MEQC and PERM eligibility reviews, 

CMS implemented a pilot eligibility review to assess states’ determination 

of eligibility and eligibility type for fiscal year 2014 through fiscal year 

2017. States develop their own approaches to testing their eligibility 

determinations under the pilot eligibility review, but must submit 

descriptions of their proposed methodology to CMS for review and 

approval. According to CMS’s instructions for the pilot eligibility reviews, 

at a minimum, states must draw a sample of at least 200 eligibility 

determinations, including both positive and negative determinations.26 For 

these sample cases, states must review all caseworker action taken from 

initial application to the final eligibility determination. Among other factors, 

for each case reviewed, states must assess the correctness of decisions 

relating to program eligibility and eligibility group (i.e., whether an enrollee 

was correctly identified as a traditionally eligible enrollee, a PPACAexpansion enrollee or a state-expansion enrollee). For each error 

identified, states are required to develop a corrective action plan to avoid 

similar errors in the future. States were required to have one round of the 

pilot eligibility reviews completed by the end of June 2014, a second 

round completed by the end of December 2014, and subsequent reviews 

to be completed in 2015, 2016, and 2017.

25The Medicaid and CHIP Payment and Access Commission (MACPAC) examined both 

MEQC and PERM and identified areas of overlap between the programs in its June 2013 

report to Congress (see the June 2013 MACPAC report http://www.macpac.gov.) 

26As an additional component of the pilot eligibility review, CMS requires the states to 

assess their automated eligibility determination processes by running test cases—

hypothetical applicants and scenarios—to identify any errors in their processes.

Page 10 GAO-16-53 Medicaid Matching Funds 

 
As part of its oversight responsibilities, CMS also conducts CMS-64 

expenditure reviews. As we have previously reported, the agency collects 

and reviews aggregate quarterly expenditure information from the states 

through its CMS-64 form, which is used to reimburse states for their 

Medicaid expenditures.27 The CMS-64 data set contains program-benefit 

costs and administrative expenses at a state aggregate level—such as a 

state’s total expenditures for such categories as inpatient hospital 

services and prescription drugs—and these reported expenditures are not 

linked to individual enrollees. State Medicaid agencies typically submit 

this information to CMS 30 days after a quarter has ended. CMS regional 

office staff review expenditures submitted through CMS-64 for 

reasonableness and to determine whether reported expenditures are 

allowable in accordance with Medicaid rules, and use the data to compute 

the federal share for each state’s Medicaid program expenditures. If, 

during the CMS-64 expenditure review, CMS is uncertain as to whether a 

particular state expenditure is allowable, then CMS regional offices may 

recommend that CMS defer the expenditure pending further review.

PPACA- and state-expansion enrollees comprised about 14 percent of 

Medicaid enrollees at the end of the last quarter in calendar year 2014. 

Additionally, these enrollees comprised about 10 percent of total Medicaid 

expenditures for 2014 enrollees.

As of June 2, 2015, approximately 69.8 million individuals were recorded 

as enrolled in Medicaid at the end of the last quarter of calendar year of 

2014. Most of these individuals—about 60.1 million—were traditionally 

eligible enrollees—comprising about 86 percent of total enrollees. About 

9.7 million of the 2014 enrollees—approximately 14 percent—were 

PPACA-expansion or state-expansion enrollees, with 7.5 million (11 

percent of all Medicaid enrollees) as PPACA-expansion enrollees and 2.3 

27GAO, Medicaid: Data Sets Provide Inconsistent Picture of Expenditures, GAO-13-47

(Washington, D.C.: Oct. 29, 2012).

PPACA- and StateExpansion Enrollees 

Comprised about 14 

Percent of 2014 

Medicaid Enrollees 

and about 10 Percent 

of Expenditures

PPACA- and StateExpansion Enrollees

Comprised about 14 

Percent of 2014 Medicaid 

Enrollees

Page 11 GAO-16-53 Medicaid Matching Funds 

 
million (3 percent of all Medicaid enrollees) as state-expansion enrollees. 

(See figure 1 for information on Medicaid enrollment in the last quarter of 

calendar year 2014 and appendix III for information comparing enrollment 

for all four quarters in 2014.)

Figure 1: Proportion of Medicaid Enrollees by Eligibility Group, Last Quarter of 

Calendar Year 2014

Notes: Figure excludes totals reported for the U.S. territories of American Samoa, Guam, Northern 

Mariana Islands, Puerto Rico, and the U.S. Virgin Islands, whose total federal Medicaid spending is 

subject to an annual cap, and which did not report numbers of enrollees for all eligibility types.

