Medicaid finances the delivery of health care services for a diverse low- income and medically needy population. The Social Security Act, which Congress amended in 1965 to establish the Medicaid program, provides the statutory framework for the program, setting broad parameters for states that choose to participate and implement their own Medicaid programs. CMS is responsible for overseeing state Medicaid programs to ensure compliance with federal requirements. Historically, Medicaid eligibility has been limited to certain categories of low-income individuals—such as children, parents, pregnant women, persons with disabilities, and individuals age 65 and older. In addition to these historical eligibility standards, PPACA permitted states to expand their Medicaid programs by covering non-elderly, non-pregnant adults with incomes at or below 133 percent of the federal poverty level (FPL). As of May 2015, 29 states, including the District of Columbia, had expanded their Medicaid programs to cover this new adult group, and one other state’s proposed expansion was pending federal approval. Federal law requires state Medicaid programs to cover a wide array of mandatory services, and permits states to cover additional services at their option. Consequently, Medicaid generally covers a wide range of health care services that can be categorized into broad types of coverage, including hospital care; non-hospital acute care, such as physician, dental, laboratory, and preventive services; prescription drugs; and LTSS in institutions and in the community. (See figure 2 for an overview of Medicaid expenditures by category.) In recent years, we and others have examined patterns of service utilization and expenditures within the Medicaid population and found that enrollment and expenditures vary among the different categories of enrollees. For example, for fiscal year 2011, children constituted the largest category of enrollees (47.4 percent), but accounted for a small share of Medicaid expenditures (19 percent). In that same year, enrollees with disabilities (14.7 percent of Medicaid enrollees) accounted for the largest share of Medicaid expenditures (42.7 percent). (See fig. 3.) In addition, we found that, generally, a small subset of Medicaid enrollees— such as those with institutional care needs or chronic conditions—account for a large portion of Medicaid expenditures. States have traditionally provided Medicaid benefits using a fee-for- service system, where health care providers are paid for each service delivered. However, according to CMS, in the past 15 years, states have increasingly implemented managed care systems for delivering Medicaid services. In a managed care delivery system, enrollees obtain some portion of their Medicaid services from a managed care organization (MCO) under contract with the state, and capitation payments to MCOs are typically made on a predetermined, per person per month basis. Nationally, about 37 percent of Medicaid spending in fiscal year 2014 was attributable to Medicaid managed care. Many states are expanding their use of managed care to additional geographic areas and Medicaid populations. States oversee Medicaid MCOs through contracts and reporting requirements. CMS provides oversight and technical assistance for the Medicaid program, but states are primarily responsible for administering their respective Medicaid programs’ day-to-day operations—including determining eligibility, enrolling individuals and providers, and adjudicating claims—within broad federal requirements. Each state has a Medicaid state plan that describes how the state will administer its Medicaid program consistent with federal requirements. States submit these state plans for approval to CMS, but have significant flexibility to structure their programs to best suit their needs. In addition, within certain parameters, states may innovate outside of many of Medicaid’s otherwise applicable requirements through Medicaid demonstrations, with HHS approval. For example, states may test ways to obtain savings or efficiencies in how services are delivered in order to cover otherwise ineligible services or populations. State FMAP = 1.00 – 0.45 (State PCI / U.S. PCI) Federal law specifies that the regular FMAP will be no lower than 50 percent and no higher than 83 percent. For fiscal year 2015, regular FMAP rates ranged from 50.00 percent to 73.58 percent. Under PPACA, state Medicaid expenditures for certain Medicaid enrollees, newly eligible under the statute, are subject to a higher federal match. States that choose to expand their Medicaid programs receive an FMAP of 100 percent beginning in 2014 for expenditures for the PPACA- expansion enrollees—those who were not previously eligible for Medicaid and are eligible now under PPACA’s expansion of eligibility criteria. The FMAP is to gradually diminish to 90 percent by 2020. States also receive an FMAP above the state’s regular match (but below the PPACA- expansion FMAP) for their Medicaid expenditures for the state-expansion enrollees—those who would not have been eligible for Medicaid prior to PPACA except that they were covered under a state’s pre-PPACA “expansion” of eligibility through, for example, a Medicaid demonstration. This FMAP is to gradually increase and eventually equal the FMAP for the PPACA-expansion enrollees beginning in 2019. The formula used to calculate the state-expansion FMAP rates is based on a state’s regular FMAP rate so the enhanced FMAP rate will vary from state to state until 2019. See figure 5 for the variation across states in the regular FMAP; Medicaid spending, enrollment, and managed care enrollment; and whether the state had expanded Medicaid coverage to newly eligible adults under PPACA as of May 2015. See appendix II for the information in tabular form. Medicaid enrollees report access to medical care that is generally comparable to that of privately insured individuals. However, some enrollees may face access challenges, such as in obtaining specialty care or dental care. CMS has taken steps to help ensure enrollees’ access to care and additional steps could bolster those efforts. CMS also has ongoing efforts to collect data from states to help assess Medicaid enrollees’ access to care, but better data are needed. Medicaid enrollees report access to care that is generally comparable to the privately insured, but some face particular access challenges. We have found that Medicaid enrollees report experiencing access to medical care that is generally comparable to that of privately insured individuals. For example, according to national survey data, few enrollees covered by Medicaid for a full year—less than 4 percent—reported difficulty obtaining necessary medical care or prescription medicine in 2008 and 2009, similar to privately insured individuals. (See fig. 6.) Regarding children, respondents with children covered by Medicaid reported positive responses to most questions about their ability to obtain care, and at levels generally comparable to those with private insurance, from 2007 through 2010. Although few Medicaid enrollees report difficulty obtaining necessary care in general, our work indicates that particular populations can face particular challenges obtaining care. For example, about 7.8 percent of working-age adults with full-year Medicaid reported difficulty obtaining care compared with 3.3 percent of similar adults with private insurance— a statistically significant difference. Some enrollees face particular challenges, such as accessing services. For example, Medicaid enrollees were more likely than individuals with private insurance to report factors such as lack of transportation and long wait times as reasons for delaying medical care. (See fig. 7.) We have also found that Medicaid-covered adults may be more likely to have certain health conditions that can be identified and managed through preventive services, such as obesity and diabetes, than individuals with private insurance. However, states’ Medicaid coverage of certain preventive services for adults has varied, which has resulted in different levels of coverage across states. Specialty care, such as mental health care and dental care, may be particularly difficult