Title XIX of the Social Security Act established Medicaid as a federal-state partnership that finances health care for low-income individuals, including children, families, the aged, and the disabled. Medicaid is an open-ended entitlement program and provided health coverage for an estimated 53.9 million individuals in 2010.federal requirements, each state administers and operates its Medicaid Within broad program in accordance with a state Medicaid plan, which must be approved by CMS. A state Medicaid plan details the populations that are served, the categories of services that are covered (such as inpatient hospital services, nursing facility services, and physician services), and the methods for calculating payments to providers. The state Medicaid plan also describes the supplemental payments established by the state and specifies which providers are eligible to receive supplemental payments and what categories of service are covered. Any changes a state wishes to make in its Medicaid plan, such as establishing new payments or changing methods for developing provider payment rates, must be submitted to CMS for review and approval as a state plan amendment. States may also receive approval from CMS for a waiver from certain Medicaid requirements in order to conduct a Medicaid demonstration, and these demonstrations may include supplemental payments. These demonstrations allow states to test new approaches to deliver or pay for health services through Medicaid. Under certain demonstrations, a state may cover populations or services that would not otherwise be eligible for federal Medicaid funding under federal rules. Some states, including California and Massachusetts, have also in recent years been allowed to make supplemental payments under Medicaid demonstrations. The terms and conditions governing such demonstrations are specific to each demonstration. All states make supplemental Medicaid payments to certain providers. DSH payments are made to hospitals and cannot exceed the unreimbursed cost of furnishing inpatient and outpatient services to Medicaid beneficiaries and the uninsured. Non-DSH supplemental payments can be made to hospitals or other providers (such as nursing homes or groups of physicians) for any category of service provided on a fee-for-service basis. For example, a state might make non-DSH supplemental payments on a quarterly basis to county-owned nursing facilities that serve low-income populations to fill the gap between what regular Medicaid rates pay toward the cost of services and higher payments permitted through the UPL. Supplemental payments are typically made for services provided on a fee-for-service basis, rather than those provided through Medicaid managed care contracts. Non-DSH supplemental payments need to be approved by CMS. To obtain the federal matching funds for Medicaid payments made to providers, each state files a quarterly expenditure report to CMS--the CMS-64. This form compiles state payments in over 20 categories of medical services, such as inpatient hospital services and outpatient hospital services. States are required to report total DSH payments made to hospitals and mental health facilities separately from other Medicaid payments in order to receive reimbursement for them. From 2001 through 2009, when completing the CMS-64 to obtain federal matching funds for non-DSH supplemental payments, states combined their non-DSH supplemental payments with their regular payments--those made using states' regular Medicaid payment rates. During this period, CMS requested that states report their non-DSH supplemental payments in a separate informational section of the CMS-64 that was not the basis for states receipt of federal matching funds. Instead, states received federal matching funds based on their reports of expenditure totals that included both regular and non-DSH supplemental payments. In 2008, we found that states reported making $6.3 billion in non-DSH supplemental payments during fiscal year 2006, but that not all states reported their non-DSH supplemental payments separately from other expenditures of Starting with the first quarter of fiscal year 2010, CMS's the same type.new reporting procedures requested that states report certain non-DSH supplemental payments separately from their regular payments on the section of the CMS-64 used to claim federal matching funds.CMS continues to provide federal matching funds to states that report these payments in combination with regular payments on this form. The data CMS finalized for fiscal year 2010 show that states and the federal government spent at least $32 billion for DSH and non-DSH supplemental payments during fiscal year 2010, with the federal share of these payments totaling at least $19.8 billion. States reported $17.6 billion in DSH payments and $14.4 billion in non-DSH supplemental payments during fiscal year 2010, but state reporting of non-DSH supplemental payments separately from regular payments was incomplete, so the exact amount of non-DSH supplemental payments is unknown. States reported $17.6 billion in DSH payments during fiscal year 2010, with the federal government reimbursing states $9.9 billion for its share