Medicaid: Federal Funds Aid Eligibility IT System Changes, but Implementation Challenges Persist
Published: 2014-12-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Medicaid eligibility IT systems play a key role in states' efforts to coordinate eligibility and enrollment processes for Medicaid, the Children's Health Insurance Program, and health insurance exchanges, as required by the Patient Protection and Affordable Care Act (PPACA). However, many states' eligibility IT systems were outdated and lacked the technical capacity to support such efforts. CMS expanded the availability of a federal financial participation matching rate of 90 percent (90/10 funding) to states for costs associated with such IT system changes. With these funds, CMS required states to implement certain requirements—known as critical success factors—by October 1, 2013.
GAO was asked to provide information on states' receipt and use of these funds and related federal oversight. This report examines: (1) 90/10 funding states have spent on eligibility IT system changes; (2) states' use of this funding to implement critical success factors, and whether any implementation challenges remain; and (3) CMS's oversight of this funding and related system changes.
GAO analyzed state-reported expenditures of 90/10 funding from June 30, 2011, through September 30, 2014; interviewed state Medicaid officials from six states, which were selected from states reporting the most expenditures of 90/10 funding; reviewed relevant laws, regulations and CMS guidance; and interviewed CMS officials.
In responding to a draft of this report, HHS concurred with our findings and provided technical comments that were incorporated, as appropriate.
section_title: What GAO Found
paragraphs: Reported spending across all 50 states and the District of Columbia totaled more than $1.8 billion for Medicaid 90/10 funds—funds for eligibility information technology (IT) system changes—through September 30, 2014. Spending has grown steadily, with the most significant increases over the most recent quarters. According to the Centers for Medicare & Medicaid Services (CMS), 34 states used 90/10 funds to implement full system replacements of their eligibility systems, while 17 states used these funds to implement modifications to their existing systems.
Using alternative approaches that reflected unique program aspects, selected states reported implementing most factors identified by CMS as being critical to enrolling individuals by October 1, 2013. However, the requirement that states transfer—send and receive—applications with the federally facilitated exchange (FFE) was the most challenging factor for states to implement, and none of the 36 states using the FFE was able to do so by October 1, 2013. One year later, 4 states remained unable to transfer applications one or both ways, but CMS continues to work with them to ensure implementation as soon as possible.
CMS modified its existing oversight to expedite states' access to these 90/10 funds and to enhance its review of state spending. CMS also followed a new practice for incrementally reviewing IT system changes. While selected states were not always clear on new requirements under the framework, they appreciated such timely reviews, enabling them to make technical changes throughout the process.

section_title: Letter
paragraphs: Enrollment in Medicaid, the joint federal-state program that finances  health insurance coverage for certain categories of low-income  individuals, is growing and likely will continue to do so—particularly within  states that choose to expand Medicaid eligibility in response to the  Patient Protection and Affordable Care Act (PPACA). The Congressional  Budget Office estimated that, as a result of PPACA, 12 million additional  people could be enrolled in Medicaid and the Children’s Health Insurance  Program (CHIP) by 2016. PPACA also required the establishment of a  coordinated eligibility and enrollment process for Medicaid, CHIP, and the  health insurance exchanges, including any income-based subsidies  available through the exchanges. This coordinated process is referred to  as the “no wrong door” policy. To implement this process, states were  required to develop the information technology (IT) systems that allow for  the exchange of data, which ensures that applicants are enrolled in the  program for which they are eligible, regardless of the program for which  they applied. While states’ Medicaid eligibility IT systems play a key role  in processing the influx of new Medicaid enrollees and ensuring  enrollment coordination, many states’ systems are antiquated and based  on outdated technology with limited technical and functional capacity to  support the streamlined processes called for in PPACA.