for some Medicaid enrollees to obtain. Access to Specialty Care, Including Mental Health Care National surveys of enrollees and our own surveys of state Medicaid officials and physicians have consistently indicated that Medicaid enrollees may have difficulty obtaining specialty care, such as mental health care. In our survey of state Medicaid officials in 2012, for example, officials in about half of the states reported challenges ensuring enough participating specialty providers for Medicaid enrollees, such as in obstetrics and gynecology, surgical specialties, and pediatric services. In addition, we found that about 21 percent of respondents with Medicaid- covered children reported that it was only sometimes or never easy to see a specialist, compared to about 13 percent of respondents with privately insured children, from 2008 through 2010. Our 2010 national survey of physicians found that specialty physicians were generally more willing to accept privately insured children as new patients than Medicaid-covered children; similarly, more physicians reported having difficulty referring Medicaid-covered children to specialty providers than reported having difficulty referring privately insured children. (See fig. 8.) We have also found that both Medicaid-covered adults and children may face challenges obtaining mental health care. Research has shown that Medicaid enrollees experience a higher rate of mental health conditions than those with private insurance. Officials we interviewed from six states that expanded Medicaid under PPACA generally reported that Medicaid expansion had increased the availability of mental health treatment for newly eligible adults, but cited access concerns for new Medicaid enrollees due to shortages of Medicaid-participating psychiatrists and psychiatric drug prescribers.survey, state officials reported problems ensuring sufficient psychiatry In our 2012 national providers for Medicaid enrollees. Among Medicaid-covered children, national survey data from 2007 through 2009 indicated that 14 percent of noninstitutionalized Medicaid-covered children had a potential need for mental health services, but most of these children did not receive mental health services. In addition, many Medicaid-covered children who took psychotropic medications (medications that affect mood, thought, or behavior) did not receive other mental health services during the same year. In December 2011, we reported that Medicaid-covered children in foster care in selected states were prescribed psychotropic medications at higher rates than nonfoster children in Medicaid during 2008. In 2012, HHS’s Administration for Children and Families issued guidance to state agencies seeking to improve their monitoring and oversight practices for psychotropic medications. See GAO, Foster Children: Additional Federal Guidance Could Help States Better Plan for Oversight of Psychotropic Medications Administered by Managed-Care Organizations, GAO-14-362 (Washington, D.C.: April 28, 2014); and Foster Children: HHS Guidance Could Help States Improve Oversight of Psychotropic Prescriptions, GAO-12-201 (Washington, D.C.: Dec. 14, 2011). our recommendation in comments on our draft report.CMS indicated that it no longer agreed that additional guidance was necessary, stating that its existing guidance applied to managed care settings. We continue to believe that our recommendation is valid. We found that many states were, or were transitioning to, managed care organizations to administer prescription-drug benefits, and that selected states had taken only limited steps to plan for the oversight of drug prescribing for foster children receiving care through these organizations—creating a risk that controls instituted under fee-for-service may not remain once states move to managed care. As we reported, additional HHS guidance that helps states prepare and implement monitoring efforts within the context of a managed-care environment could help ensure appropriate oversight of psychotropic medications to children in foster care. In recent years, Medicaid enrollees’ use of dental services increased, but some access problems persist. We found that while the percentage of individuals with Medicaid dental coverage who had a dental visit increased from 28 percent in 1996 to 34 percent in 2010, individuals with Medicaid dental coverage were still much less likely than privately insured individuals to have visited the dentist. About two-thirds of Medicaid- covered children, for example, did not visit the dentist at all in 2010, while most privately insured children did. (See fig. 9.) This difference in use of dental services persisted despite the fact that Medicaid-covered children may have a greater need for dental care than privately insured children. We have found that Medicaid-covered children are almost twice as likely to have untreated tooth decay as privately insured children. In addition, states have found it particularly challenging to ensure a sufficient number of dental providers for Medicaid enrollees. CMS has taken some steps to address access to dental care, and other steps could build on those efforts. In 2010, for example, the agency launched a Children’s Oral Health Initiative that aimed to, among other things, increase the proportion of Medicaid and State Children’s Health Insurance Program (CHIP) children who receive a preventive dental service. In response to our prior recommendations, CMS also took steps to ensure that states gather information on the provision of Medicaid dental services by managed care programs, and to improve the accuracy of the data on HHS’s Insure Kids Now website, which provides state- reported information on dentists who serve children enrolled in Medicaid and CHIP. We recommended that CMS require states to verify that dentists listed on the Insure Kids Now website have not been excluded from Medicaid by HHS, and periodically verify that excluded providers are not included on the lists of dentists posted by the states. However, CMS has said that it relies on states to provide accurate lists of eligible dentists and that data issues prevent the agency from independently verifying that excluded providers are not included on the website. We continue to believe that CMS should require states to ensure that excluded providers are not listed on the website, so that it does not present inaccurate information about providers available to serve Medicaid-covered children. We also recommended that for states that provide Medicaid dental services through managed care organizations, CMS ensure that states with inadequate managed care dental provider networks take action to CMS has reported taking steps to improve strengthen these networks.these networks, including meeting with national dental associations, but we believe more can be done to identify inadequate networks and, once inadequate networks are identified, to work with states to strengthen them to help ensure that they meet the needs of Medicaid enrollees. CMS has ongoing efforts to collect data from states to help assess Medicaid enrollees’ access to care and identify areas for improvement. States are required to submit certain types of data to CMS, and they can opt to submit other types of data. For example, states are required to submit reports on the provision of certain services for eligible children, as part of the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit. These reports, known as CMS 416 reports, include such information as the number of children receiving well-child checkups and the number of children referred for treatment services for conditions identified during well-child checkups. CMS has used these reports to identify states with low reported rates of service provision, to help identify state Medicaid programs needing improvements. In addition, states voluntarily report Child Core Set measures, which assess the quality of care provided through Medicaid and CHIP, and include, for example, measures of access to primary care and the receipt of follow-up care for children prescribed attention deficit hyperactivity disorder medication. Also, states that use managed care plans to deliver services for Medicaid and CHIP enrollees are required