Traditionally eligible enrollees are eligible under historic eligibility standards. Patient Protection and 

Affordable Care Act (PPACA)-expansion enrollees are individuals whose coverage began after their 

state opted to expand Medicaid as authorized by PPACA. State-expansion enrollees are individuals 

who were not traditionally eligible, but were covered by Medicaid under a state-funded program or a 

state demonstration as of December 1, 2009 in states that subsequently opted to expand Medicaid as 

authorized by PPACA.

As of June 2, 2015, states had reported $481.77 billion in Medicaid 

expenditures for services in calendar year 2014.28 Of this total, 

expenditures for traditionally eligible enrollees were $435.91 billion 

(comprising about 90 percent of total expenditures), about $35.28 billion 

(7 percent of total expenditures) was for PPACA-expansion enrollees and 

$10.58 billion (2 percent of total expenditures) was for state-expansion 

enrollees. (See figure 2 and appendix IV for more information on 2014 

Medicaid expenditures.)

28These data were extracted from the CMS-64 net Financial Management Report for 

calendar year 2014, and exclude administrative expenditures. 

Expenditures for PPACAand State-Expansion

Enrollees Comprised 

about 10 Percent of 

Spending for 2014 

Medicaid Enrollees

Page 12 GAO-16-53 Medicaid Matching Funds 

 
Figure 2: Total Medicaid Expenditures for Calendar Year 2014 by Enrollee Eligibility 

Group

Notes: Percentages do not total 100 due to rounding.

Figure excludes totals reported for the U.S. territories of American Samoa, Guam, Northern Mariana 

Islands, Puerto Rico, and the U.S. Virgin Islands, whose total federal Medicaid spending is subject to 

an annual cap, and which did not report expenditures for all eligibility types.

Traditionally eligible enrollees are eligible under historic eligibility standards. Patient Protection and 

Affordable Care Act (PPACA)-expansion enrollees, are individuals whose coverage began after their 

state opted to expand Medicaid as authorized by PPACA. State-expansion enrollees are individuals 

who were not traditionally eligible, but were covered for Medicaid under a state-funded program or a 

state demonstration as of December 1, 2009 in states that subsequently opted to expand Medicaid as 

authorized by PPACA.

Overall, the federal share of Medicaid expenditures was approximately 61 

percent of spending for Medicaid services in 2014. For traditionally 

eligible enrollees, the percentage of federal spending was 58 percent of 

total Medicaid expenditures for this population. For PPACA-expansion 

enrollees, the overall proportion of federal spending was 100 percent, and 

for state-expansion enrollees, the overall proportion of federal spending 

was 74 percent.

Page 13 GAO-16-53 Medicaid Matching Funds 
CMS has implemented reviews that (1) assess the accuracy of eligibility 

determinations, and (2) examine states’ expenditures to ensure they are 

attributed to the correct eligibility group. However, both reviews contain 

gaps that limit CMS’s ability to ensure that expenditures for the different 

eligibility groups are appropriately matched with federal funds.

CMS has implemented interim efforts to assess states’ Medicaid eligibility

determinations by requiring states to conduct pilot eligibility reviews. 

States conduct these reviews to assess the correctness of their decisions 

related to program eligibility and eligibility group, which defines the 

amount of federal matching funds for eligible individuals. To implement 

the changes required by PPACA to streamline and automate the 

Medicaid enrollment process, states had to make significant changes to 

their systems and develop new policies and procedures.29 In recognition 

of the states’ need to redesign their Medicaid business operations and 

systems, CMS designed these pilot eligibility reviews to provide more 

timely feedback on the accuracy of states’ eligibility determinations than 

under previous assessments, and allow for quicker corrective action. 

According to CMS, the pilot eligibility reviews (1) provide state-by-state 

programmatic assessments of the performance of new processes and 

systems in adjudicating eligibility; (2) identify strengths and weaknesses 

in operations and systems leading to errors; and (3) test the effectiveness 

of corrections and improvements in reducing or eliminating those errors.30

States have completed the initial round of pilot eligibility reviews, which 

showed wide variation in both the design and the results among the 

29For example, states must adopt a single streamlined application that can be submitted 

via multiple channels—such as mail, in-person, phone, or online; use a HHS-managed 

data services hub to access federal verification sources; and facilitate account transfers 

and data-sharing between the exchanges and Medicaid.