of these payments. Fifty of the 51 states reported making DSH payments during fiscal year 2010, with total reported payments ranging from about $650,000 for South Dakota to over $3.1 billion for New York.10 states reporting the largest total DSH payments in fiscal year 2010 The accounted for more than 70 percent of the $17.6 billion nationwide total, and the 4 states with the largest total DSH payments--New York, California, Texas, and New Jersey--accounted for almost half (47 percent) of the nationwide total. In assessing the contribution of DSH payments to each state's overall spending, we found that DSH payments as a percentage of states' reported Medicaid payments varied considerably among the states. Among states that reported DSH payments, the percentage ranged from less than 1 percent (Arizona, Delaware, North Dakota, South Dakota, Wisconsin, and Wyoming) to 17 percent (New Hampshire). Figure 1 provides information on the amount of each state's DSH payments and each state's DSH payments as a percentage of its total Medicaid expenditures. (App. II lists each state's reported DSH payments during fiscal year 2010, the federal share of those payments, the state's total Medicaid payments, and each state's total reported DSH payment as a percentage of the state's total Medicaid payments and of total nationwide DSH payments.) The majority of DSH payments were to hospitals for traditional inpatient and outpatient services. During fiscal year 2010, 83 percent of the nationwide total of reported DSH payments ($14.7 billion) was paid to hospitals for traditional inpatient and outpatient services and 17 percent of the total ($2.9 billion) was paid to mental health facilities for inpatient and outpatient mental health services. During fiscal year 2010, states separately reported making $14.4 billion in non-DSH supplemental payments (of which the federal share was $9.9 billion), primarily for inpatient hospital services.states were to report non-DSH supplemental payments on the CMS-64 separately from their regular payments for six categories of service. Thirty states separately reported non-DSH payments during fiscal year 2010, with reported payments ranging from $125,000 for Vermont to $3.1 billion for Texas. In assessing the contribution of non-DSH supplemental payments to each state's overall spending, we found that non-DSH supplemental payments as a percentage of states' Medicaid spending also varied considerably across the 30 states that separately reported these payments, ranging from 1 percent for Vermont to over 17 percent for Illinois. Figure 2 provides information on the amount of each state's non-DSH supplemental payments and each state's non-DSH supplemental payments as a percentage of its total Medicaid expenditures. (App. II lists each state's reported non-DSH supplemental payments during fiscal year 2010, the federal share of those payments, the state's total Medicaid payments, and each state's total reported non-DSH supplemental payments as a percentage of the state's total Medicaid payments and of total nationwide non-DSH supplemental payments.) Of the six categories of service for which states reported making non-DSH supplemental payments, states reported the largest amount of payments for inpatient hospital services. States reported $11 billion in non-DSH supplemental payments for inpatient services (with a federal share of $7.7 billion). States reported $1.8 billion in non-DSH supplemental payments for outpatient services (with a federal share of $1.15 billion). (See fig. 3.) The proportion of a state's reported expenditures that were non-DSH supplemental payments varied across states and categories of service. In some states, non-DSH supplemental payments represented very little of the state's reported expenditures for a category of service, while in other states, non-DSH supplemental payments represented more than one-third of the state's reported expenditures for a category of service. For example, 27 states separately reported non-DSH supplemental payments for inpatient hospital services, and the percentage of their expenditures for inpatient hospital services that were non-DSH supplemental payments ranged from less than 1 percent (Virginia and Washington) to 48 percent (Tennessee); 13 states separately reported non-DSH supplemental payments for outpatient hospital services, and the percentage of their expenditures for outpatient hospital services that were non-DSH supplemental payments ranged from less than 1 percent (Texas) to 57 percent (Illinois); and 16 states separately reported non-DSH supplemental payments for physician and surgical services, and the percentage of their expenditures for physician and surgical hospital services that were non-DSH supplemental payments ranged from less than 1 percent (Oklahoma) to 34 percent (West Virginia). See appendix II for more information about each state's reported total and non-DSH supplemental payments for inpatient hospital services, outpatient hospital services, nursing facility services, physician and surgical services, other practitioners' services, and intermediate care facility services. The exact amount of non-DSH supplemental payments nationwide is unknown, in