to annually review these plans to evaluate the quality, timeliness, and access to services that the plans provide—and submit their “external quality review” reports to CMS. In 2011, we reported on problems and gaps in the required CMS 416 reports. We found that states sometimes made reporting errors, and in some cases those errors overstated the extent to which children received well-child checkups. In addition, states did not always report required data on how many Medicaid-covered children were referred for additional services to address conditions identified through check-ups. Finally, we found that CMS did not require states to report information on whether Medicaid-covered children actually received services for which they were referred—or to report information separately for children in managed care versus those in fee-for-service systems. CMS has since taken steps to improve the CMS 416 data, and we believe more can be done, as discussed below. In response to our recommendation that CMS establish a plan to review the accuracy and completeness of the CMS 416 data and ensure that problems are corrected, CMS has established an automated quality assurance process to identify obvious reporting errors and as of March 2015 was developing training for state staff responsible for the data. We also recommended that CMS work with states to explore options for capturing information on children’s receipt of services for which they were referred. The agency has issued guidance to states about how to report referrals for health care services, but has not required states to report whether children receive services for which they are referred. CMS officials noted that data collection tools other than the CMS 416 reports, such as the Child Core Set measures, provide CMS with information on whether children are receiving needed care—and that HHS was developing additional measures to help fill gaps in assessing children’s care. While these are positive steps, we have noted that CMS’s ability to monitor children’s access to services is dependent on consistent, reliable, complete, and sufficiently detailed data from each state. The Child Core Set measures, for example, are voluntarily reported by states, and we have reported that although the number of states reporting measures has increased in recent years, that states have varied considerably in the number of measures they reported. We continue to believe that information on whether children receive services for which they are referred is important for monitoring and ensuring their access to care. We also recommended that CMS work with states to explore options for reporting on the receipt of services separately for children in managed care and fee-for-service delivery models. However, CMS officials indicated that they do not plan to require states to report such information, in part, to limit the reporting burden for states. CMS officials added that the states report information on children’s access to care through their managed care external quality review reports. While this is a positive step, these reports do not represent a consistent set of measures used by all states that CMS can use for oversight purposes. We continue to believe that having accurate and complete information on children’s access to health services, by delivery model, is an important element of monitoring and ensuring access to care and that CMS should fully implement this recommendation. Our 2015 report on managed care services used by Medicaid enrollees in 19 states highlighted the importance of having reliable data to help understand patterns of managed care utilization and the impact that managed care delivery models may have on enrollees’ access to care. We found that the number of managed care services used by adult and child enrollees varied by state, population, type of service, and whether enrollees were enrolled in comprehensive managed care plans for all or part of the year. For example, the number of services per enrollee per year for adults ranged from about 13 to 55 services per enrollee per year, across the 19 states. (See fig. 10.) With regard to children, in almost every selected state, the total service utilization was higher for children who were enrolled in comprehensive managed care for less than the full year, when compared with those enrolled for a full year. This type of information can be useful for understanding access to care among enrollees in Medicaid managed care plans. A detailed, interactive display of the data used to support our findings is available at http://www.gao.gov/products/GAO-15-481. Given Medicaid’s size, complexity, and diversity, transparency in how funds are used is critical to ensuring fiscal accountability. However, a lack of reliable CMS data about program payments and state financing of the non-federal share of Medicaid hinders oversight, and our work has pointed to the need for better data, as well as improved policy and oversight, to ensure that funds are being used appropriately and efficiently. In addition, gaps in HHS’s criteria, process, and policy for approving states’ demonstration spending raise questions about billions of dollars in federal spending. While HHS and CMS have taken important steps in recent years to improve transparency, oversight, and fiscal accountability, more can be done to build on those efforts. Improving HHS’s review and approval process for demonstration spending may prevent unnecessary federal spending. Data limitations hinder the transparency of program payments and state financing sources, and hinder federal oversight. Federal Data on Program Payments CMS does not have the complete and reliable data needed to understand the payments states make to individual providers, nor does it have a transparent policy and standard process for assessing whether those payments are appropriate. States have considerable flexibility in setting payment rates that providers, such as hospitals, receive for services rendered to individual Medicaid enrollees. In addition to these regular claims-based payments, states may make (and obtain federal matching funds for) payments to certain providers that are not specifically linked to services Medicaid enrollees receive. These payments can help offset any remaining costs of care for Medicaid patients, and in some cases can be used to offset costs incurred treating uninsured patients. These types of payments are known as supplemental payments, which include disproportionate share hospital (DSH) payments and other payments, such as those known as Medicaid upper payment limit (UPL) supplemental payments. States have some flexibility in how they distribute supplemental payments to individual providers. However, Medicaid payments to providers should not be excessive, as the law states that they must be “economical and efficient.” We have had longstanding concerns about federal oversight of supplemental payments, which our work has found to be a significant and growing component of Medicaid spending, totaling at least $43 billion in fiscal year 2011. CMS oversight of provider supplemental payments is limited because the agency does not require states to report provider- specific data on these payments, nor does it have a policy and standard process for determining whether Medicaid payments to individual providers are economical and efficient. States may have incentives to make excessive Medicaid payments to certain institutional providers, such as local government hospitals needing or receiving financial support from the state. Absent a process to review these payments—and absent data on total payments individual providers receive—the agency may not identify potentially excessive payments to providers, and the federal government could be paying states hundreds of millions—or billions—of dollars more than what is appropriate, as shown in the examples below. Additional actions needed to identify and Efforts to ensure only eligible individuals and providers participate in Medicaid can be improved. The federal government and the states both play important roles in ensuring that Medicaid payments made to health care providers and managed care organizations are correct and appropriate. The size and diversity of