Recognizing the challenges that states may face in updating their  Medicaid eligibility IT systems, the Centers for Medicare & Medicaid  Services (CMS) expanded the availability of an enhanced federal financial  participation (FFP) matching rate of 90 percent to states’ expenditures  related to the design, development, and installation of new or improved  Medicaid eligibility IT systems that are incurred from April, 19, 2011,  through December 31, 2015. For the purposes of this report, we use the term “90/10 funding” to refer to total spending on Medicaid eligibility IT  systems; specifically, the 90 percent federal match associated with the   10 percent state share. The availability of 90/10 funding—as well as the  need to change Medicaid IT systems to comply with PPACA—has  sparked significant changes to eligibility IT systems nationwide. While  states can use this funding to support a wide range of IT system changes,  CMS specified certain functions—termed “critical success factors”—that it  required states to implement. These critical success factors, which were  expected to be in place by the beginning of the initial open enrollment  period for the exchanges on October 1, 2013, included state Medicaid IT  systems being able to accept a single streamlined application, convert  existing state Medicaid income standards to Modified Adjusted Gross  Income (MAGI), and coordinate with the exchanges, as applicable.
You asked us to provide information on the extent to which states have  obtained such enhanced federal funding for Medicaid eligibility IT system  improvements, how the funds have been used in the states, and the  federal role in assessing the availability and use of these funds. In this  report, we examine (1) how much 90/10 funding states have spent on  Medicaid eligibility IT system changes; (2) how states have used 90/10  funding to implement the critical success factors, and whether any  implementation challenges remain; and (3) how CMS oversees states’  use of 90/10 funding, including for implementation of system changes.
To examine how much 90/10 funding states have spent on Medicaid  eligibility IT system changes, we analyzed state-reported Medicaid  expenditure data from the CMS-64—a form that states complete quarterly  to obtain federal reimbursement for services provided or administrative  costs incurred under the Medicaid program. We reviewed states’ reported  expenditures for the quarter ending June 30, 2011, the first quarter for  which 90/10 funds were available to states, through the quarter ending  September 30, 2014. Three states had not reported finalized spending  data for the quarter ending June 30, 2014, and no states had reported  any spending for the quarter ending September 30, 2014. We also  interviewed CMS officials and obtained information from CMS on the  scope of IT system changes being undertaken by states. To determine  the reliability of the CMS-64 data, we interviewed CMS officials and  reviewed related documentation describing how these data are collected  and processed, and examined other research that has used these data to  report state expenditures. We also discussed these data and their  limitations, as well as agency efforts to improve state reporting with CMS  officials.sufficiently reliable for the purposes of our engagement.
We determined that the data we used in this report were  To examine how states have used 90/10 funding to implement the critical  success factors and whether challenges remain, we interviewed state  Medicaid officials from six states, which were selected from among those  reporting the most expenditures of 90/10 funding. These states, which  represented more than a third of all reported 90/10 funding expenditures  through September 2014, were selected for geographic diversity and to  represent a range in terms of the age of their eligibility systems, as well  as their approach to using the Federally Facilitated Exchange (FFE) or  establishing a state-based exchange. The selected states were Hawaii,  Kansas, Minnesota, New Mexico, North Carolina, and Pennsylvania. In  each of these states, we reviewed state or federal documentation of IT  system changes related to the applicable critical success factors and  reviewed related CMS correspondence. For the three critical success  factors that applied to all states, our review was limited to the selected  states because consistent national data were not available. However,  for the remaining two critical success factors that only apply to states  using the FFE, CMS had data for all such states that specified their  implementation dates.success factors provide a national view of implementation efforts for  states using the FFE.
Thus, our findings related to these two critical  To examine how CMS oversees states’ use of 90/10 funding, we  interviewed CMS officials about the agency’s oversight of state Medicaid  expenditures and eligibility IT system changes, including its new  Enterprise Life Cycle process, which the agency developed to oversee  states’ implementation of certain IT initiatives. We also examined how the  agency’s review of the 90/10 funding varies from its historical oversight of  IT changes to the Medicaid Management Information System (MMIS). We  also reviewed documents for our selected states that were available on  CMS’s Collaborative Application Lifecycle Tool (CALT), which is an  electronic repository to which states can store and share documents  supporting the implementation of their Medicaid IT system changes,  among other purposes. The CALT also includes planning documents for  all states and related CMS approval documents. We interviewed state  and CMS officials about the documents available on CALT, and reviewed  relevant federal laws, and CMS regulations and guidance issued to  facilitate state implementation of system changes.