part because not all states that made non-DSH supplemental payments in 2010 reported them on the CMS-64 separately from regular payments, and some states separately reported some but not all of their non-DSH supplemental payments. For example, Georgia reported $0 for non-DSH supplemental payments during fiscal year 2010, but according to CMS, it made non-DSH supplemental payments of $120.6 million for nursing home services during 2010. CMS officials told us that they are aware that some states did not separately report all of their non-DSH supplemental payments. Officials stated that they have taken, and are taking, steps to improve states' reporting of non-DSH supplemental payments for the six categories of service. They told us that after revising the form CMS-64 to include lines for separate reporting of certain non-DSH supplemental payments, they monitored states' reports of these payments and, as a result, they learned that some states had not reported these payments separately. They then took steps to improve states' reporting of these payments, for example, by training state staff in the use of the revised form CMS-64 and asking regional CMS staff to work with states to identify and resolve reporting problems. CMS officials also noted, however, that some states encountered technical difficulties with their state databases. For example, CMS officials told us that the data systems used by some states in 2010 did not permit them to separate the non-DSH supplemental payments from their regular payments. CMS officials confirmed that states did not separately report all non-DSH supplemental payments in 2010 and acknowledged that CMS cannot definitively determine the extent to which reporting is incomplete. The 39 states that separately reported non-DSH supplemental payments during either 2006 or 2010 (or both) reported an increase of $8.1 billion in non-DSH supplemental payments during this period. Most of this increase was from 15 states that reported during both years, and most of the reported increase was for inpatient hospital services. However, because of the potential for underreporting of supplemental payments for one or both years, the extent of the actual increase and the contributing factors cannot be quantified. Our examination of information from CMS and from public sources about changes in 11 judgmentally selected states indicates that some states were making new and modified non-DSH supplemental payments during this period, contributing to the reported increase. Changes in reporting also contributed to the increase. The 39 states that separately reported non-DSH supplemental payments during either 2006 or 2010, or during both years, together reported $8.1 billion more in non-DSH supplemental payments during 2010 than 2006. Nineteen states separately reported some non-DSH supplemental payments during both years, with 15 of those states reporting more for these payments during 2010 and 4 of those states reporting less for these payments during 2010. Eleven states reported non-DSH supplemental payments separately only during 2010, and 9 states reported non-DSH supplemental payments separately only during 2006. (See fig. 4 and table 1.) Most of the $8.1 billion increase was from the 15 states that separately reported non-DSH supplemental payments during both years, with higher non-DSH supplemental payments reported during 2010. The increase in these states ranged from $1 million (Washington) to $2.3 billion (Texas). For the 4 states that separately reported lower non-DSH supplemental payments during 2010, the decrease ranged from $12 million (Oklahoma) to $608 million (North Carolina). The largest change in non-DSH supplemental payments separately reported during 2006 and 2010 was for inpatient hospital services. The net increase in these separately reported payments was $6.3 billion, and the number of states that separately reported non-DSH supplemental payments for inpatient hospital services increased from 23 during 2006 to 27 during 2010. (App. III lists the amounts each state reported separately for non-DSH supplemental payments during 2006 and 2010 and the categories of service for which they reported these payments.) Because of the potential underreporting of non-DSH supplemental payments during one or both of the years examined, the extent of the actual increase cannot be quantified. On the basis of some reports, Medicaid spending on hospital services is increasing, and growth in non-DSH supplemental payments has been cited as a contributing factor. A January 2012 article on the growth in U.S. health spending found that while overall Medicaid spending growth slowed in 2010, Medicaid spending growth on hospital services increased in 2010 compared to 2009. The researchers attributed the growth in Medicaid spending for hospital services, in part, to a large amount of non-DSH supplemental payments reported during the last quarter of calendar year 2010. A March 2012 report by the Medicaid and CHIP Payment and Access Commission found that states reported over $23 billion in non-DSH supplemental payments for hospital services during 2011. Information from CMS and from public sources about changes in 11 judgmentally