the Medicaid program make it particularly vulnerable to improper payments—including payments made for treatments or services that were not covered by program rules, that were not medically necessary, or that were billed for but never provided. Medicaid improper payments are a significant cost to Medicaid—totaling an estimated $17.5 billion in fiscal year 2014, according to HHS. Due to our concerns about Medicaid’s improper payment rate and the sufficiency of federal and state oversight, we added Medicaid to our list of high-risk programs in 2003.appropriate use of funds by (1) identifying and preventing improper payments in both fee-for-service and managed care, (2) setting appropriate payment rates for managed care organizations, and (3) ensuring only eligible individuals and providers participate in Medicaid. Responsibility for program integrity activities is spread across multiple state and federal entities, resulting in fragmented efforts, creating the potential for unnecessary duplication, which we have previously identified in some areas, as well as program areas not being covered. The combined federal and state efforts have recovered only a small portion of the estimated improper payments in Medicaid, and the Medicaid improper These factors, coupled with recent payment rate has recently increased.and projected increases in Medicaid spending, heighten the importance of coordinated and cost-effective program integrity efforts. CMS has taken many important steps in recent years to help improve program integrity— including some in response to our recommendations—and we believe even more can be done in this area. Coordinating to Minimize Duplication and Ensure Coverage Our work has highlighted how careful coordination of federal and state efforts is necessary to both avoid duplication and ensure maximum program coverage. Given the number of entities involved in program integrity efforts, coordination among entities is critical. (See fig. 14.) Without careful coordination, the involvement of multiple state and federal entities in Medicaid program integrity results in fragmented efforts, possibly leaving some program areas insufficiently covered. In 2014, we reported a gap in oversight of the growing expenditures on Medicaid managed care, which constituted over a quarter of federal Medicaid expenditures in 2011. In particular, we found that the federal government and the states were not well positioned to identify improper payments made to—or by—managed care organizations. We found that CMS had largely delegated managed care program integrity oversight activities to the states, but states generally focused their efforts on fee- for-service claims. We concluded that further federal and state oversight, coupled with additional federal guidance and support to states, could help ensure that managed care organizations are taking appropriate actions to identify and prevent improper payments. Specifically, we recommended that CMS 1. require states to conduct audits of payments to and by managed care 2. update CMS’s Medicaid managed care guidance on program integrity practices and effective handling of recoveries by managed care plans; and 3. provide states with additional support in overseeing Medicaid managed care program integrity, such as the option to obtain audit assistance from existing Medicaid integrity contractors. CMS generally agreed with our recommendations, and has taken steps to provide states with additional guidance. In October 2014, CMS made available on its website the managed care plan compliance toolkit to provide further guidance to states and managed care plans on identifying improper payments to providers. In addition, agency officials told us that, as of December 2014, at least six states were using their audit contractors to audit managed care claims. While CMS has taken steps to improve oversight of Medicaid managed care, the lack of a comprehensive program integrity strategy for managed care leaves a growing portion of Medicaid funds at risk. In our view, CMS actions to require states to conduct audits of payments to and by managed care organizations, and to update guidance on Medicaid managed care program integrity practices and recoveries, are crucial to improving program integrity, and we will continue to follow CMS’s actions in this area. (Appendix I includes our open recommendations regarding Medicaid improper payments, which we believe could help reduce improper payments if implemented.) On June 1, 2015, the agency issued a proposed rule to revise program integrity policies, including policy measures that we have recommended. Among other measures, if finalized, the rule would require states to conduct audits of managed care organizations’ encounter and financial data every three years. Additionally, the proposed rule would standardize the treatment of recovered overpayments by plans. Our work has highlighted the importance of focusing state and federal resources on cost-effective efforts to identify improper payments. States’ information systems are a key component of program integrity activities, and states’ program integrity efforts include receiving, reviewing, and paying Medicaid claims; and auditing claims payments after the fact. Consistent with the requirements defined by CMS, states use Medicaid Management Information Systems (MMIS) provider and claims processing subsystems to perform program integrity activities related to provider enrollment and prepayment review. (See fig. 15.) Our work has shown that the effectiveness of states’ information systems used for program integrity purposes is uncertain. In 2015, we reviewed 10 states’ use of information technology systems to support efforts aimed at preventing and detecting improper payments. These states’ information systems ranged in age and capability, with 3 of the 10 states’ operating systems being more than 20 years old. However, the effectiveness of the states’ use of the systems for program integrity purposes is not known, and we recommended that CMS require states to measure and report quantifiable benefits of program integrity systems when requesting federal funds, and to reflect their approach for doing so. CMS concurred with these recommendations. In our past work, we also recommended—and CMS acted on—other measures to streamline program integrity efforts, as shown in the following examples. CMS’s hiring of separate review and audit contractors for its program integrity efforts was inefficient and led to duplication because key functions—such as assessing whether payments were improper and learning states’ Medicaid policies—were performed by both contractors. We recommended that CMS eliminate duplication between the separate contractors, which CMS did in conjunction with the agency’s redesign of its Medicaid Integrity Program. This redesign eliminated the review contractor function and included a more collaborative and coordinated audit approach that leverages state expertise to identify potential audit targets, and relies on more complete and up-to-date state Medicaid claims data. Two CMS oversight tools—the state comprehensive reviews and the state program integrity assessments—were duplicative because both tools were used to collect similar information from the states. Furthermore, we found that the state program integrity assessments contained unverified and inaccurate data. We recommended that CMS eliminate this duplication, and CMS subsequently discontinued the state program integrity assessments. CMS’s comprehensive reviews of states’ program integrity efforts contained important information about all aspects of states’ program integrity capabilities. However, we found no apparent connection between the reviews’ findings and CMS’s selection of states for audits. We recommended that CMS use the knowledge gained from the comprehensive reviews as a criterion for focusing audit resources toward states with structural or data-analysis vulnerabilities. CMS agreed and, among other steps, in 2013 redesigned the reviews to streamline the process, reduce the burden on states, and refocus the reviews on risk-assessment. Ensuring Medicaid Remains a Payer of Last Resort CMS and the states must ensure that if Medicaid enrollees