30For each error identified, states are required to develop a corrective action plan to avoid 

similar errors in the future. 

Limitations in 

Eligibility and 

Expenditure Reviews 

Hamper CMS’s Ability 

to Ensure the 

Appropriateness of 

Federal Matching 

Funds

A Gap Exists in CMS’s 

Interim Efforts to Assess 

the Accuracy of Eligibility 

Determinations

Page 14 GAO-16-53 Medicaid Matching Funds 

 
states—reflecting, in part, the latitude they were given in designing their 

review methodology.31 Although the results varied, pilot eligibility reviews 

for eight of the nine states we examined identified eligibility determination 

errors, improper payments associated with those errors, and described 

the states’ plans for corrective action to prevent similar errors. For 

subsequent rounds, CMS revised its guidance. For example, CMS 

updated instructions for the second round to include standard definitions 

for errors and deficiencies, and to require the inclusion of eligibility 

redeterminations in the review, and plans to further refine the instructions 

for future rounds. Based on these updated instructions, the results of the 

future rounds of pilot eligibility reviews may result in more comparable 

information.

However, the pilot eligibility reviews do not include a review of the 

accuracy of federal eligibility determinations in certain states that 

delegated authority to the federal government to make Medicaid eligibility 

determinations through the FFE.

32 Officials from the National Association 

of Medicaid Directors told us that states had raised concerns earlier that 

federal determinations were incorrect, citing challenges related to 

transferring information between federal exchanges and state systems. 

Additionally, we recently reported that states using FFEs experienced 

challenges transferring applications and transmitting information between 

state and federal data sources, which contributed to enrollment delays.33

CMS has established another mechanism—termed the eligibility support 

contractor pilot program—to assist in developing new methodologies for 

31For example, in the initial round, CMS did not define errors and permitted each state to 

define its own errors resulting in variation across the states, with some states only 

reporting as errors factors that resulted in an incorrect eligibility determination, while other 

states reported factors that did not result in an incorrect determination. 

32The state Medicaid agencies in these 10 states continue to determine eligibility for 

individuals who applied through the state Medicaid program, and these state 

determinations of eligibility are subject to review under the pilot eligibility review. In the 24 

states whose FFEs make an eligibility assessment, the FFEs may recommend a positive 

or negative eligibility determination, but the states retain final authority to make the 

determination. According to CMS officials, these state determinations are included in the 

scope of the states’ pilot eligibility reviews. 

33See GAO-15-169. In that report, we found that although the ability to transfer information 

between federal and state data sources has improved, the capability to conduct real time 

application transfers of information for immediate eligibility determinations remains 

elusive.

Page 15 GAO-16-53 Medicaid Matching Funds 

 
assessing eligibility determinations; however, the eligibility support 

contractor program generally does not assess federal determinations for 

accuracy. Therefore, for the states in which the federal government 

performs eligibility determinations, there is a gap in assuring that the 

determinations are accurate.34 According to CMS officials, the purpose of 

the eligibility support contractor program—along with the pilot eligibility 

reviews—is to inform revisions to the eligibility component of the PERM, 

which will be resumed in 2018. In the interim, CMS uses the eligibility 

support contractor to assist CMS in developing a methodology for the 

future PERM eligibility review, including a methodology for assessing 

federal eligibility determinations. The contractor will make 

recommendations to CMS on necessary changes to the methodology 

used to test eligibility determinations for the MEQC and PERM.

As a result, under the current process, CMS will not be able to assess the 

accuracy of federal eligibility determinations until 2018, thereby creating 

the potential risk for improper payments in the states that have delegated 

authority to the federal government to make eligibility determinations 

through the FFEs. Federal internal control standards require that federal 

agencies identify and assess risks associated with achieving agency 

objectives.35 One method for identifying the risk of inaccurate eligibility 

determinations could include consideration of findings from audits and 

other assessments. However, neither of the interim measures—the pilot 

eligibility reviews or the eligibility support contractor program—

implemented by CMS will identify risks for improper payments due to 

erroneous federal determinations. According to CMS officials, the agency 

excluded federal determinations from the pilot eligibility reviews states 

must conduct because these states do not have the resources to fully 

review the federal determinations. Moreover, CMS officials noted that a 

review of federal determinations—which are independent of a state’s own 

process—would not assist states in correcting their own eligibility 

determination processes. However, a review of federal eligibility 

34CMS permits the states to work with the eligibility support contractor in developing a 

methodology to review eligibility determinations and submit the results in place of the pilot 

eligibility review results. Two states that have delegated authority to their FFEs to make 

Medicaid eligibility determinations—Alabama and Montana—have elected to work with the 

eligibility support contractor and include federal determinations in the scope of their 

review. 