selected states suggests that some increases from 2006 to 2010 in reported non-DSH supplemental payments were due to increases in payments states made after establishing new non-DSH supplemental payments or increasing their existing non-DSH supplemental payments. The available information suggests that changes to existing payments also resulted in some decreases from 2006 to 2010 in reported non-DSH supplemental payments, including, for example, when states terminated non-DSH supplemental payments. In recent years, states have submitted and received approval to implement new non-DSH supplemental payments, according to CMS officials. Available information, maintained by CMS and derived from state Medicaid plans from 11 selected states, indicates that new or modified supplemental payments made by states contributed to increased non-DSH supplemental payments. For example: Illinois reported $1.4 billion more for non-DSH supplemental payments for inpatient hospital services during 2010 than during 2006. From 2006 through 2010, Illinois established new non-DSH supplemental payments for inpatient hospital services and also modified several existing payments for these services. Taken together, these new and modified payments were estimated to result in an increase in Illinois's supplemental payments for inpatient services by about $1.2 billion during fiscal year 2010. Colorado reported $411 million more for non-DSH supplemental payments for inpatient and outpatient hospital services during 2010 than during 2006. Colorado established a set of new non-DSH supplemental payments for inpatient and outpatient hospital services. These supplemental payments were to a variety of hospital types, including rural hospitals, hospitals with neonatal intensive care units, and state teaching hospitals. Effective on July 1, 2009, these new payments were estimated to result in an increase in payments of about $300 million during fiscal year 2010. Arkansas reported $173 million more for non-DSH supplemental payments for inpatient hospital services during 2010 than during 2006. Arkansas made new non-DSH supplemental payments for inpatient hospital services provided by private hospitals, and it also modified existing non-DSH supplemental payments for inpatient hospital services. Arkansas's new supplemental payments, effective July 1, 2009, were estimated to increase the state's supplemental payments for inpatient services by about $110 million during fiscal year 2010. South Carolina reported $39 million for non-DSH supplemental payments for nursing facility services during 2010, but did not report making such payments during 2006. South Carolina had suspended certain non-DSH supplemental payments for nursing facility services prior to fiscal year 2006, but it reinstated these payments, effective on October 1, 2008, with a slight change to payment qualification criteria. Reinstating these payments was estimated to increase payments by about $25 million during fiscal year 2010. According to the available information about changes in these 11 judgmentally selected states, some states' non-DSH supplemental payments decreased from 2006 to 2010 because they terminated supplemental payments or made changes to their Medicaid programs that reduced supplemental payments. For example: North Carolina reported $607 million less in non-DSH supplemental payments for inpatient and outpatient hospital services in 2010 than in 2006. According to CMS, North Carolina discontinued making non-DSH supplemental payments to non-state government hospitals, effective on October 1, 2006. Discontinuation of these payments for inpatient and outpatient hospitals would have resulted in a reduction in payments. Georgia reported $221 million less in non-DSH supplemental payments for inpatient and outpatient hospital services in 2010 than in 2006. Georgia implemented a managed care program in 2007, and according to CMS, the state estimated that its supplemental payments (which generally can only be made for services provided on a fee-for-service basis) were reduced by more than $100 million per year as a result. Missouri reported paying $70 million in non-DSH supplemental payments for inpatient hospital services during 2006 and did not report making such payments during fiscal year 2010. According to CMS, the state reported that it did not make non-DSH supplemental payments for inpatient services during fiscal year 2010 because the State General Assembly did not approve funding for such payments. Changes in state reporting of non-DSH supplemental payments also contributed to differences in amounts between 2006 and 2010. In some cases, an apparent increase in non-DSH supplemental payments was due, at least in part, to more complete reporting of non-DSH supplemental payments in 2010 than in 2006. For example: Pennsylvania reported $0 for non-DSH supplemental payments during 2006 and $410 million for non-DSH supplemental payments for nursing facility services during 2010, for an apparent increase of $410 million in supplemental payments. However, Pennsylvania made, but did not separately report, non-DSH supplemental payments for nursing home services during 2006. South Carolina reported $0 