have another source of health care coverage, that source should pay, to the extent of its liability, before Medicaid does. Medicaid enrollees may have health care coverage through third parties—such as private health insurers—for a number of reasons. For example, some adults may be covered by employer-sponsored insurance even though they qualify for Medicaid. Similarly, children may be eligible for Medicaid while being covered under a parent’s health plan. Figure 16 shows the estimated prevalence of private health insurance among Medicaid enrollees. In 2015, we found that states had adopted various approaches to identify enrollees with other insurance than Medicaid, and states were working to ensure that these third parties paid for health care services to the extent of their liability before Medicaid. However, these states needed additional CMS guidance and support in these efforts.CMS play a more active leadership role in monitoring, supporting, and promoting state third-party liability efforts. Specifically, we recommended that CMS 1. routinely monitor and share across all states information regarding key third-party liability efforts and challenges, and 2. provide guidance to states on their oversight of third-party liability efforts conducted by Medicaid managed care plans. CMS concurred with our recommendations, and stated that it would continue to look at ways to provide guidance to states to allow for sharing of effective practices and to increase awareness of initiatives under development in states. CMS also stated that it would explore the need for additional guidance regarding state oversight of third-party liability efforts conducted by Medicaid managed care plans. In the preamble to the June 1, 2015, proposed rule, the agency indicated it plans to issue guidance, which would require managed care plans to include information on third-party liability amounts in the encounter data submitted to states. We will continue to follow CMS’s actions in this area. Managed care is designed to ensure the provision of appropriate health care services in a cost-efficient manner. However, the design of capitation payments, which are made prospectively to health plans to provide or arrange for services for Medicaid enrollees, can create incentives that adversely affect program integrity and patient care. For example, these payments may create an incentive to underserve or deny access to needed care. Thus, appropriate safeguards are needed to ensure access to care and appropriate payment in Medicaid managed care. In 2010, we found that CMS’s oversight of states’ Medicaid managed care rate setting methodologies was not consistent across its regional offices, and that in assessing the quality of the data used to set rates, the agency primarily relied on state and health plan assurances, thereby placing billions of federal and state dollars at risk. We found significant gaps in CMS’s oversight. For example, in one instance, the agency had not reviewed one state’s rate setting for multiple years, resulting in the state receiving approximately $5 billion a year in federal funds for three years without having had its rates reviewed by CMS. We also found that regional offices varied in their interpretations of how extensive a review of states’ rate setting was needed and the sufficiency of evidence for meeting actuarial soundness requirements, among other things. We recommended that CMS 1. implement a mechanism to track state compliance with requirements, 2. clarify guidance on rate-setting reviews, and 3. make use of information on data quality in determining the appropriateness of managed care capitation rates. As a result of our work, CMS implemented a detailed checklist to standardize the regional offices’ reviews. CMS has also taken a number of other steps to improve its oversight of states’ rate setting. In 2014, CMS completed its development of a database to track contracts, including rate-setting reviews. According to agency officials, as of March 2015, 57 rate submissions had been submitted to the database and were undergoing review by CMS’s Office of the Actuary and the Division of Managed Care Plans. CMS officials reported that the agency had developed a managed care program review manual, which included modules on financial oversight, and had updated rate setting and contract review tools. In 2014, the agency released its 2015 Managed Care Rate Setting Consultation Guide, which clarified the agency’s requirements relating to the information states must submit in developing their rate certifications, including a description of the type, sources, and quality of the data used by the state in setting its rates. On June 1, 2015, the agency issued a proposed rule that, if finalized, would make changes to Medicaid managed care rate setting, such as requiring more consistent and transparent documentation of the rate setting process to allow for more effective reviews of states’ rate certification submissions. We will continue to follow CMS’s actions in this area. Both CMS and the states play an important role in ensuring that only eligible individuals receive Medicaid coverage and that only eligible providers receive payment. Our work has highlighted several issues facing CMS and the states in their efforts to minimize fraud in Medicaid eligibility among both enrollees and providers. To be eligible for Medicaid coverage, applicants must meet financial and nonfinancial requirements, such as federal and state requirements regarding residency, immigration status, and documentation of U.S. citizenship. Similarly, to participate in Medicaid, providers must enroll and submit information about their ownership interests and criminal background. States must screen potential Medicaid providers, search exclusion and debarment lists, and take action to exclude those providers who appear on those lists. Using 2011 data, we recently identified indications of potentially fraudulent or improper payments related to certain Medicaid enrollees and paid to some providers, as shown in our review of approximately 9 million enrollees in four states and summarized below. While these cases indicate only potentially improper payments, they raise questions about the effectiveness of beneficiary and provider enrollment screening controls. We identified about 8,600 enrollees who had payments made on their behalf concurrently by two or more of our selected states.approved benefits of at least $18.3 million for these enrollees in these states. We identified about 200 deceased enrollees in the four states who appear to have received Medicaid benefits totaling at least $9.6 million. Specifically, our analysis matching Medicaid data to the Social Security Administration’s data on date of death found these individuals were deceased before the Medicaid service was provided. We found that about 50 medical providers in the four states we examined had been excluded from federal health care programs, including Medicaid; these providers were excluded from these programs when they provided and billed for Medicaid services during fiscal year 2011. The selected states approved the claims at a cost of about $60,000. We found that the identities of over 50 deceased providers in the four states we examined were used to receive Medicaid payments. Our analysis matching Medicaid eligibility and claims data to the Social Security Administration’s full death file found these individuals were deceased before the Medicaid service was provided. The Medicaid benefits involved with these deceased providers totaled at least $240,000 for fiscal year 2011. We found nearly 26,600 providers with addresses that did not match any U.S. Postal Service records. These unknown addresses may have errors due to inaccurate data entry or differences in the ages of MMIS and U.S. Postal Service address-management tool data, making it difficult to determine whether these cases involve fraud through data matching alone. CMS has taken steps since 2011 to strengthen the Medicaid beneficiary and provider enrollment-screening controls in ways that may address the issues we identified, and we believe that additional CMS guidance could bolster those efforts. In 2013, CMS issued federal regulations, in response