35See GAO/AIMD-00-21.3.1

Page 16 GAO-16-53 Medicaid Matching Funds 

 
determinations would help CMS assess whether the FFEs are 

appropriately determining an applicant’s eligibility for Medicaid.

CMS modified its standard quarterly review of CMS-64 expenditures to 

examine expenditures for both categories of the expansion population.36

As part of this modified review, CMS staff must select a sample of 

different types of enrollees—including at least 25 PPACA-expansion 

eligible enrollees, 10 state-expansion eligible enrollees (where 

applicable), and 5 traditionally eligible enrollees—and examine their 

expenditures to ensure that they were reported as expenditures for the 

correct eligibility type. According to CMS officials, the expenditure review 

is primarily intended to ensure that states are correctly grouping 

expenditures for the different eligibility groups as initially determined, not 

whether the determination is correct. For example, the review assesses 

whether the expenditures for someone the state has determined to be a 

PPACA-expansion enrollee are submitted for the PPACA-expansion 

eligibility group.

In our review of the pilot eligibility reviews, we found that eight of the nine 

states we reviewed reported errors that reflected both incorrect eligibility 

determinations and errors in the eligibility determination process that did 

not result in an incorrect determination.37 For example

• Eight of the nine states reported errors that resulted in incorrect 

eligibility determinations, including enrollment of individuals with 

insurance or incomes exceeding Medicaid standards. Total improper 

payment amounts among these states ranged from $20 to 

approximately $48,000 across their samples of approximately 200-

300 eligibility determinations.

• One of the eight states reported as an error its failure to send out 

notification letters to some enrollees within the correct timeframe—but 

this error did not affect the accuracy of the eligibility determination.

We found that errors were often related to income verification, 

inadequately trained staff, or challenges transmitting information between 

36States that did not expand Medicaid are not subject to the special expenditure review.

37We were unable to calculate an error rate for each state because states were permitted 

to develop their own definitions of errors. Consequently, some states included as errors 

factors that did not result in erroneous eligibility determinations.

CMS’s Expenditure 

Reviews Cannot Identify 

Eligibility-Related Errors, 

Limiting Assurance that 

Expenditures Are 

Appropriately Matched 

with Federal Funds

Page 17 GAO-16-53 Medicaid Matching Funds 

 
exchange and Medicaid databases. States described the corrective 

actions they planned to take for each error identified in their pilot eligibility 

reviews.

Although the changes CMS has made to the CMS-64 expenditure review 

have enabled the agency to identify certain types of erroneous 

expenditures for the expansion population, these reviews may not be able 

to identify expenditures that are erroneous due to incorrect eligibility 

determinations, such as those identified in the state pilot eligibility review 

examples above. As a result, CMS’s expenditure review cannot provide 

assurance that states’ expenditures are correctly matched based on 

enrollees’ eligibility categories.38 CMS officials told us that the CMS-64 

expenditure review process is not informed by the findings of the pilot 

eligibility reviews. Thus, if a state’s pilot eligibility review identified errors 

in the state’s eligibility determinations or automated eligibility systems, 

CMS is not using that information to target its CMS-64 review of that 

state’s expenditures for PPACA-expansion enrollees. For example, none 

of the eight states we examined that reported eligibility determination 

errors in their pilot eligibility reviews were identified as having eligibilityrelated expenditure errors by CMS regional offices. As a result, CMS is 

missing the opportunity to better assure that the appropriate federal 

matching rate is being applied to states’ expenditures. Federal internal 

control standards require that federal agencies identify and assess risks 

associated with achieving agency objectives. In addition, such information 

should be communicated to others within the agency to enable them to 

carry out their internal control responsibilities. Although the purposes of 

the CMS-64 expenditure review are distinct from the eligibility review, the 

information gained from the pilot eligibility reviews on state eligibility 

determination errors could be useful in identifying potentially erroneous 

expenditures that require further review by CMS.

PPACA authorized many significant changes to the Medicaid program, 

such as expanded eligibility and streamlined eligibility processes between 

Medicaid and the exchanges. However, implementing these changes 

38For example, in its deferral report for the fourth quarter of fiscal year 2014 for all states, 

CMS had identified erroneously reported expenditures for the expansion population in two

states. One state had included, as part of its reporting of expenditures for PPACAexpansion enrollees, expenditures for services that pre-dated the implementation of the 

expansion and a second state had erroneously included expenditures for dual-eligible 

beneficiaries as PPACA-expansion enrollee expenditures. These two states were not 

among the nine states we reviewed.

