Medicaid: Data Sets Provide Inconsistent Picture of Expenditures
Released: 2012-11-29T00:00:00

Letter

Background

Medicaid is a health care program jointly funded by the federal government and states to provide care for certain low-income individuals. The federal government oversees states’ Medicaid programs, and typically pays from 50 to 83 percent of each state’s allowable Medicaid costs. Medicaid enrollees are entitled to receive a range of medical services, including hospital care, physician services, laboratory and other diagnostic tests, prescription drugs, dental care, and long-term care services. In addition, Medicaid provides assistance to low-income elderly individuals who are also eligible for Medicare, called “dual eligibles.”This assistance can include covering Medicare premiums and cost sharing.

Medicaid Expenditure Data

MSIS is a national Medicaid eligibility and claims data set, and is the federal source of Medicaid expenditure data that can be linked to a specific enrollee. State Medicaid agencies are required to provide CMS, through MSIS, quarterly electronic files approximately 45 days after a quarter has ended. These files contain: (1) persons covered by Medicaid, known as “eligible files”; and (2) adjudicated claims, known as the “paid claims file,” for medical services reimbursed by the Medicaid program. Each state’s eligible file contains one record for each person covered by Medicaid for at least 1 day during the reporting quarter. Individual eligible files consist of demographic and monthly enrollment data. Paid claims files contain information on medical service-related claims and capitation payments.

MSIS data include enrollees’ eligibility status for Medicaid and the Children’s Health Insurance Program (CHIP), types of services received by enrollees, and expenditure data. MSIS data are used for policy analysis, program utilization, and forecasting expenditures. However, MSIS data are not used to determine the federal share of Medicaid expenditures, and are not used by the states to manage the daily operations of their Medicaid programs.

The CMS-64 data set contains program-benefit costs and administrative expenses that are not linked to individual enrollees. State Medicaid agencies submit this information 30 days after a quarter has ended 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. CMS-64 data are reported at a state aggregate level, such as a state’s total expenditures for such categories as inpatient hospital services and prescription drugs. Therefore, unlike MSIS, these data do not include individual expenditure data on the state’s enrollees or the services they received under Medicaid. Also unlike MSIS, CMS-64 contains expenditures that are not linked to specific enrollees, such as supplemental payments including Disproportionate Share Hospital (DSH) payments. CMS-64 data are the most-reliable and most-comprehensive information on Medicaid spending. Agency officials review expenditures submitted through CMS-64, and use the data to compute the federal financial participation for each state’s Medicaid program costs.

Medicaid: A High-Risk Program

Our reports have demonstrated the need for CMS to improve its oversight of this growing, complex program. In particular, federal internal-control standards, as documented in GAO’s Standards for Internal Control in the Federal Government, state that program managers need both operational and financial data to determine whether they are meeting their goals for accountability and efficient use of resources in order to make operating decisions, monitor performance, and allocate resources. Pertinent information should be identified, captured, and distributed in a form and time frame that permits people to perform their duties efficiently. These reports have also identified shortcomings with the MSIS and CMS-64 data sets, particularly in two areas: Medicaid program integrity and supplemental payments.

See GAO, National Medicaid Audit Programs: CMS Should Improve Reporting and Focus on Audit Collaboration with States, GAO-12-627 (Washington, D.C.: June 14, 2012). including its expenditures and audit outcomes, program improvements, and plans for effectively monitoring the program.

We also recently reported that the accountability and transparency of supplemental payments have been lacking using CMS-64. Specifically, our work found that states reported $32 billion in DSH and non-DSH Medicaid supplemental payments during fiscal year 2010. However, the exact amount of supplemental payments is unknown using CMS-64 because not all states reported their non-DSH supplemental payments separately from their regular payments. In an earlier report, we also found that information on non-DSH supplemental payments was incomplete because states did not provide full information to CMS regarding these payments. We noted that until reliable and complete information on states’ supplemental payments is available, federal officials overseeing the program and others will lack the information they need to review payments and ensure that they are appropriately spent for Medicaid purposes.

