NATIONAL MEDICAID 

AUDIT PROGRAM

CMS Should Improve 

Reporting and Focus on 

Audit Collaboration with 

States 

Statement of Carolyn L. Yocom 

Director, Health Care

Testimony 

Before the Subcommittee on Federal Financial Management, 

Government Information, Federal Services, and 

International Security, Committee on Homeland Security 

and Governmental Affairs, U.S. Senate

For Release on Delivery 

Expected at 10:00 a.m. EDT

June 14, 2012

GAO-12-814T

United States Government Accountability Office

GAO

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Page 1 GAO-12-814T National Medicaid Audit Program

Chairman Carper, Ranking Member Brown, and Members of the 

Subcommittee:

I am pleased to be here today to discuss the National Medicaid Audit 

Program. Until recently, Medicaid program integrity had been primarily a 

state responsibility. Specifically, states have been responsible for 

ensuring the qualifications of the providers who bill the program, detecting 

improper payments, recovering overpayments, and referring suspected 

cases of fraud and abuse to law enforcement authorities.1 At the federal 

level, however, the Deficit Reduction Act of 2005 (DRA) created the 

Medicaid Integrity Program to oversee and support state program integrity 

efforts, and, among other actions, directed the Centers for Medicare & 

Medicaid Services (CMS) to hire contractors to review and audit state 

Medicaid claims data.2 CMS established the Medicaid Integrity Group 

(MIG) to implement and oversee the National Medicaid Audit Program 

(NMAP).3

My statement will highlight key findings from a report prepared at your 

request.

4

 

1

An improper payment is any payment that should not have been made or that was made 

in an incorrect amount (including overpayments and underpayments) under statutory, 

contractual, administrative, or other legally applicable requirements. This definition 

includes any payment to an ineligible recipient, any payment for an ineligible good or 

service, any duplicate payment, any payment for a good or service not received (except 

where authorized by law), and any payment that does not account for credit for applicable 

discounts. Improper Payments Elimination and Recovery Act of 2010, Pub. L. No. 111-

204, § 2(e), 124 Stat. 2224, 2227 (codified at 31 U.S.C. § 3321 note). The Centers for 

Medicare & Medicaid Services estimated that $21.9 billion (8 percent) of Medicaid’s 

federal expenditures of $270 billion in fiscal year 2011 involved improper payments, the 

second highest amount reported by any federal program.

This report focuses on: (1) the effectiveness of the MIG’s 

implementation of NMAP and (2) the MIG’s efforts to redesign NMAP. To 

conduct this work, we analyzed NMAP data provided by the MIG and 

interviewed MIG officials. In addition, we reviewed reports submitted by 

the MIG’s review and audit contractors and interviewed representatives of 

2

Pub. L. No. 109-171, § 6034, 120 Stat. 3, 74-78 (2006) (codified at 42 U.S.C. § 1396u-6). 

CMS is the federal agency within the Department of Health and Human Services that 

oversees Medicaid.

3

See GAO, Medicaid Program Integrity: Expanded Federal Role Presents Challenges to 

and Opportunities for Assisting States, GAO-12-288T (Washington, D.C.: Dec. 7, 2011). 

4

See GAO, National Medicaid Audit Program: CMS Should Improve Reporting and Focus 

on Audit Collaboration with States, GAO-12-627 (Washington, D.C.: June 14, 2012).

 
 

Page 2 GAO-12-814T National Medicaid Audit Program

each type of contractor. We also interviewed program integrity officials in 

11 states to obtain their perspectives on NMAP, and collected additional 

information from 8 states where the MIG has recently implemented 

changes to NMAP.5

We found that, compared to the initial test audits and the more recent 

collaborative audits, the majority of the MIG audits conducted under 

NMAP were less effective because they used Medicaid Statistical 

Information System (MSIS) data.