Conclusions

Page 18 GAO-16-53 Medicaid Matching Funds 

 
requires states to adapt their systems, policies, and procedures, resulting 

in a complex realignment of processes, and necessitating careful review 

by CMS to ensure that determinations of eligibility and the reporting of 

expenditures are accurate. As CMS redesigns its oversight and 

monitoring tools to better capture the changes brought about by PPACA 

to Medicaid eligibility and federal matching funds, the agency has 

implemented measures to inform its processes for assessing states’

eligibility determinations and reporting of expenditures.

However, in the short term, CMS is missing opportunities to better ensure 

the accuracy of eligibility determinations in all states, and also ensure that 

Medicaid expenditures for different eligibility groups are appropriately 

matched with federal funds. By excluding Medicaid eligibility 

determinations made by the FFEs from its pilot eligibility reviews, CMS 

has created a gap in efforts to ensure that only eligible individuals are 

enrolled into the Medicaid program. Furthermore, although CMS has a 

process for assessing the accuracy of eligibility determinations in the 

states, CMS does not use the results of these eligibility reviews, which 

have the potential to provide valuable information on state eligibility 

determinations, to better target its review of Medicaid expenditures for 

different eligibility groups. Using the eligibility reviews to inform its reviews 

of state-reported expenditures may assist CMS in identifying payments 

made on behalf of ineligible or incorrectly enrolled individuals, thereby 

reducing the risk of improper payments in the Medicaid program.

To improve the effectiveness of its oversight of eligibility determinations, 

we recommend that the Administrator of CMS conduct reviews of federal 

Medicaid eligibility determinations to ascertain the accuracy of these 

determinations and institute corrective action plans where necessary.

To increase assurances that states receive an appropriate amount of 

federal matching funds, we recommend that the Administrator of CMS 

use the information obtained from state and federal eligibility reviews to 

inform the agency’s review of expenditures for different eligibility groups 

in order to ensure that expenditures are reported correctly and matched 

appropriately.

We provided a draft of this report to HHS for comment. In its written 

comments, HHS highlighted the actions the department has taken to 

ensure the accuracy of Medicaid eligibility determinations made through 

the exchanges, citing the multi-layer verification processes in place to 

assess applicant eligibility, and also noted that it conducts reviews of 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation

Page 19 GAO-16-53 Medicaid Matching Funds 
expenditure data submitted by the states. HHS agreed with our first 

recommendation and agreed with the concept of our second 

recommendation. 

HHS concurred with our first recommendation to conduct reviews on 

federal Medicaid eligibility determinations to ascertain the accuracy of 

these determinations and institute corrective action plans where 

necessary. HHS noted that federal eligibility determinations in two states 

are currently being reviewed by the eligibility support contractor, and 

stated that federal determinations will be included as part of the future 

PERM eligibility review. However, the eligibility component of the PERM 

will not be resumed until 2018, and in the interim, without a systematic 

assessment of federal eligibility determinations, we remain concerned 

that CMS lacks a mechanism to identify and correct federal eligibility 

determination errors and associated payments. Given the program 

benefits and federal dollars involved, we urge CMS to look for an 

opportunity to identify erroneous federal eligibility determinations and 

implement corrective actions as soon as possible.

With regard to our second recommendation, HHS agreed that ensuring 

accurate eligibility determinations and correct expenditure reporting is an 

important safeguard for the Medicaid program but did not state whether it 

specifically concurred with the recommendation. HHS further noted that 

eligibility and expenditure reviews are two distinct, but complementary 

oversight processes, with different timeframes. In consideration of HHS’s 

comments, we adjusted our recommendation to take into account the 

differences in the timeframes for these two types of reviews. We continue 

to believe that using the information obtained from state and federal 

eligibility reviews to inform the agency’s review of expenditures for 

different eligibility groups will help ensure that expenditures are reported 

correctly and matched appropriately. Eligibility reviews are conducted on 

a different timeframe than the expenditure reviews, and because states 

are required to identify errors and develop corrective action plans to 

address these errors, it is anticipated that, over time, the eligibility reviews 

will support HHS’s efforts to appropriately match state expenditures. 