MSIS Medicaid Expenditures Amounts Are Generally Less than CMS-64 Expenditure Amounts

MSIS Medicaid expenditure amounts nationwide were generally less than CMS-64 amounts. For fiscal years 2007, 2008, and 2009, total expenditures based on MSIS data for the nation were 86, 87, and 88 percent, respectively, of the amounts shown in CMS-64. In fiscal years 2007 through 2009, the difference in Medicaid expenditures between the two data sets decreased from about $46 billion in fiscal year 2007 to $43 billion in fiscal year 2009. For fiscal year 2009, the most-recent and most-complete data available, MSIS showed $323 billion in total expenditures compared with the $366 billion in CMS-64, a difference of $43 billion. (See table 1.)

MSIS Medicaid expenditures for individual states were generally less than CMS-64 amounts. In fiscal years 2007 through 2009, states’ MSIS Medicaid expenditures ranged from 59 percent to 120 percent compared with CMS-64. In fiscal year 2009 alone, states’ MSIS Medicaid expenditures ranged from 59 to 119 percent of those in CMS-64. (See fig. 1.) Specifically, MSIS Medicaid expenditures were less than CMS-64 amounts in 40 states. These expenditures were greater than CMS-64 expenditures in 6 states, and were similar to CMS-64 expenditures in 5 states.reported in MSIS and CMS-64 by dollar amount in fiscal year 2009.

Some Factors Could Be Quantified and Accounted for Approximately Half of the Expenditure Difference between the Data Sets

Some—but not all—factors could be quantified to narrow the difference between MSIS and CMS-64 expenditures. In particular, we adjusted for expenditures that could not be attributed to individual beneficiaries—one of the key differences in the design of the data sets. However, we could not quantify the effect of other factors, such as inconsistent CMS guidance across the two data sets.

Differences Attributable to the Design of the Data Sets Could Be Quantified and Adjusted

MSIS is designed to report claims data, and CMS-64 is designed to reimburse states for their federal share of Medicaid expenditures. As we have noted, some expenditures that are required to be reported in CMS-64 do not appear in MSIS, such as when the expenditure is not tied to an individual enrollee’s claim. After adjusting the MSIS data to include expenditures for factors not related to individual enrollees’ claims, Medicaid expenditures for the nation based on MSIS data were 92, 93, and 94 percent of amounts shown in CMS-64 data, respectively, for fiscal years 2007, 2008, and 2009. (See table 2.)

For fiscal year 2009, we were able to adjust MSIS data for four factors: DSH payments, Medicare premiums, national and state rebates for prescription drugs, and Medicaid health insurance payments. None of these factors were reported in MSIS because CMS officials indicated they were not attributed to an individual enrollee.

DSH payments were included under the hospital expenditure category in CMS-64, but not in MSIS. We adjusted MSIS expenditure data to account for DSH payments to hospitals. For example, in fiscal year 2009, states reported approximately $88 billion in total hospital expenditures on CMS-64, which included approximately $18 billion for DSH payments. Total hospital expenditures in MSIS were at about $53 billion. Adding the $18 billion in DSH payments to total hospital expenditures in MSIS increased the percentage of MSIS expenditures from 60 percent of CMS-64 expenditures to 81 percent. Even after this adjustment, MSIS hospital expenditures are $17 billion lower than those on CMS-64, indicating that there are additional factors that account for the difference in hospital-related expenditures between the two data sets.

Medicare premiums were included in CMS-64, but CMS did not require states to report them in MSIS. In addition, Medicaid payments for enrollees with Medicare coinsurance and deductibles are included in MSIS, but within the various service types, and cannot be distinguished from other expenditures. In fiscal year 2009, total expenditures for Medicare as reported on CMS-64 were approximately $11 billion, whereas MSIS expenditures for the Medicare category were $0. Adjusting for the approximately $11 billion reported in fiscal year 2009 for Medicare premiums in CMS-64 increased the percentage of total Medicare expenditures in MSIS from 0 percent of CMS-64 expenditures to 92 percent, or a difference of $908 million. Thus, the primary factor that accounted for the difference in Medicare expenditures between the two data sets can be attributed to the absence of Medicare premium expenditures in MSIS.