We conducted this performance audit from December 2013 through  December 2014 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform our  work 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: Under federal law, states are eligible for an enhanced federal matching  rate of 90 percent for the design, development, or installation of Medicaid  claims processing and information retrieval systems. Historically, CMS  had allowed states to claim this 90 percent matching rate for the design,  development, or installation of system changes to MMIS, which includes  Medicaid claims processing, among other things, but such a match was  not available for Medicaid eligibility IT systems changes. However, in  2011, CMS extended the availability of the 90 percent matching rate for   which includes undertaking  changes to Medicaid eligibility IT systems,efforts to implement the “no wrong door” policy. Under this policy,  individuals can apply for health coverage through an exchange or a  state’s Medicaid agency, and regardless of which “door” they choose,  their eligibility will be determined for coverage under Medicaid, CHIP, or  the exchange, including any income-based subsidies available through  the exchange. To this end, applications are then to be routed to the  program for which the individual is eligible. Along with the “no wrong door”  policy, CMS envisioned streamlined enrollment processes that include the  real-time transfer of applications between state Medicaid agencies and  the FFE, and immediate eligibility determinations. States are eligible to  use 90/10 funding for changes they make to their Medicaid IT systems  regardless of whether they are operating their own exchanges or using  the FFE. States may also receive a 75 percent matching rate for the  maintenance and any ongoing costs of operating an upgraded Medicaid  eligibility system. The 75 percent FFP is generally available when the  Medicaid eligibility system changes become operational, and unlike 90/10  funding, does not expire.
To access 90/10 funding, states must first submit advanced planning  documents (APDs) to CMS—the federal agency that oversees the  Medicaid program and provides guidance and technical assistance to  states related to Medicaid eligibility system changes. CMS reviews the APDs to ensure that certain technical and operational criteria are met  before states are eligible for 90/10 funding. To receive CMS approval,  states must develop IT systems that meet technical standards and  conditions, which require states to develop IT systems that are flexible,  advance the Medicaid Information Technology Architecture principles,  and promote data exchanges and the reuse of Medicaid technologies  across systems and states, among other things.
In addition to these technical requirements, CMS specified operational  requirements—known as critical success factors—to help states prioritize  the many changes that they were making to their eligibility systems to  comply with PPACA. Due to differences among states in their approaches  to establishing an exchange, not all states needed to implement all critical  success factors. For example, states running their own exchanges would  not need to implement the factor relating to sending and receiving  applications to and from the FFE. That particular factor would only apply  to the states that were using the FFE. (See table 1.)
To claim the federal share of state costs for these eligibility system  changes, states report their expenditures on the form CMS-64, which  states complete quarterly to obtain federal reimbursement for services or  administrative costs under the Medicaid program. State Medicaid  agencies submit expenditure information 30 days after a quarter has  ended, and CMS reviews these submissions to authorize and compute  the applicable federal share of expenditures claimed. Even after  reporting, states are permitted to adjust previously reported expenditures  on the CMS-64 for up to 2 years from the quarter of their initial reporting.  Any adjustments that a state makes will appear in the quarter in which the  state made it, but will not be applied retroactively to the state’s initial  report.
section_title: Nationally, States Reported Spending More Than $1.8 Billion to Replace or Modify Medicaid Eligibility It Systems
paragraphs: Reported spending of 90/10 funding across all 50 states and the District  of Columbia totaled more than $1.8 billion for Medicaid eligibility IT  system changes as of September 30, 2014, with the federal government  contributing more than $1.6 billion and states contributing about   $200 million. Over three quarters of states’ reported spending of 90/10  funding—$1.4 billion—was for contractors selected by states to  implement changes to their eligibility IT systems. Although 90/10   funding was available to states beginning in April 2011, only 2 states  reported spending funds on Medicaid eligibility IT system changes by  September 30, 2011. Over the next year, however, the number of states  reporting such spending increased dramatically; and by March 2014, all  50 states and the District of Columbia had reported related spending.  Similarly, the amount of spending reported for each quarter has also  grown steadily, with the most significant increases reported over the most  recent quarters. (See fig. 1.) Appendix I includes information on 90/10  funding by state.
Across the country, states’ changes to Medicaid eligibility IT systems  ranged from full system replacements to more limited modifications, with  the scope of a state’s changes dependent on a number of factors,  including the age of their system and the extent of integration among  state programs. According to CMS, 34 states implemented full system  replacements, while 17 states implemented system modifications. State- reported spending of 90/10 funding varied widely, ranging from   $1.8 million in South Dakota to $180 million in North Carolina, as of   June 30, 2014. (See fig. 2.) Although there were spending differences  among individual states, the median amount spent on eligibility IT  systems in states modifying their systems was about one half of the  median amount spent in states that were undertaking full system  replacements during this time.