HHS’s comments are reproduced in appendix I. HHS also provided 

technical comments, which we incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Secretary of Health 

and Human Services, the Administrator of CMS, appropriate 

Page 20 GAO-16-53 Medicaid Matching Funds 
congressional committees, 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 regarding this report, please 

contact me 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 V.

Carolyn L. Yocom

Director, Health Care

Page 21 GAO-16-53 Medicaid Matching Funds 
Appendix I: Comments from the Department of Appendix I: Comments from the Department Health and Human Services

of Health and Human Services

Page 22 GAO-16-53 Medicaid Matching Funds 
Appendix I: Comments from the Department of 

Health and Human Services

Page 23 GAO-16-53 Medicaid Matching Funds 
Appendix I: Comments from the Department of 

Health and Human Services

Page 24 GAO-16-53 Medicaid Matching Funds 
Appendix I: Comments from the Department of 

Health and Human Services

Page 25 GAO-16-53 Medicaid Matching Funds 
Appendix II: Scope and Methodology

To determine the enrollment and spending for individuals who enrolled in 

Medicaid in 2014, and the extent to which these individuals were 

identified as eligible under the Patient Protection and Affordable Care Act 

(PPACA), we examined data submitted to the Centers for Medicare & 

Medicaid Services (CMS) by states as part of their enrollment and 

expenditure reporting.1 These data included information from new 

enrollment forms developed by CMS that are used by states to report the 

number of enrollees by eligibility type, as well as expenditure data, to 

CMS by means of the Quarterly Medicaid Statement of Expenditures for 

the Medical Assistance Program—also known as the form CMS-64—

within the Medicaid Budget and Expenditure System (MBES). We 

reviewed data for each quarter in calendar year 2014 and relevant 

guidance and documentation where available. We also interviewed 

knowledgeable CMS officials in the Center for Medicaid and CHIP 

Services about data available on Medicaid enrollment and expenditures, 

and what steps they take to ensure data reliability. Based on these 

discussions, we determined that these data were sufficiently reliable for 

our purposes.

States submit total enrollment and aggregate actual total quarterly 

Medicaid expenditures on the CMS-64 no later than 30 days after the end 

of each quarter. However, states may continue to submit additional data 

for each quarter on a continual basis and make adjustments to the 

previous three quarters submitted. States may report expenditures up to a 

period of two years (possibly more) after the date of the original service 

payment. Because these are point-in-time estimates, the data are current 

as of the date we pulled the data from MBES.2 CMS-64 data are reported 

at a state aggregate level, and therefore do not include individual 

expenditure data on the state’s enrollees or the services they received 

under Medicaid.

1

In this report, we use the term “state” to refer to the 50 states and the District of 

Columbia. We excluded Medicaid administrative expenditures and data reported by the 

U.S. territories of American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, 

and the U.S. Virgin Islands, whose total federal Medicaid spending is subject to an annual 

cap, and which did not report numbers of enrollees and expenditures for all eligibility 

types.

2

States do not necessarily report consistently for each eligibility or service category or 

quarter. For example, at the time of our review of the data, of the 28 states that had 

expanded Medicaid, 21 had reported enrollment data for PPACA-expansion eligible 

enrollees for December 2014 and 14 had reported enrollment data for the state-expansion 

individuals for December 2014. Some states had reported data for both groups. 

Appendix II: Scope and Methodology

About CMS-64 

Submission through 

MBES

Page 26 GAO-16-53 Medicaid Matching Funds 

 
Appendix II: Scope and Methodology

We obtained enrollment and expenditure data for calendar year 2014—

the first full year that states had the option of expanding Medicaid under 

PPACA. This includes the first through fourth quarters of the 2014 

calendar year (ending March, June, September, and December 2014, 

respectively). Because data are reported for each month, we use the last 

month of the quarter to report for that quarter. For example, we used the 

numbers reported for March 2014 as the numbers reported by states for 

the first quarter of 2014. We extracted these data from the MBES on June 

2, 2015. We reviewed the data for reasonableness and consistency, 

including screening for missing data, outliers, and obvious errors. While 

enrollment data may be identified for a particular month in a quarter, 

expenditure data may not be identified for a particular month in a quarter 

because it is reported cumulatively for each quarter and added each 

subsequent quarter in the year.

Beginning in January 2014, states and territories also began reporting 

enrollment data. CMS implemented a new form—the CMS-64.Enroll 

form—to collect information on total enrollment and enrollment eligibility 

type (e.g., PPACA-expansion enrollees and state-expansion enrollees). 