Prescription drug rebates were included in CMS-64, but CMS did not Prescription drug rebates are require states to report them in MSIS.made by drug manufacturers to states in a lump sum payment for Medicaid enrollees who use specific drugs, and therefore are not connected to individual claims. In fiscal year 2009, total expenditures for the prescription drugs category, as reported on CMS-64, were initially about $25 billion. However, there was a reduction to $16 billion when $10 billion dollars in national and state prescription drug rebates were included. Total prescription drug expenditures in MSIS were approximately $25 billion. Adjusting for the $10 billion reported for prescription drug rebates in CMS-64 decreased the percentage of MSIS expenditures from 161 percent of CMS-64 expenditures to 99 percent of CMS-64 expenditures. Thus, the difference in reported prescription drug expenditures can be almost entirely attributed to the rebates.

Some Medicaid health insurance payments were included in CMS-64 that CMS did not require states to report in MSIS.2009, total expenditures for the managed care and Medicaid premium assistance expenditure category, as reported on CMS-64, were approximately $82 billion, of which $3 billion were for Medicaid health insurance payments not reported in MSIS. Total managed care and Medicaid premium assistance expenditures, as reported in MSIS, were approximately $85 billion. Adjusting for the roughly $3 billion for Medicaid health insurance payments increased the percentage of MSIS expenditures from 100 percent of CMS-64 expenditures to more than 103 percent. Therefore, total managed care and Medicaid premium assistance expenditures in MSIS were greater than those reported in CMS-64. (Fig. 4 compares the MSIS baseline to the MSIS adjusted expenditures as a percentage of CMS-64, by expenditure category, for fiscal year 2009.)

Concluding Observations

In fiscal year 2009, the difference between MSIS and CMS-64 was $43 billion. Much of the difference was primarily the result of the different designs of each data set. CMS uses MSIS data for beneficiary-specific expenditures, while CMS-64 data are used to compute the federal financial participation for each state’s Medicaid program costs. However, even after adjusting for DSH payments, Medicare premiums, prescription drug rebates, and Medicaid health insurance payments, differences remain. In fiscal year 2009, total MSIS expenditure data, after adjustments, showed MSIS at 94 percent of CMS-64 expenditures, which left billions of dollars unexplained.

The remaining differences between the two data sets are potentially explained by inconsistencies in CMS guidance and states’ reporting practices, neither of which can be quantified. In fiscal years 2007 through 2009, CMS provided states with inconsistent MSIS and CMS-64 guidance regarding expenditure definitions, reporting dates, and reporting of supplemental payments. Additionally, when compared with CMS-64, state MSIS data were often delayed beyond the time frames established by CMS, inconsistent in reporting payments for local government providers, and were of poor quality.

Taken together, these two data sets have the potential to offer a robust view of the Medicaid program, enhancing CMS oversight of aggregate spending trends, per beneficiary spending growth, and cross-state comparisons, all of which could be useful in improving the financial integrity of this high-risk program. This is critical given that Medicaid, a program that GAO identified on our high-risk list, has among the highest estimated improper payments of any federal program reporting such data. However, the usefulness of these data sets as oversight tools is limited because of delays in reporting and unnecessary inconsistencies between the two data sets, both of which are inconsistent with federal internal control standards. The 3-year lag in states’ reporting of MSIS data prevents its use for timely oversight of beneficiary-related utilization and other spending trends. For example, identifying a difference in hospital expenditures between MSIS and CMS-64 is of limited use when detected 3 years later. If states were meeting the current requirement of providing MSIS data 45 days after each quarter, then such comparisons could provide more useful and timely information.