for non-DSH supplemental payments for physician and surgical services during 2006 and $46 million for non-DSH supplemental payments for these services during 2010, for an apparent increase of $46 million in supplemental payments. However, CMS told us that South Carolina paid $43 million for non-DSH supplemental payments for physician and surgical services during 2006, so the actual increase in payments for these services from 2006 to 2010 was $3 million, not $46 million. In contrast, an apparent decrease in some states' non-DSH supplemental payments was due, at least in part, to not reporting these payments separately during 2010. For example, as noted above, Georgia made, but did not separately report, non-DSH supplemental payments during 2010. States that did not separately report payments during 2010, but did separately report them in 2006, created the appearance of decreases in non-DSH supplemental payments. Medicaid supplemental payments can help ensure that providers make important services available to Medicaid beneficiaries. However, the transparency and accountability of these often very large payments have been lacking. Although CMS has instituted new reporting procedures for, and more complete reporting of, non-DSH supplemental payments, the exact amount of these payments is still not known because not all states have provided complete information as CMS requested during 2010. Nevertheless, as reporting of non-DSH supplemental payments becomes more complete, the significance of these payments, in terms of cost, growth, and contribution to total Medicaid payments for those providers receiving them, is becoming clearer. Identifying and monitoring Medicaid supplemental payments and ensuring that they, along with regular Medicaid payments, are consistent with federal requirements are complex tasks that will require continued vigilance by CMS. Ongoing federal efforts to improve the completeness of reporting of Medicaid supplemental payments are important for effective oversight and to better understand these payments' role in financing Medicaid services. We provided a draft of this report to HHS for review. HHS stated that HHS and CMS will continue their ongoing efforts to improve states' reporting of Medicaid supplemental payments. HHS's letter is reprinted in appendix IV. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services, the Administrator of the Centers for Medicare & Medicaid Services, 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 members have any questions, please contact me at (202) 512-7114 or iritanik@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix V. This appendix provides information about our analyses of reported supplemental Medicaid expenditures and our analyses of information from selected states. Supplemental Medicaid payments include Disproportionate Share Hospital (DSH) payments to hospitals and other supplemental payments to hospitals or other providers, which we refer to as non-DSH supplemental payments. To determine what supplemental Medicaid payments states reported during fiscal year 2010 and how non-DSH supplemental payments reported during 2010 compared with those reported during 2006, we obtained and analyzed data about the Medicaid expenditures states reported during these 2 years. To examine reasons for differences between 2006 and 2010 in reported non-DSH supplemental payments, and to obtain additional information about states' reports of these payments, we obtained information from the Centers for Medicare & Medicaid Services (CMS) and public sources about non-DSH supplemental payments in a nongeneralizable, judgmental sample of 11 states. In addition, we reviewed relevant federal laws, regulations, and guidance; our prior work on supplemental Medicaid payments; and other relevant documentation. We also interviewed officials from CMS. To determine what Medicaid payments states reported, we examined data from the standardized expenditure reports states submit to CMS on a quarterly basis using form CMS-64. States have 30 days after the end of a quarter to submit this form and must certify that the data are correct to the best of their knowledge. CMS reviews these reports and works with states to resolve any questions before certifying them as final. CMS transfers the certified, finalized data into a Financial Management Report (FMR) and makes annual data available on its website. CMS allows states to make adjustments to their prior CMS-64 submissions for up to 2 years. The annual FMR incorporates adjustments reported by the states by applying reported adjustments to the fiscal year during which they are reported, even if an adjustment corrects expenditures reported during an earlier fiscal year. Expenditures reported during fiscal year 2010. We obtained fiscal year 2010 FMR data from CMS on December 22, 2011. These data reflected adjustments to expenditures reported by states on the quarterly reports filed during fiscal year 2010 and included states' reported total Medicaid expenditures, DSH expenditures, and any non-DSH expenditures the states reported separately from their other expenditures. Fiscal year 2010 was the most recent year for which certified data were