These data show the numbers of beneficiaries who were enrolled at any 

time during each month. This would include, for example, beneficiaries 

who may have been enrolled at the beginning of June and were no longer 

enrolled at the end of June. Because the enrollment data are point-in-time 

estimates, we were unable to add the numbers of enrollees across 

quarters to obtain the total number of Medicaid enrollees for the year.3

Individuals might be enrolled continuously and adding up each month 

would count the same individuals multiple times.

The CMS-64 data are used to reimburse the states for the applicable 

federal share of Medicaid expenditures.4 As we previously stated, CMS 

reviews these submissions, and the data are the most reliable accounting 

3

Since there is much turnover in the Medicaid program, Medicaid enrollment measured in 

different ways can produce vastly different enrollment figures. Medicaid enrollment could 

be measured by “ever enrolled” persons (i.e., the number of people covered by Medicaid 

for any period of time during the year); “person-year equivalents” (i.e., the average 

enrollment over the course of the year); and “point-in-time” (i.e., the number of Medicaid 

enrollees at a specified date). We used these data to reflect point-in-time estimates—

enrollment in the program as of the last month of each quarter.

4

CMS uses CMS-64 data to reconcile actual aggregate expenditures reported by states 

with estimated expenditures reported by states prior to the quarter in the CMS-37 form.

Enrollment data

Expenditure data

Page 27 GAO-16-53 Medicaid Matching Funds 

 
Appendix II: Scope and Methodology

of total Medicaid expenditures.5 We extracted expenditure data from the 

CMS-64 net expenditures Financial Management Report for calendar 

year 2014. The Financial Management Report is an annual account of 

states’ program and administrative Medicaid expenditures, including 

federal and state expenditures by expenditure category. This source 

includes expenditures under Medicaid demonstrations, as well as 

adjustments by states or CMS and collections.6 Expenditure data from the 

CMS-64 may not have been reviewed by CMS. Additionally, these data 

do not tie expenditures to services provided to particular individuals 

during the reporting period.

5

As we previously reported, CMS has another data set that reports state Medicaid 

expenditures, but it has a different purpose and limitations. The Medicaid Statistical 

Information System (MSIS) was established as a national eligibility and claims data set, 

and can provide CMS a summary of expenditures linked to specific beneficiaries on the 

basis of their medical claims for care. CMS reviews these data for reliability, and uses 

these data for policy analysis, program utilization, and forecasting expenditures. See 

GAO, Medicaid: Data Sets Provide Inconsistent Picture of Expenditures, GAO-13-47

(Washington, D.C.: Oct. 29, 2012). Because claims data would not yet be submitted or 

complete for PPACA-expansion enrollees (who received coverage under Medicaid 

beginning January 1, 2014) during the time period of our analysis, MSIS data were not 

appropriate for our analysis. 

6

Adjustments are made by states to correct overpayments, underpayments, or reporting 

errors to spending reported in prior quarterly reports. Collections include reimbursement 

from private or public insurance plans or third parties that are liable for some portion of 

enrollees’ health care costs, as well as recoveries made through efforts to reduce fraud, 

waste, and abuse.

Page 28 GAO-16-53 Medicaid Matching Funds 

 
Appendix III: Medicaid Enrollment in 2014

Table 2 shows the number of individuals enrolled in Medicaid at any time 

during the last month of each quarter in 2014, by eligibility group. As 

shown, Patient Protection and Affordable Care Act (PPACA)-expansion 

enrollees and state-expansion enrollees comprised a small portion of total 

enrollees in all quarters of 2014. These are point-in-time estimates—that 

is, counts of enrollees for the last month in each quarter. These numbers 

should not be added across quarters to obtain the total number of 

Medicaid enrollees for the year because doing so might count the same 

enrollees multiple times.

Table 2: Medicaid Enrollment Data (in millions), 2014 

First quarter

(ending March 2014)

Second quarter 

(ending June 2014)

Third quarter 

(ending September 2014)

Fourth quarter 

(ending December 2014)

States 

reporting

Enrollees

(percentage of 

total)

States 

reporting

Enrollees 

(percentage of 

total)

States 

reporting

Enrollees 

(percentage of 

total)

States 

reporting

Enrollees 

(percentage of 

total)

Total enrollees 51 61.2

(100%)

50 66.0

(100 %) 

48 56.9

(100%)

47 69.8

(100%)

Traditionally 

eligiblea —- 55.4

(90%)

—- 58.7

(89%)

—- 50.2

(88%)

—- 60.1

(86%)

PPACAexpansion23 4.1

(7%)

23 5.6

(8%)

22 4.6

(8%)

23 7.5

(11%)

Stateexpansion13 1.7

(3%)

14 1.7

(3%)

15 2.0

(4%)

16 2.3

(3%)

Source: GAO analysis of Centers for Medicare & Medicaid Services enrollment data, as of June 2, 2015. | GAO-16-53

Notes: Numbers may not add to total due to rounding.