We reviewed relevant Department of Health and 

Human Services Office of the Inspector General (HHS-OIG) reports, and 

interviewed HHS-OIG officials involved in early assessments of the MIG’s 

review and audit contractors. More information on our scope and 

methodology is provided in the full report. We performed our work from 

July 2011 to June 2012 in accordance with generally accepted 

government auditing standards.

6

 

5

CMS had implemented changes to NMAP in nine states; however, eight responded to 

our questions on the changes to the program. We selected these 11 states because of 

their geographic diversity and because together they accounted for more than half of 

Medicaid spending and beneficiaries.

MSIS is an extract of states’ claims 

data and is missing key elements, such as provider names, that are 

necessary for identifying audit targets. Since fiscal year 2008, a small 

fraction (4 percent) of the 1,550 MSIS audits identified $7.4 million in 

potential overpayments, over two-thirds did not identify overpayments, 

and the remaining audits (27 percent) were ongoing. In contrast, 26 test 

audits and 6 collaborative audits—which used states’ more robust 

Medicaid Management Information System (MMIS) claims data and 

allowed states to select the audit targets—together identified more than 

$12 million in potential overpayments. (See fig. 1.) Furthermore, the 

typical amount of the potential overpayment for MSIS audits ($16,000) 

was smaller than the amounts identified through test and collaborative 

audits—$140,000 and $600,000—respectively.

6

For this statement, we refer to audits that used MSIS data as MSIS audits. The other two 

types of NMAP audits (test audits and collaborative audits) used state claims data. 
 

Page 3 GAO-12-814T National Medicaid Audit Program

Figure 1: Number of Audits and Total Potential Overpayments Identified and Sent to States for Recoupment (in millions of 

dollars) by Audit Approach, through February 2012

Notes: Test audits were conducted from 2007 through 2010. MSIS audits began in 2008 and are 

ongoing. Collaborative audits began in 2010 as part of the redesign of the NMAP and are also 

ongoing. Dollar amounts shown are potential overpayments in final audit reports sent to states for 

recovery. They do not reflect the amounts in draft audit reports or the amounts actually recovered by 

the states. Percentages may not total 100 because of rounding.

The MIG reported that it is redesigning NMAP, but has not provided 

Congress with key details about the changes it is making to the program, 

including why it changed to collaborative audits, new analytical roles for 

its contractors, and its plans to monitor and evaluate the redesign. Early 

results showed that this collaborative approach may enhance state 

program integrity activities by allowing states to leverage the MIG’s 

resources to augment their own program integrity capacity. However, the 

lack of a published plan detailing how the MIG will monitor and evaluate 
 

Page 4 GAO-12-814T National Medicaid Audit Program

NMAP raises concerns about the MIG’s ability to effectively manage the 

program. Given that NMAP has accounted for more than 40 percent of 

MIG expenditures, transparent communications and a strategy to monitor 

and continuously improve NMAP are essential components of any plan 

seeking to demonstrate the MIG’s effective stewardship of the resources 

provided by Congress.

Our report includes recommendations that the Acting Administrator of 

CMS ensure that the MIG’s (1) planned update of its comprehensive plan 

provides key details about NMAP, including its expenditures and audit 

outcomes, program improvements, and plans for effectively monitoring 

the program; (2) future annual reports to Congress clearly address the 

strengths and weaknesses of the audit program and its effectiveness; and 

(3) use of NMAP contractors supports and expands states’ own program 

integrity efforts through collaborative audits. In commenting on a draft of 

our report, HHS partially concurred with our first recommendation but 

believed that CMS's annual report to Congress was a more appropriate 

vehicle for reporting NMAP results than its comprehensive plan. HHS 

concurred with the other two recommendations.

Chairman Carper, Ranking Member Brown, and members of the 

Subcommittee, this concludes my prepared remarks. I would be pleased 

to respond to any questions you may have at this time.

For questions about this statement, please contact 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 statement. Individuals making key contributions to this testimony 

include Walter Ochinko, Assistant Director; Sean DeBlieck; Leslie V. 

Gordon; and Drew Long.

GAO Contact and 

Staff 

Acknowledgments 

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