Medicaid: Additional Efforts Needed to Ensure that State Spending is Appropriately Matched with Federal Funds
Published: 2015-10-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.
section_title: What GAO Recommends
paragraphs: 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.

section_title: Letter
paragraphs: 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). 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. Twenty-six states and the District of Columbia opted to expand  their Medicaid programs for 2014. States that choose to expand their  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. 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. 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.
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. 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. 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  eligibility reviews, and regional office reports for nine selected states. 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. 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.
subsections: section_title: Background
paragraphs: 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. State responsibilities  include, among other things, determining eligibility, enrolling beneficiaries,  and adjudicating claims.
subsections: section_title: Medicaid Funding
paragraphs: 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  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. 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.
section_title: Medicaid Funding for Different Eligibility Groups
paragraphs: . We refer to FMAPs that are calculated using this formula as  regular FMAP rates. 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, 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.
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. (See table 1.) Consequently, a state that chooses to expand its  Medicaid program could potentially receive three different FMAPs for its  different types of Medicaid enrollees.
section_title: Medicaid Enrollment
paragraphs: 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.  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  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. 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. 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. 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.
section_title: CMS Oversight of Medicaid Enrollment and Expenditures
paragraphs: 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. Under the PERM, CMS measures and reports to  Congress improper payment rates in three component areas: (1) fee- for-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  those determined to be ineligible and thus denied enrollment—and  identify any improper payments for services.
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. 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 PPACA- expansion 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.
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. 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.
section_title: PPACA- and State- Expansion Enrollees Comprised about 14 Percent of 2014 Medicaid Enrollees and about 10 Percent of Expenditures
paragraphs: 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.
subsections: section_title: PPACA- and State- Expansion Enrollees Comprised about 14 Percent of 2014 Medicaid Enrollees
paragraphs: 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  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.)
section_title: Expenditures for PPACA- and State-Expansion Enrollees Comprised about 10 Percent of Spending for 2014 Medicaid Enrollees
paragraphs: As of June 2, 2015, 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  (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.)
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.
section_title: Limitations in Eligibility and Expenditure Reviews Hamper CMS’s Ability to Ensure the Appropriateness of Federal Matching Funds
paragraphs: 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.
subsections: section_title: A Gap Exists in CMS’s Interim Efforts to Assess the Accuracy of Eligibility Determinations
paragraphs: 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. 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.
States have completed the initial round of pilot eligibility reviews, which  showed wide variation in both the design and the results among the  states—reflecting, in part, the latitude they were given in designing their  review methodology. 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. 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.
CMS has established another mechanism—termed the eligibility support  contractor pilot program—to assist in developing new methodologies for  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. 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. 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  determinations would help CMS assess whether the FFEs are  appropriately determining an applicant’s eligibility for Medicaid.
section_title: CMS’s Expenditure Reviews Cannot Identify Eligibility-Related Errors, Limiting Assurance that Expenditures Are Appropriately Matched with Federal Funds
paragraphs: CMS modified its standard quarterly review of CMS-64 expenditures to  examine expenditures for both categories of the expansion population.  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. 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  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. 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 eligibility- related 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.
section_title: Conclusions
paragraphs: 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  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.
section_title: Recommendations for Executive Action
paragraphs: 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.
section_title: Agency Comments and Our Evaluation
paragraphs: 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  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.
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section_title: Appendix I: Comments from the Department of Health and Human Services
section_title: Appendix II: Scope and Methodology
paragraphs: 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. 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.
subsections: section_title: About CMS-64 Submission through MBES
paragraphs: 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.
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.
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.
section_title: Enrollment data
paragraphs: 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.  Individuals might be enrolled continuously and adding up each month  would count the same individuals multiple times.
section_title: Expenditure data
paragraphs: The CMS-64 data are used to reimburse the states for the applicable  federal share of Medicaid expenditures. As we previously stated, CMS  reviews these submissions, and the data are the most reliable accounting  of total Medicaid expenditures. 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. 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.
section_title: Appendix III: Medicaid Enrollment in 2014
paragraphs: 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.
section_title: Appendix IV: Medicaid Expenditures in 2014
paragraphs: 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.
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: 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.