to PPACA, to establish a more rigorous approach to verify the information needed to determine Medicaid eligibility. Under these regulations, states are required to use electronic data maintained by the federal government to the extent that such information may be useful in verifying eligibility. CMS created a tool called the Data Services Hub, implemented in fiscal year 2014, to help verify some of the information used to determine eligibility for Medicaid and other health programs. States are to use the hub to both verify an individual’s eligibility when they receive an application, and to reverify eligibility on at least an annual basis thereafter, unless the state has an alternative mechanism approved by HHS. In addition, in February 2011, CMS and HHS’s Office of Inspector General issued regulations establishing a new risk-based screening process for providers with enhanced verification measures, such as unscheduled or unannounced site visits and fingerprint-based criminal background checks. If properly implemented by CMS, the hub and the additional provider screening measures could help mitigate some of the potential improper payment issues that we identified. However, we identified gaps in state practices for identifying deceased enrollees, as well as state challenges in screening providers effectively and efficiently, and recommended that CMS provide guidance to states to better 1. identify enrollees who are deceased, and 2. screen providers by using automated information available through Medicare’s enrollment database. HHS concurred with our recommendations and stated it would work with states to determine additional approaches to better identify deceased enrollees, and that it would continue to educate states about the availability of provider information and how to use that information to help screen Medicaid providers more effectively and efficiently. We will continue to monitor HHS’s efforts in this area. Medicaid’s federal-state partnership could be improved through a revised federal financing approach that better addresses variations in states’ financing needs. First, automatically providing increased federal financial assistance to states affected by national economic downturns—through an increased FMAP—could help provide timely and targeted assistance that is more responsive to states’ economic conditions. Second, revisions to the current FMAP formula could more equitably allocate Medicaid funds to states by better accounting for their ability to fund Medicaid. These improvements could better align federal funding with each state’s resources, demand for services, and costs; better facilitate state budget planning; and provide states with greater fiscal stability during times of economic stress. assistance would better aid states during economic downturns. better reflect states’ varying ability to fund Medicaid. Economic downturns can hamper states’ ability to fund their Medicaid programs. During economic downturns, states’ employment and tax revenues typically fall, while enrollment in the Medicaid program tends to increase as the number of individuals with incomes low enough to qualify for Medicaid coverage rises. We have reported that each state, however, can experience different economic circumstances—and thus different levels of change in Medicaid enrollment and state revenues during a downturn. Figures 17 and 18 show the percentage change in Medicaid enrollment and state tax revenue, by state, respectively. In response to the two most recent recessions, Congress acted to temporarily increase support to states by increasing the federal share of Medicaid funding provided by the FMAP formula. Following the 2001 recession, the Jobs and Growth Tax Relief Reconciliation Act of 2003 provided states $10 billion in temporary assistance through an increased FMAP. In response to the 2007 recession, the American Recovery and Reinvestment Act of 2009 (Recovery Act) provided states with $89 billion through a temporarily increased FMAP. Under the Recovery Act, the level of funding was intended to help both maintain state Medicaid programs so enrollees would be assured continuity of services—and to assist states with fiscal needs beyond Medicaid. Our prior work, however, found that these efforts to provide states with temporary increases in the FMAP were not as responsive to states’ economic conditions as they could have been. Improving the responsiveness of federal assistance to states during economic downturns would facilitate state budget planning, provide states with greater fiscal stability, and better align federal assistance with the magnitude of the economic downturn’s effects on individual states. We have identified opportunities to improve the timing, amount, and duration of assistance provided, as detailed below. Automatic and timely trigger for starting assistance. To be effective at stabilizing state funding of Medicaid programs, assistance should be provided close to the beginning of a downturn. An automatically activated, prearranged mechanism for triggering federal assistance could use readily available economic data to begin assistance rather than rely on legislative action at the time of a future national economic downturn. Targeted assistance based on state needs. States’ efforts to fund Medicaid during economic downturns face two main challenges: (1) financing increased enrollment, and (2) replacing lost revenue. We found that better targeting of assistance based on each state’s level of need could help ensure that federal assistance is aligned with the magnitude of an economic downturn’s effect on individual states. Timely and tapered end of assistance. Determining when and how to end increased FMAP assistance to states is complicated.found that more gradually reducing the percentage of increased FMAP provided to states could help mitigate the effects of a slower recovery. Such tapered assistance would avoid abrupt changes and allow states to plan their transitions back to greater reliance on their own revenues. See GAO-12-38. that policymakers could adjust depending on circumstances, such as competing budget demands and other state fiscal needs beyond Medicaid. We compared this prototype formula with assistance provided during the Recovery Act. Under our prototype formula, assistance would have begun in January 2008 rather than in October 2008, as was the case under the Recovery Act; the end of assistance would have been triggered in April 2011, and assistance would have been phased out by September 2011, rather than in June 2011 under the Recovery Act and its extension. Based on our work, we noted that Congress could consider enacting an FMAP formula that is targeted for variable state Medicaid needs and provides automatic, timely, and temporary increased FMAP assistance in response to national economic downturns. As of July 2015, Congress has not enacted such a formula. In commenting on drafts of our 2011 reports, HHS agreed with the analysis and goals of the reports, emphasized the importance of aligning changes to the FMAP formula with individual state circumstances, and offered several considerations to guide policy choices regarding appropriate thresholds for timing and targeting of increased FMAP funds. In prior work spanning more than three decades, we have emphasized that in federal-state programs such as Medicaid, funds should be allocated to states in a manner that is equitable from the perspective of both enrollees and taxpayers. To be equitable from the perspective of enrollees, and thereby allow states to provide a comparable level of services to each person in need, a funding allocation mechanism should take into account the demand for services in each state—which depends on both the number of people needing services and their level of need—and geographic cost differences among states. To be equitable from the perspective of taxpayers, an allocation mechanism should ensure that taxpayers in poorer states are not more heavily burdened than those in wealthier ones. To account for states’ relative wealth, a mechanism must take into account each state’s ability to finance its share of program costs from its own resources, which should account for all potentially taxable