available from all 50 states and the District of Columbia. To assess the reliability of the fiscal year 2010 data, we reviewed the steps CMS took to ensure the accuracy of expenditure data and we examined the data for outliers or other unusual values, which we discussed with CMS officials. We determined that the data were sufficiently reliable to describe the expenditures reported by the states during fiscal year 2010, although as discussed in this report, we found that states' separate reporting of non-DSH supplemental payments was incomplete. Expenditures reported during fiscal year 2006. We obtained data about expenditures reported during fiscal year 2006 as part of work we For that work, we obtained reported DSH payments reported in 2008. from CMS's FMR for fiscal year 2006, which included adjustments reported by states for prior years. To obtain data about non-DSH supplemental payments, we extracted expenditure data that had been reported on a section of the CMS expenditure report--the form CMS-64.9I--that states were to use for informational purposes during 2006 to identify non-DSH supplemental payments made under Medicaid's Upper Payment Limit regulations.adjustments states reported through their CMS-64.9I entries during fiscal year 2006 and through October 5, 2007. As described in our 2008 report, our assessment of the reliability of the fiscal year 2006 data included review of the steps CMS took to ensure the accuracy of expenditure data submitted to the Medicaid Budget and Expenditure System, comparison to data we obtained from a nongeneralizable sample of 5 states, and We adjusted these data to reflect comparison to similar data published by the Urban Institute. We determined that the data were sufficiently reliable to describe the expenditures identified by the states during fiscal year 2006, although as we discussed in our earlier report, we concluded that states' separate reporting of non-DSH supplemental payments was incomplete. Our analyses of reported DSH and non-DSH payments included identification of state-by-state and nationwide expenditures for DSH and non-DSH supplemental payments in both absolute (dollar amount) and relative (percentage) terms. DSH payments can be made to hospitals for traditional inpatient and outpatient services and to mental health facilities for inpatient and outpatient mental health services; we examined reported payments to both types of hospitals. Non-DSH supplemental payments can be made for various categories of service (such as inpatient hospital services or physician and surgical services) provided by hospitals or other types of providers (such as nursing homes or intermediate care facilities); we examined payments for specific categories of services. Some states may not have separately reported all of their non-DSH supplemental payments during 2006 or 2010. We did not quantify the extent to which states did not separately report their supplemental payments. Therefore, we may not be capturing the full amount of states' non-DSH supplemental payments or the degree to which these payments have changed over time. We did not examine whether changes in non-DSH supplemental payments were associated with changes in states' regular Medicaid payments. To examine reasons for differences between 2006 and 2010 in reported non-DSH supplemental payments, and to obtain additional information about states' reports of these payments, we obtained information from CMS and public sources about non-DSH supplemental payments in a judgmental sample of 11 states selected to include a mix of relevant characteristics. We selected a nongeneralizable sample of states, including some that separately reported non-DSH supplemental payments (1) in fiscal year 2006, but not 2010 (Georgia and Missouri); (2) in fiscal year 2010, but not 2006 (Maine, Massachusetts, and Pennsylvania); and (3) both (Arkansas, Colorado, Illinois, North Carolina, South Carolina, and Texas). These states differed in absolute and relative changes in reported non-DSH supplemental payments and changes in categories of service for which payments were reported. The information we used to select states included published information as well as preliminary information from CMS. (For more information about non-DSH supplemental payments made by these states in 2006 and 2010, see app. III.) For each of our selected states, we asked CMS to provide us with documentation, such as state plan amendments, that could shed light on observed differences from 2006 to 2010 in reported non-DSH supplemental payments. We reviewed this information, along with information from other public sources (such as states' websites) to identify possible reasons for changes in reported payments and to develop rough estimates of the financial impact of planned changes. The state plan amendments states submit when proposing new supplemental payments, or modifications to existing payments, include an estimate of the financial impact of the state plan amendment. This estimate is intended to reflect the impact of the state plan amendment as a whole, even if the amendment covers several changes. CMS officials told us that these estimates are the best available estimates of the financial