CMS has recently completed a pilot study aimed in part on improving MSIS data. CMS has indicated that it will begin implementing aspects of this initiative in all states by fiscal year 2014. One goal of this initiative is to integrate state reporting of MSIS with the reporting of CMS-64 data. However, CMS officials have indicated they have yet to determine a timeline for this goal. While the initial results of this pilot have not been finalized, improving the timeliness and consistency of MSIS and CMS-64 data through this effort could aid CMS’s understanding and oversight of this high-risk program.

Agency Comments

HHS reviewed a draft of this report and provided technical comments, which we incorporated as appropriate.

As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretary of Health and Human Services, the Administrator of CMS, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 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 VI.

Appendix I: Scope and Methodology

We conducted two types of analysis of Medicaid expenditures for this report to compare the Medicaid Statistical Information System (MSIS) and CMS-64 data. First, we conducted a baseline analysis to compare total expenditures reported to MSIS and CMS-64 nationally and by state. We also compared reported expenditures by expenditure category. Secondly, we conducted an adjustment analysis. Specifically, we attempted to reconcile the expenditures by making adjustments to MSIS on the basis of the differences we identified in the MSIS and CMS-64 data sets. To the extent possible, we added expenditures reported in CMS-64, but not reported in MSIS, to total expenditures in MSIS.

To determine the extent to which MSIS and CMS-64 data sets on Medicaid expenditures differ, nationally and by state, for fiscal years 2007 through 2009, we conducted a multistep analysis.expenditures from both data sets, we calculated the expenditures reported in MSIS as a percentage of those reported in CMS-64. We also determined the percentage difference in total expenditures between the two data sets, by expenditure category.

Step 1: Obtain MSIS and CMS-64 Data In order to identify the baseline of total Medicaid expenditures for fiscal years 2007 through 2009, we obtained from the Center for Medicare & Medicaid Services (CMS) MSIS and CMS-64 data for each of the 50 states and the District of Columbia.

MSIS data: We obtained the MSIS Annual Person Summary File data, which CMS officials confirmed were appropriate for our analysis. The summary file includes monthly enrollment data, but only includes annual expenditure data by type of service. It is most comparable to CMS-64 because both data sets provide total expenditures for the fiscal year. The summary file also includes some enrollment and expenditure information on the Children’s Health Insurance Program (CHIP).

CMS-64 data: We used the CMS-64 net expenditures financial management report within the Medicaid Budget and Expenditure System. The financial management report is an annual account of states’ program and administrative Medicaid expenditures, including federal and state expenditures by expenditure category. The financial management report also contains information solely related to Medicaid.

Step 2: Determine Medicaid Expenditures in MSIS for the Fiscal Year on the Basis of the Number of Medicaid Enrollees Because MSIS includes both Medicaid and CHIP expenditures, we separated these expenditures to the extent possible. To do this, we first determined whether a beneficiary was eligible for Medicaid or CHIP by using the monthly eligibility code in MSIS. The Annual Person Summary File ties an entire month’s expenditures to an individual on the basis of his or her monthly eligibility code. The next step was to remove, to the extent possible, the CHIP expenditures in order to match MSIS expenditures with CMS-64. (CMS-64 does not include CHIP expenditures.)

CMS officials indicated that states were able to report CHIP expenditures within MSIS if they had a Medicaid expansion-CHIP program (i.e., a CHIP program that operates as part of the Medicaid program), also known as M-CHIP. Consequently, we were able to distinguish between Medicaid and M-CHIP spending. We thus removed from all MSIS totals any M-CHIP expenditures to the extent possible. We determined the number of months in the fiscal year a beneficiary received benefits under Medicaid or M-CHIP. On the basis of this count, we prorated the enrollees’ total expenses for the fiscal year on the basis of the proportion of the year a person was enrolled in either M-CHIP or Medicaid. If a person was enrolled in the M-CHIP program for part of the year, then a portion of the annual spending was apportioned toward M-CHIP. For example, if a person was enrolled in M-CHIP for 3 months, then a quarter of the expenditures would be considered M-CHIP, and the remaining three-quarters of expenditures would be considered Medicaid. Consequently, the Medicaid expenditures include prorated amounts for Medicaid and M-CHIP enrollees.