income, including personal income of state residents and corporate income. Our prior work has found that the current FMAP formula does not adequately address variation in the demand for services in each state, geographic cost differences, and state resources. The FMAP formula uses per capita income as the basis for calculating each state’s federal matching rate. However, per capita income is a poor proxy for the size of a state’s population in need of Medicaid services, as two states with similar per capita incomes can have substantially different numbers of Per capita income also does not include any low-income residents.measure of geographic differences in the costs of providing health care services, which can vary widely. Finally, although per capita income measures the income received by state residents—such as wages, rents, and interest income—it does not include other components of a state’s resources that affect its ability to finance Medicaid, such as corporate income produced within the state, but not received by state residents. In 2013, we identified multiple alternative data sources that could be used to develop measures of the demand for Medicaid services, geographic cost differences, and state resources. These measures could be combined in various ways to provide a basis for allocating Medicaid funds more equitably among states. (See table 2.) We have reported over the years on challenges facing the Medicaid program and concerns about the adequacy of federal oversight. As previously discussed, in 2003, we designated Medicaid as a high-risk program due to its size, growth, diversity of programs, and concerns about gaps in oversight. More than a decade later, those factors remain relevant for federal oversight. In addition, state Medicaid programs are changing rapidly. PPACA has led to unprecedented programmatic changes, and more are anticipated as states continue to pursue new options available under the law to expand eligibility and restructure payment and health care delivery systems. The effects of changes brought on by PPACA, as well as the aging of the U.S. population, will continue to emerge in the coming years and are likely to exacerbate the challenges that already exist in federal oversight and management of the Medicaid program.delivery and payment approaches, as well as new technologies, will continue to pose challenges to federal oversight and management. These changes have implications for enrollees and for program costs, and underscore the importance of ongoing attention to federal oversight efforts. In addition, other changes in states’ health care Emerging changes brought on by PPACA will transform states’ enrollment processes, as well as increase enrollment and program spending. Oversight to monitor access and use of services will be critical. Enrollment processes. PPACA required the establishment of a coordinated eligibility and enrollment process for Medicaid, CHIP, and the health insurance exchanges. To implement this process— referred to as the “no wrong door” policy—states were required to develop IT systems that allow for the exchange of data to ensure that applicants are enrolled in the program for which they are eligible, regardless of the program for which they applied. We found that some states struggled with meeting the requirement to transfer—send and receive—applications with the federally facilitated exchange. Increased enrollment. Enrollment is expected to increase significantly, even in states that do not implement the expansion, as streamlined processes and publicity about the expansion encourage enrollment among previously eligible but unenrolled adults and children. The sheer number of additional enrollees—about 10 million by 2020, according to Congressional Budget Office (CBO) estimates—may stretch health care resources and exacerbate challenges to ensuring access to care. Increased spending. Over the next 5 years, Medicaid expenditures are expected to increase more rapidly than in the prior 10 years, rising from an estimated $529 billion in combined federal and state spending in 2015 to about $700 billion in 2020, due, in part, to the continuing implementation of PPACA. The federal share of expenditures, which has historically averaged about 57 percent, is projected to increase as well, to about 60 percent, largely because of the enhanced federal match required under PPACA for newly eligible enrollees. While expenditures grew at an average annual rate of 5.3 percent between 2005 and 2015, the CMS Office of the Actuary has projected that the rate of increase will rise to 5.8 percent between 2015 and 2020. See CMS, 2014 Actuarial Report on the Financial Outlook for Medicaid. spending, including supplemental payments that states often make to institutional providers, would help to ensure the fiscal accountability and integrity of the program, facilitate efforts to manage program costs, and provide information needed for policy making. Lastly, improved federal program integrity efforts will be critical to ensuring the appropriate use of program funds. Continued increases in states’ demonstration spending, changes in states’ delivery systems and payment approaches, as well as the aging of the population and the introduction of new technologies also will continue to pose challenges to federal oversight. Increased demonstration spending. Medicaid spending governed by the terms and conditions of Medicaid demonstrations, rather than traditional Medicaid state plan requirements, accounted for close to one-third of federal Medicaid spending in 2014—up from one-fourth of federal Medicaid spending in 2013 and one-fifth in 2011. The trend among states to seek flexibilities under the demonstration authority has implications for enrollees’ access and program spending. For example, enrollees may lose protections—such as those to limit cost- sharing or to provide certain mandatory benefits—under the traditional Medicaid program. The federal government will need to oversee increasingly diverse Medicaid programs not subject to traditional Medicaid requirements. As of February 2015, HHS had approved demonstration proposals from two states—Arkansas and Iowa— allowing them to provide coverage to some or all of their expansion populations through premium assistance to purchase private health insurance on exchanges established under PPACA. Changes in states’ delivery systems. Growth of managed care and states’ exploration of new models of health care delivery systems, particularly for long-term services and supports, will further heighten the need for program oversight. Enrollment of Medicaid populations in managed care arrangements continues to grow, with attendant challenges for program oversight. Over the next 5 years, expenditures for capitation payments and premiums are projected to grow more rapidly than total Medicaid expenditures. We have found weaknesses in CMS and state oversight of managed care. The HHS Office of Inspector General has also documented weaknesses in state standards, as well as significant issues with the availability of providers, and called for CMS to work with states to improve oversight of managed care plans. Recent state efforts to explore new health care models have implications for federal oversight of enrollees’ care and program costs. In July 2012, CMS announced a major initiative to support state design and testing of innovative health care payment and service delivery models intended to enhance quality of care and lower costs for enrollees in Medicaid, CHIP, and Medicare, as well as other state residents. Beginning in 2017, states may embark on even more ambitious efforts to reshape their payment and delivery systems. The past two decades have seen a marked shift in where and how long term care services are delivered to disabled and aged enrollees, with care increasingly being provided in home- and community-based settings rather than in institutions such as nursing homes. In fiscal year 2011, about 45 percent of long term care spending was for home- and community-based services, up from 32 percent in 2002. As the population ages—and particularly as the number of people over age 85 increases—Medicaid expenditures on these services are predicted to grow. New