impact of changes states make to their state plans. We did not attempt to develop a full, dollar-by-dollar explanation of any state's changes from 2006 to 2010 in reported amounts of non-DSH supplemental payments. We did not determine the accuracy of states' estimates of the financial impact of their state plan amendments. Information from our judgmental sample of 11 states cannot be generalized to other states. This appendix provides state-by-state and nationwide information about the DSH and non-DSH supplemental Medicaid payments reported during fiscal year 2010 by the states and the District of Columbia. Table 2 shows states' reported Medicaid payments, their DSH and non-DSH supplemental payments, the federal share of DSH and non-DSH supplemental payments, and the percentage of the state Medicaid payments that was for DSH and non-DSH supplemental payments. Table 3 shows states' reported DSH payments, including payments for traditional and mental health hospitals (as dollar amounts and as a percentage of the state DSH payments), total DSH payments, and total DSH payments as a percentage of the national total for DSH payments. Table 4 shows states' reported non-DSH supplemental payments, including the amounts states reported for certain categories of service (as dollar amounts and as a percentage of the state non-DSH supplemental payments), total non-DSH supplemental payments, and total non-DSH supplemental payments as a percentage of the national total for non-DSH supplemental payments. The six categories of service listed are those for which CMS requested information-- inpatient hospital services, outpatient hospital services, nursing facility services, physician and surgical services, other practitioners' services, and intermediate care facility services. Tables 5 through 10 provide additional information about states' reported Medicaid payments for the six categories of service for which CMS obtained information about non-DSH supplemental payments-- inpatient hospital services, outpatient hospital services, nursing facility services, physician and surgical services, other practitioners' services, and intermediate care facility services. For each of these six categories, the tables provide the states' reported Medicaid payments, non-DSH supplemental payments, the federal share of the non-DSH payments, and the percentage of the state Medicaid payments for this category that was for non-DSH supplemental payments. This appendix provides state-by-state and nationwide information about non-DSH supplemental Medicaid payments reported during 2006 by the states and District of Columbia in comparison to similar payments reported during 2010. Table 11 shows the total amount of non-DSH supplemental payments states reported during 2006 and 2010 and the change from 2006 to 2010 in these amounts, both as a dollar amount and as a percentage of the 2006 total. Table 12 shows states' reported non-DSH supplemental payments for specific categories of service during 2006 and 2010. In addition to the contact named above, Tim Bushfield, Assistant Director; Kristen Joan Anderson; Helen Desaulniers; Sandra George; Giselle Hicks; Roseanne Price; and Jessica C. Smith made key contributions to this report. Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue. GAO-11-318SP. Washington, D.C.: March 1, 2011. High-Risk Series: An Update. GAO-11-278. Washington, D.C.: February 2011. Medicaid: Ongoing Federal Oversight of Payments to Offset Uncompensated Hospital Care Costs Is Warranted. GAO-10-69. Washington, D.C.: November 20, 2009. Medicaid: CMS Needs More Information on the Billions of Dollars Spent on Supplemental Payments. GAO-08-614. Washington, D.C.: May 30, 2008. Medicaid Financing: Long-standing Concerns about Inappropriate State Arrangements Support Need for Improved Federal Oversight. GAO-08-650T. Washington, D.C.: April 3, 2008. Medicaid Financing: Long-Standing Concerns about Inappropriate State Arrangements Support Need for Improved Federal Oversight. GAO-08-255T. Washington, D.C.: November 1, 2007. Medicaid Financing: Federal Oversight Initiative Is Consistent with Medicaid Payment Principles but Needs Greater Transparency. GAO-07-214. Washington, D.C.: March 30, 2007. 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. Medicaid Financing: States' Use of Contingency-Fee Consultants to Maximize Federal Reimbursements Highlights Need for Improved Federal Oversight. GAO-05-748. Washington, D.C.: June 28, 2005. Medicaid: States' Efforts to Maximize Federal Reimbursements Highlight Need for Improved Federal Oversight. GAO-05-836T. Washington, D.C.: June 28, 2005. Medicaid: Intergovernmental Transfers Have Facilitated State Financing Schemes. GAO-04-574T. Washington, D.C.: March 18, 2004. Medicaid: Improved Federal Oversight of State Financing Schemes Is Needed. GAO-04-228. Washington, D.C.: February 13, 2004. Major Management Challenges and Program Risks: Department of Health and Human Services. GAO-03-101. Washington, D.C.: January 2003. Medicaid: HCFA Reversed Its Position and Approved Additional State Financing Schemes. GAO-02-147. Washington, D.C.: October 30, 2001. Medicaid: State Financing Schemes Again Drive Up Federal Payments. GAO/T-HEHS-00-193. Washington, D.C.: September 6, 2000. Medicaid: Disproportionate Share Payments to State Psychiatric Hospitals. GAO/HEHS-98-52. Washington, D.C.: January 23, 1998. Medicaid: Disproportionate Share Hospital Payments to Institutions for Mental Diseases. GAO/HEHS-97-181R. Washington, D.C.: July 15, 1997. Medicaid: States Use Illusory Approaches to Shift Program Costs to Federal Government. GAO/HEHS-94-133. Washington, D.C.: August 1, 1994.