We excluded totals reported for the U.S. territories of American Samoa, Guam, Northern Mariana 

Islands, Puerto Rico, and the U.S. Virgin Islands, whose total federal Medicaid spending is subject to 

an annual cap, and which did not report numbers of enrollees for all eligibility groups. For the 

purposes of this report, we include the District of Columbia as a state.

Traditionally eligible enrollees are eligible under historic eligibility standards. Patient Protection and 

Affordable Care Act (PPACA)-expansion enrollees are individuals whose coverage began after their 

state opted to expand Medicaid as authorized by PPACA. State-expansion enrollees are individuals 

who were not traditionally eligible, but were covered by Medicaid under a state-funded program or

state demonstration as of December 1, 2009 in states that subsequently opted to expand Medicaid as 

authorized by PPACA.

a

We calculated the number of traditionally eligible enrollees by subtracting the number of PPACAexpansion and state-expansion enrollees from the number of total enrollees. Traditionally eligible 

enrollees are comprised of different categories of enrollees including pregnant women, aged, blind, or 

disabled individuals, and states did not consistently report numbers for these groups. For example, 

most states reported enrollment for at least one eligibility category, but did not necessarily report for 

all categories across all quarters. Because we calculated this number, we do not have the number of 

states reporting this number.

Appendix III: Medicaid Enrollment in 2014

Page 29 GAO-16-53 Medicaid Matching Funds 
Appendix IV: Medicaid Expenditures in 2014

Table 3 reflects Medicaid expenditures paid by eligibility group, in 2014. 

As shown, expenditures for Patient Protection and Affordable Care Act 

(PPACA)-expansion enrollees and state-expansion enrollees comprised a 

small portion of total Medicaid expenditures in 2014.

Table 3: Medicaid Expenditures (in billions) by Eligibility Group, 2014

Eligibility Type

Number of 

states 

reporting

Total Medicaid federal share State share

Dollars Percentage of

total

Dollars Percentage of 

total

Dollars Percentage of 

total

Totals 51 $481.77 100% $295.98 100% $185.03 100%

Traditionally 

eligiblea 27 $435.91 90% $252.87 85% $182.37 99%

PPACAexpansion25 $35.28 7% $35.28 12% $0.00 0%

State-expansion 17 $10.58 2% $7.83 3% $2.66 1%

Source: GAO analysis of Centers for Medicare & Medicaid Services expenditure data as of June 2, 2015. | GAO-16-53

Notes: Numbers may not add to total due to rounding.

We excluded totals reported for the U.S. territories of American Samoa, Guam, Northern Mariana 

Islands, Puerto Rico, and the U.S. Virgin Islands, whose total federal Medicaid spending is subject to 

an annual cap, and which did not report expenditures for all eligibility groups. For the purposes of this 

report, we include the District of Columbia as a state.

Traditionally eligible enrollees are eligible under historic eligibility standards. Patient Protection and 

Affordable Care Act (PPACA)-expansion enrollees, are individuals whose coverage began after their 

state opted to expand Medicaid as authorized by PPACA. State-expansion enrollees are individuals 

who were not traditionally eligible, but were eligible for Medicaid under a state-funded program or a 

state demonstration as of December 1, 2009 in states that subsequently opted to expand Medicaid as 

authorized by PPACA.

a

States did not report expenditures for the traditionally eligible. We calculated this group by 

subtracting the reported expenditures for PPACA-expansion and state-expansion enrollees from the 

reported total expenditures. Not all states reported expenditures for both groups.

Appendix IV: Medicaid Expenditures in 2014

Page 30 GAO-16-53 Medicaid Matching Funds 
Appendix V: GAO Contact and Staff 

Acknowledgments

Carolyn L. Yocom, (202) 512-7114 or yocomc@gao.gov

In addition to the contact named above, Robert Copeland, Assistant 

Director; Christine Davis; Sandra George; Giselle Hicks; Drew Long; 

Jasleen Modi; Giao N. Nguyen; and Emily Wilson made key contributions 

to this report.

Appendix V: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(291226) Page 31 GAO-16-53 Medicaid Matching Funds 
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