Among the six states we reviewed, the prior Medicaid eligibility IT  systems in five of the states were 20 to 30 years old, and varied in terms  of the extent of integration with other state programs and overall function,  as illustrated by the following two examples.
North Carolina’s prior Medicaid eligibility IT system was a state-based  system that was over 30 years old, and was used to determine  eligibility and process enrollment for 17 programs run by the state’s  Department of Health and Human Services, according to state  officials. The state had begun development of a new integrated IT  system in 2009, and was continuing to work on its implementation  when 90/10 funding became available.
Hawaii’s Medicaid eligibility IT system was a state-wide system that  was over 25 years old, and was also used to determine eligibility for  the Supplemental Nutrition Assistance Program, Temporary  Assistance to Needy Families, and other human service programs,  according to state officials. However, the state separately contracted  with the Arizona Medicaid program to conduct program enrollment  activities, and Hawaii officials noted that they expected this  arrangement to continue for the foreseeable future. The state officials  added that Hawaii had needed a new eligibility IT system for quite  some time, but was not able to pursue IT improvements until 90/10  funding became available.
Differences in state-reported spending could reflect other factors, such as  a state’s readiness to implement a new eligibility IT system. For example,  two states we reviewed—New Mexico and North Carolina—were able to  obtain approval and claim expenditures for 90/10 funding soon after it  became available, because they were already working on eligibility IT  system improvements.
As previously noted, states’ spending on the maintenance and operation  of these new systems is eligible for a federal match of 75 percent.  Through September 30, 2014, 27 states reported spending an additional  $205 million on maintenance and operation activities, about 79 percent of  which was paid to contractors.state spending for maintenance and operation costs.
section_title: Selected States Used Alternative Approaches to Implement Most Critical Success Factors; but Challenges Transferring Applications Persist Among States Using the FFE
paragraphs: Selected states implemented most of the critical success factors using  alternative approaches, which often reflected unique program aspects.  However, all states using the FFE faced challenges transferring  applications to and from the FFE, and those challenges contributed to  enrollment delays.
subsections: section_title: Selected States Met Most Critical Success Factors, Often by Using Alternative Approaches
paragraphs: Officials from the selected states reported that they were largely able to  implement three critical success factors that applied to all states—the  abilities to (1) accept a single, streamlined application; (2) verify applicant  eligibility based on electronic data sources, such as the federal data  services hub; and (3) convert existing income standards to MAGI, and  process Medicaid applications based on these rules—by the beginning of  the initial open enrollment period, October 1, 2013. The six states we  reviewed often used alternative approaches, which CMS approved, to  implement each of these three critical success factors. (See table 2.)
In some states, the use of these alternative approaches reflected unique  program aspects of states’ Medicaid programs or IT systems, as  illustrated by the following examples.
To implement the factor related to accepting a single, streamlined  application, four states we reviewed (Kansas, New Mexico, North  Carolina, and Pennsylvania) developed alternative applications that  were tailored to their specific programs.developed an alternative application to reflect the integration of its  Medicaid eligibility and enrollment system with its Supplemental Food  and Nutrition Program and its Temporary Assistance to Needy  Families program, according to state officials.
In particular, New Mexico
For the critical success factor relating to verifying applicant income,  three states we reviewed (Kansas, New Mexico, and North Carolina)  used existing state sources to verify applicant eligibility instead of  relying on the federal data services hub. In North Carolina, for example, officials indicated that the state received approval for an  alternative to the hub, and chose to rely on its existing link to the  Social Security Administration, as well as other sources for  verification.