Summary:
GAO designated Medicaid a high-risk program because of concerns about its size, growth, and inadequate fiscal oversight. The program cost the federal government and states an estimated $383 billion in fiscal year 2010. In addition to regular Medicaid payments to providers, states make supplemental payments, including DSH payments, which are intended to offset the uncompensated costs of care provided to uninsured individuals and Medicaid beneficiaries. States also make other supplemental payments, which we refer to as non-DSH supplemental payments, to hospitals and other providers, for example, to help offset the costs of care provided to Medicaid beneficiaries. GAO and others have raised concerns about the transparency of states' Medicaid supplemental payments. GAO was asked to provide information on supplemental payments. GAO examined (1) how much states reported paying in supplemental Medicaid payments during fiscal year 2010 and (2) how non-DSH supplemental payments reported during 2010 compared with those reported during 2006 and reasons for differences. GAO analyzed CMS's Medicaid expenditure data for all states and information from CMS and other sources about non-DSH supplemental payments in a nongeneralizable sample of 11 states selected to capture a mix of relevant characteristics. In its comments on a draft of GAO's report, HHS stated that HHS and CMS will continue their ongoing efforts to improve states' reporting of supplemental Medicaid payments. States reported $32 billion in Medicaid supplemental payments during fiscal year 2010, but the exact amount of supplemental payments is unknown because state reporting was incomplete. On expenditure reports used to obtain federal funds filed with the Department of Health and Human Services' (HHS) Centers for Medicare & Medicaid Services (CMS), states reported the following: A total of $17.6 billion in Disproportionate Share Hospital (DSH) payments. The 10 states reporting the largest total DSH payments in fiscal year 2010 accounted for more than 70 percent of the nationwide total, with 4 states-- New York, California, Texas, and New Jersey--accounting for almost half (47 percent). DSH payments as a percentage of total Medicaid payments varied considerably--ranging from 1 to 17 percent--among the 50 states that reported DSH payments. A total of $14.4 billion in non-DSH supplemental payments to hospitals and other providers. Because not all states reported these payments separately, complete information is not available. Like DSH payments, non-DSH supplemental payments as a percentage of total state Medicaid spending varied considerably--also ranging from 1 to 17 percent--among the 30 reporting states. These payments can also constitute a large portion of states' expenditures for particular categories of services, such as inpatient or outpatient hospital, nursing facility, or physician and surgical services. For example, non-DSH supplemental payments for inpatient hospital services ranged from 1 to 48 percent of state expenditures for these services among reporting states. CMS officials told GAO that they were taking steps to improve states' reporting of non-DSH supplemental payments, including working with states to train staff on reporting of payments and on identifying and resolving reporting problems. States' reported non-DSH supplemental payments were more than $8 billion higher during 2010 than during 2006, the year for which GAO previously reported on the amount of these payments. More complete state reporting of payments and new and modified supplemental payments were factors in this increase. The information available to identify changes from 2006 to 2010 came from 39 states that separately reported non-DSH supplemental payments during either 2006 or 2010 or both. Most of the increase was from the 15 states that reported some payments in both years and reported higher non-DSH supplemental payments during 2010 than 2006. In addition, most of the reported increase was for inpatient hospital services. In 11 selected states, GAO found that new and modified supplemental payments contributed to some increases. For example, new and modified supplemental payments for hospital services in Colorado and Illinois are estimated to increase the states' non-DSH supplemental payments by about $300 million and $1 billion per year, respectively. However, data limitations prevented GAO from quantifying the full extent to which the increase was attributable to new and modified payments. In light of the apparent increase in non-DSH supplemental payments, ongoing federal efforts to improve the completeness of reporting are important for effective oversight and to better understand the payments' role in financing Medicaid services.