In contrast, CMS officials told us that until fiscal year 2010, states with a stand-alone CHIP program (i.e., one that is operated separately from a Medicaid program by the state; also known as S-CHIP) were not supposed to report these expenditures into MSIS despite the presence of the S-CHIP eligibility code. CMS officials indicated that any expenditures associated with S-CHIP should be assumed to be Medicaid expenditures despite the CHIP eligibility code. Therefore, we included any expenditures associated with the S-CHIP code as Medicaid expenditures.

Lastly, we included as Medicaid expenditures any other expenditures associated with all other eligibility categories. These other eligibility variables included “unknown” and “ineligible,” as well as Medicaid. Consequently, for states with standalone S-CHIP programs and those that did not separate out M-CHIP expenditures, the total Medicaid expenditures may be inflated in MSIS. Similarly, any expenditures reported under the unknown and ineligible categories that were not Medicaid expenditures may also inflate Medicaid expenditures.

Step 3: Matching Inconsistent Definitions of Services between MSIS and CMS-64 MSIS and CMS-64 data consist of expenditures broken down by service types.definitions of Medicaid service types used in each data set. This is necessary because, in many instances, a one-to-one match of service types in MSIS to those in CMS-64 is not possible. For example, in fiscal years 2007 through 2009, the MSIS Annual Person Summary File had 29 service types, whereas CMS-64 had 43. (See table 3 for a list of MSIS and CMS-64 service types used in fiscal years 2007 through 2009.)

Appendix II: Total Baseline Medicaid Expenditures in MSIS and CMS-64, by State, Fiscal Year 2009

State Ohio

Appendix III: Total Adjusted Medicaid Expenditures in MSIS and CMS-64, by State, Fiscal Year 2009

State Ohio

Appendix IV: Adjusted MSIS Expenditures as a Percentage of CMS-64, by State, Fiscal Year 2009

Appendix V: Adjusted MSIS Expenditures as a Percentage of CMS-64, by State and Expenditure Category, Fiscal Year 2009

Appendix V: Adjusted MSIS Expenditures as a Percentage of CMS-64, by State and Expenditure Category, Fiscal Year 2009 Adjustments were made by adding expenditures reported in CMS-64 to those reported in the Medicaid Statistical Information System (MSIS). Specifically, we added Disproportionate Share Hospital payments, national and state rebates for prescription drugs, Medicaid health insurance payments, and Medicare premiums to the expenditures reported in MSIS. No adjustments were made for acute and long-term support services (LTSS)-noninstitutional and LTSS-institutional.

Appendix VI: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, Robert Copeland, Assistant Director; Muriel Brown; Shaunessye Curry; Greg Dybalski; Sandra George; Giselle Hicks; Drew Long; Jessica Morris; and Monica Perez Nelson made key contributions to this report.

Related GAO Products

Medicaid: States Reported Billions More in Supplemental Payments in Recent Years. GAO-12-694. Washington, D.C.: July 20, 2012.

National Medicaid Audit Programs: CMS Should Improve Reporting and Focus on Audit Collaboration with States. GAO-12-627. Washington, D.C.: June 14, 2012.

High Risk Series: An Update. GAO-11-278. Washington, D.C.: February 16, 2011.

Medicaid: CMS Needs More Information on the Billions of Dollars Spent on Supplemental Payments. GAO-08-614. Washington, D.C.: May 30, 2008.

Medicaid Demonstration Waivers: Recent HHS Approvals Continue to Raise Cost and Oversight Concerns. GAO-08-87. Washington, D.C.: January 31, 2008.

Medicaid Financial Management: Steps Taken to Improve Federal Oversight but Other Actions Needed to Sustain Efforts. GAO-06-705. Washington, D.C.: June 22, 2006.

Major Management Challenges and Program Risks: Department of Health and Human Services. GAO-03-101. Washington, D.C.: January 1, 2003.

Medicaid Financial Management: Better Oversight of State Claims for Federal Reimbursement Needed. GAO-02-300. Washington, D.C.: February 28, 2002.