For the critical success factor relating to MAGI criteria, five states we  reviewed opted to convert their eligibility rule systems to MAGI, and  one state—Kansas—opted instead to use CMS’s MAGI-in-the-Cloud  to determine eligibility because its new eligibility system, the Kansas  Eligibility Enforcement System, is not expected to be operational until  November 2014, according to state officials.
section_title: States Using the FFE Experienced Challenges Transferring Applications, Which Contributed to Enrollment Delays
paragraphs: The remaining two critical success factors—the minimum essential  coverage (MEC) check and the application transfer function—apply to the  36 states using the FFE and involve transmitting information between  state and federal data sources, which we refer to as IT connections. For  the MEC check, states’ Medicaid IT systems were to respond to  electronic inquiries from the FFE on applicants’ current Medicaid or CHIP  coverage, a one-way transmission of information from the FFE to the  state. While none of the 36 states using the FFE was able to establish  this connection by the first day of the initial open enrollment period, 22  states were able to do so at some point in October 2013, and were joined   The experiences in  by another 3 states by the end of December 2013.our selected states largely mirrored the experiences of states nationally.  For the 4 states using the FFE that we reviewed, Pennsylvania  implemented the MEC check by October 6, 2013, while North Carolina  and New Mexico implemented this critical success factor on   November 12, 2013, and January 16, 2014, respectively. Kansas had not  implemented the MEC check as of October 2014. Officials in some of the  states we reviewed cited the complexity of establishing the IT connection  as contributing to initial delays in implementation.
Because states typically had different dates in which they were able to implement each  connection, we discuss states’ abilities to send applications to the FFE or receive  applications from the FFE separately. Collectively, we refer to sending and receiving as  “transferring applications” or “application transfers.”
FFE, with 7 states doing so; an additional 23 states began to send  applications to the FFE during the subsequent 5 months. States also  gradually began receiving applications from the FFE, with the first states  doing so in December 2013, and implementation in the remaining states  generally occurring by the end of April 2014. However, nearly a year after  the initial open enrollment period, a handful of states remain unable to  transfer applications. (See fig. 3.) CMS officials noted that they continue  to work with these states to ensure implementation as soon as possible.  However, the capability to conduct real time application transfers for  immediate eligibility determinations remains elusive in all states. While a  CMS official acknowledged that real time application transfers continue to  be a goal, he does not anticipate this occurring until 2015 or 2016, given  variability in states’ abilities.
Some of the states that we reviewed cited evolving technical  requirements from CMS as a challenge to their initial efforts to implement  this critical success factor. For example, CMS issued the initial technical  requirements for application transfers in April 2013 and then final  requirements two months later—about three months before the open  enrollment period. Since CMS’s technical requirements involve  thousands of lines of code, a CMS official acknowledged that changes to  the initial requirements created additional work for states that were  following them. A New Mexico official indicated that the state made some  initial assumptions in developing its system that later needed modifying  once CMS issued final requirements. A CMS official noted variation in  states’ abilities to make such adjustments in a timely manner and that  some states began incorporating the initial requirements into their  systems, while other states purposely waited for the final requirements.
The delay in FFE readiness to transfer applications to and from the states  further complicated efforts to implement this critical success factor. A  CMS official acknowledged that the FFE was not ready to send or receive  applications when open enrollment began. CMS was first able to receive  applications from states in mid-October 2013 and to send applications to  states in November 2013. The official also indicated that some states’  systems were not ready to receive applications despite successful testing  of their systems. In such cases, the agency worked with states to send  applications to them incrementally until their systems were working  properly and were able to receive greater numbers of applications.
Because states were not able to transfer applications in time for open  enrollment, CMS provided states with a subset of the information from the  applications submitted to the FFE in a simple excel spreadsheet, which  they called a “flat file,” beginning on October 16, 2013. While the flat file  did not necessarily advance state efforts toward developing the IT  connections needed to transfer applications, it did provide states with a  sense of the volume of applications they would receive from the FFE, and  allowed them to reach out to potentially eligible individuals to encourage  them to apply directly to the state’s Medicaid office. Officials in some of  the states we reviewed, including New Mexico and Pennsylvania, did not  find the flat file useful in identifying and enrolling eligible individuals, citing  the limited information provided. However, CMS issued guidance on  November 29, 2013, that gave states the option to obtain a waiver  allowing them to enroll applicants into Medicaid using information from  the flat file. The states that we reviewed did not seek such a waiver;  however, six other states using the FFE did seek waivers.
For the estimated 2.9 million Medicaid applications waiting for processing  in states cited in a June 2014 report, delayed implementation of the  application transfer function—while not the sole factor behind delays—did  have implications for enrollees’ timely enrollment in Medicaid. For  example, Pennsylvania officials attributed some of its application backlog  of 60,000 Medicaid applications in spring 2014 to delays in receiving  applications from the FFE, but also noted other reasons, such as the  state’s process for non-MAGI applications received from the FFE, which  may have required additional contact or verification by the state. As  another contributing factor to delayed enrollment, the initial open  enrollment period saw a surge of Medicaid applicants seeking health  insurance coverage, but the capacity of states to process this enrollment  surge varied. Incomplete or inconsistent application data also affected  states’ ability to process applications in a timely manner. The officials  from the sample states we interviewed that established state-based  exchanges and were not using the FFE to transfer applications cited  backlogs due to technology challenges, as well as the volume of  applications received. For example, Minnesota officials attributed the  state’s backlog to initial technology issues with applications that were not  correctly processed in the system and required manual processing.  Similarly, Hawaii officials remarked that the backlog of applications at the  beginning of the initial open enrollment period was due, in part, to the  backlog that had existed in the previous legacy system.
section_title: CMS Modified Existing Monitoring Practices and Added A New Framework to Oversee Spending of 90/10 Funding
paragraphs: CMS’s oversight of states’ use of 90/10 funding largely mirrored—but  further modified—its existing oversight of states’ MMIS IT changes, which  are also eligible for a 90 percent federal match. For example, oversight of  funding for changes to both Medicaid IT systems included agency review  and approval of APDs, requests for proposals, contracts with consulting  firms, and CMS-64 data.in light of these compressed timeframes for states to implement their  Medicaid eligibility system IT changes. Specifically, the 90/10 funding  gave states less than 3 years—from April 2011 to October 2013—to  implement the critical success factors. In contrast, states often take more  than 5 years to complete the design and implementation of major  changes to their MMIS IT systems.
However, CMS often modified these activities  Two activities that CMS modified to accommodate the compressed  timeframes were methods used to review APDs and CMS-64 spending.
Expedited APD review: CMS established an expedited APD review  of 30 days rather than the 60 days allowed for MMIS APD reviews.  According to CMS officials, the expedited review enabled states to  access 90/10 funding more quickly, enabling them to issue RFPs for  consulting firms that will plan and implement the new technology for  Medicaid eligibility IT systems changes. CMS also provided states  with an APD checklist to minimize requests for additional information,  and streamlined its review and approval of RFPs and states’ contracts  with consulting firms.
Enhanced review of CMS-64: CMS added new lines to the CMS-64  for states to separately report state and contractor expenditures for  Medicaid eligibility IT system changes. To provide more timely  information on the amount of 90/10 funding that had been spent, CMS  implemented a new financial management process in 2013 to monitor  funding for Medicaid eligibility IT system changes each federal fiscal  year. According to CMS officials, this effort aligned states’ approved  APD budgets with expenditure data in CMS’s financial management  system to ensure that states did not exceed the amounts they were  approved for each fiscal year. If a state exceeded or did not spend its  budgeted amount, CMS would adjust the approved amount of 90/10  funding for the following year.
In addition to modifying existing oversight practices, CMS followed new  practices defined by its Enterprise Life Cycle framework to review the  progress that states were making to implement Medicaid eligibility IT  system changes, which focus on incremental reviews at distinct stages, or  “gates.” These practices differ from CMS’s practice of certifying MMIS IT  changes after the new system is operational for 60 days. To progress  through each of the three gates (planning, design, and implementation),  states were required to submit planning documents—known as artifacts— to CMS for approval. For example,  to pass the planning gate, states provided the agency with finalized  financial management and performance measurement plans;  for the design gate, states submitted system design and change  management plans; and  for the implementation gate, states submitted a finalized information  security risk assessment plan.
Depending on the scope of states’ changes, the artifacts required by CMS  varied. CMS developed templates for many of these artifacts to facilitate  state development of them, and encouraged collaboration among states  by making documents available through the new Internet-based  repository known as the CALT. CMS intended this tool to be a vehicle for  collaboration among states, allowing them to share source code and  other information and make use of others’ approaches as a model for  their own implementation. While Minnesota officials found that the CALT  fulfilled this purpose by assisting them in connecting with other states  using the same contractor, half the states we reviewed found it unwieldy  and difficult to navigate.
As a final step in the implementation gate, CMS conducted an operational  readiness review wherein states demonstrated their new eligibility IT  systems and readiness to implement the critical success factors. Based  on these readiness reviews, CMS either approved the state’s system or  granted a conditional approval pending additional state action. In some  states, CMS held more than one operational readiness review reflecting  the phased approach some states took to implement system changes.  For example, because New Mexico implemented its integrated eligibility  system in phases, CMS held two operational readiness reviews for the  state and granted conditional approval after the first review, requiring the  state to conduct further testing on its application transfer function. While  this incremental review facilitated implementation and reflected unique  circumstances of states’ Medicaid programs, our prior work that focused  on the development of the FFE found that partial CMS reviews of system  changes did not ensure that required approvals occurred in a timely  fashion.
State officials also identified challenges they experienced with aspects of  this new oversight framework, which were often exacerbated due to the  compressed timeframes that states had to implement the IT system  changes. For example, officials from Pennsylvania said that they received  little feedback from CMS on their gate presentations despite significant  time and resources that the state spent preparing for such gate reviews.  According to Pennsylvania officials, the CMS contractors who participated  in the gate reviews were unfamiliar with the state’s IT system and thus  were unable to provide the state with actionable feedback during the early  gates reviews. Additionally, because the life cycle framework was a new  approach, some states we reviewed did not fully understand the  requirements. For example, New Mexico officials noted that they did not  always know what was required at each gate and likened the process to  “building a car as it is driving down the road.”
Overall, however, CMS’s new approach for reviewing IT systems through  the Enterprise Life Cycle framework created some positive changes,  according to CMS and state officials. For example, prior to the framework,  CMS reviewed documents and monitored system functions after states  had implemented their new systems. Under these circumstances, any  deficiencies identified by CMS had to be adjusted before CMS would  approve any ongoing funding for system maintenance. According to CMS  and state officials, this retrospective review and certification was costly  and time consuming because it occurred after the changed systems were  operational. Officials from both New Mexico and Kansas agreed and  noted that the new gate review process allowed them to make technical  changes throughout the process rather than at the end, allowing for  improved project management. Officials from North Carolina, Kansas,  and New Mexico also noted that these reviews largely mirrored their  internal oversight processes, thus allowing them to use internal  documents to meet certain federal requirements and minimize duplicate  efforts.
section_title: Agency Comments
paragraphs: We provided a draft of this product to HHS for comment. In its written  comments, reproduced in appendix II, HHS concurred with our findings  and noted that supporting the Medicaid eligibility and enrollment process,  as well as aiding IT changes in the states, continues to be among its  ongoing priorities. The Department stated that 90/10 funding is an  important federal investment to provide states the resources needed to  make the systems improvements envisioned by PPACA. The Department  also highlighted actions it has undertaken to expedite states’ access to  90/10 funding and to enhance its review of related state spending, among  other activities. In addition, HHS provided technical comments that were  incorporated, as appropriate.
We are sending a copy of this report to the Secretary of Health and  Human Services. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.
If you or your staffs have any questions about 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 III.
section_title: Appendix I: Total State Reported Spending for Medicaid Eligibility IT System Changes and Maintenance
paragraphs: The Centers for Medicare & Medicaid Services (CMS) expanded the  availability of an enhanced federal financial participation (FFP) matching  rate of 90 percent—which we refer to as 90/10 funding—to states’  expenditures related to the design, development, and installation of new  or improved Medicaid eligibility IT systems incurred from April 19, 2011,  through December 31, 2015. States are also eligible to receive a   75 percent FFP indefinitely for costs associated with the maintenance and  the operation of Medicaid eligibility systems that have been upgraded to  meet applicable standards and conditions by December 31, 2015. States  report these expenditures on the CMS-64—the form that states complete  quarterly to obtain federal reimbursement for services provided or  administrative costs incurred under the Medicaid program. Table 3  summarizes total state reported spending on Medicaid eligibility IT system  changes through the quarter ending September 30, 2014.
section_title: Appendix II: Comments from the Department of Health and Human Services
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgements
paragraphs: In addition to the contact named above, Susan T. Anthony, Assistant  Director; Carolyn Fitzgerald; Caroline Hale; Anne Hopewell; Drew Long;  JoAnn Martinez-Shriver; Vikki Porter; and Hemi Tewarson made key  contributions to this report.