technology. New developments in technology, such as innovations in health care treatments and telemedicine, are likely to influence how state Medicaid programs deliver and pay for care— raising implications for federal oversight of access to care and costs. In 2008, CBO concluded from its review of the economic literature that roughly half of the increase in health care spending during the past several decades was associated with the expanded capabilities of medicine brought about by technological advances, including new drugs, devices, or services, as well as new clinical applications of existing technologies. The potential for new technologies to contribute significantly to long-term health care spending growth poses particular challenges for the Medicaid program. State Medicaid directors have highlighted as a critical concern the emergence of high-cost, cutting-edge pharmaceuticals, in light of the requirement that state Medicaid programs that cover outpatient drugs must cover nearly all Food and Drug Administration-approved prescription drugs of manufacturers that participate in the Medicaid drug rebate program. These changes underscore the importance of addressing problems we have identified in ensuring fiscal accountability, program integrity, and access. For example, as additional states submit demonstration proposals—and as the demonstrations HHS has already approved come up for renewal—the concerns and recommendations that we have raised about HHS approving demonstrations without assurances that they will not increase federal expenditures are likely to persist or increase. The potential for sweeping changes in state Medicaid programs’ payment and service delivery systems has implications for enrollees’ access to and quality of care, and for program costs. Increasing enrollment in managed care arrangements may heighten concerns about access to care and program integrity within these arrangements. We have made recommendations to HHS that could help address concerns we have raised in these areas. Attention to Medicaid’s transformation and the key issues facing the program will be important to ensuring that Medicaid is both effective for the enrollees who rely on it and accountable to the taxpayers. GAO has multiple ongoing studies in these areas and will continue to monitor the Medicaid program for the Congress. We provided a draft of this report to HHS for review. HHS provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the Secretary of Health and Human Services, 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 Katherine M. Iritani at (202) 512-7114 or iritanik@gao.gov or Carolyn L. Yocom at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. The following table lists Medicaid-related matters for congressional consideration GAO has published that are classified as open because Congress has either not taken or has not completed steps to implement the matter. The matters are listed by key issue and report. The following table lists selected Medicaid-related recommendations GAO has made to the Department of Health and Human Services that are classified as open because the agency has either not taken or has not completed steps to implement the recommendation. The recommendations are listed by key issue and report. MACPAC did not report managed care information for Maine, Tennessee, or Vermont due to data issues. In addition to the contacts named above, Robert Copeland, Assistant Director; Robin Burke; Nancy Fasciano; Sandra George; Drew Long; Jasleen Modi; Giao N. Nguyen; Vikki Porter; and Emily Wilson made key contributions to this report. The following are selected GAO products pertinent to the key issues discussed in this report. Other products may be found at GAO’s web site at www.gao.gov. Behavioral Health: Options for Low-Income Adults to Receive Treatment in Selected States. GAO-15-449. Washington, D.C.: June 19, 2015. Medicaid: Service Utilization Patterns for Beneficiaries in Managed Care. GAO-15-481. Washington, D.C.: May 29, 2015. Children’s Health Insurance Program: Effects on Coverage and Access, and Considerations for Extending Funding. GAO-15-348. Washington, D.C.: February 27, 2015. Foster Children: Additional Federal Guidance Could Help States Better Plan for Oversight of Psychotropic Medications Administered by Managed-Care Organizations. GAO-14-362. Washington, D.C.: April 28, 2014. Children’s Health Insurance: Information on Coverage of Services, Costs to Consumers, and Access to Care in CHIP and Other Sources of Insurance. GAO-14-40. Washington, D.C.: November 21, 2013. Dental Services: Information on Coverage, Payments, and Fee Variation. GAO-13-754. Washington, D.C.: September 6, 2013. Children’s Mental Health: Concerns Remain about Appropriate Services for Children in Medicaid and Foster Care. GAO-13-15. Washington, D.C.: December 10, 2012. Medicaid: States Made Multiple Program Changes, and Beneficiaries Generally Reported Access Comparable to Private Insurance. GAO-13-55. Washington, D.C.: November 15, 2012. Foster Children: HHS Guidance Could Help States Improve Oversight of Psychotropic Prescriptions. GAO-12-201. Washington, D.C.: December 14, 2011. Medicaid and CHIP: Most Physicians Serve Covered Children but Have Difficulty Referring Them for Specialty Care. GAO-11-624. Washington, D.C.: June 30, 2011. Medicaid and CHIP: Reports for Monitoring Children’s Health Care Services Need Improvement. GAO-11-293R. Washington, D.C.: April 5, 2011. Medicaid and CHIP: Given the Association between Parent and Child Insurance Status, New Expansions May Benefit Families. GAO-11-264. Washington, D.C.: February 4, 2011. Oral Health: Efforts Under Way to Improve Children’s Access to Dental Services, but Sustained Attention Needed to Address Ongoing Concerns. GAO-11-96. Washington, D.C.: November 30, 2010. Medicaid: State and Federal Actions Have Been Taken to Improve Children’s Access to Dental Services, but Gaps Remain. GAO-09-723. Washington, D.C.: September 30, 2009. Medicaid Preventive Services: Concerted Efforts Needed to Ensure Beneficiaries Receive Services. GAO-09-578. Washington, D.C.: August 14, 2009. Medicaid: Extent of Dental Disease in Children Has Not Decreased, and Millions Are Estimated to Have Untreated Tooth Decay. GAO-08-1121. Washington, D.C.: September 23, 2008. Medicaid: Concerns Remain about Sufficiency of Data for Oversight of Children’s Dental Services. GAO-07-826T. Washington, D.C.: May 2, 2007. Medicaid Demonstrations: More Transparency and Accountability for Approved Spending Are Needed. GAO-15-715T. Washington, D.C.: June 24, 2015. Medicaid Demonstrations: Approval Criteria and Documentation Need to Show How Spending Furthers Medicaid Objectives. GAO-15-239. Washington, D.C.: April 13, 2015. Medicaid: CMS Oversight of Provider Payments Is Hampered by Limited Data and Unclear Policy. GAO-15-322. Washington, D.C.: April 10, 2015. Medicaid Financing: Questionnaire Data on States’ Methods for Financing Medicaid Payments from 2008 through 2012. GAO-15-227SP. Washington, D.C.: March 13, 2015, an e-supplement to GAO-14-627. Medicaid Demonstrations: HHS’s Approval Process for Arkansas’s Medicaid Expansion Waiver Raises Cost Concerns. GAO-14-689R. Washington, D.C.: August 8, 2014. Medicaid: Completed and Preliminary Work Indicate that Transparency around State Financing Methods and Payments to Providers Is Still Needed for Oversight. GAO-14-817T. Washington, D.C.: July 29, 2014. Medicaid Financing: States’ Increased Reliance on Funds from Health Care Providers and Local Governments Warrants Improved CMS Data Collection. GAO-14-627. Washington, D.C.: July 29, 2014. Medicaid Demonstration Waivers: Approval Process Raises Cost Concerns and Lacks Transparency. GAO-13-384. Washington, D.C.: June 25, 2013. Medicaid: More Transparency of and Accountability for Supplemental Payments Are Needed. GAO-13-48. Washington, D.C.: November 26, 2012. Medicaid: Data Sets Provide Inconsistent Picture of Expenditures. GAO-13-47. Washington, D.C.: October 29, 2012. Medicaid: States Reported Billions More in Supplemental Payments in Recent Years. GAO-12-694. Washington, D.C.: July 20, 2012. 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 Demonstration Waivers: Recent HHS Approvals Continue to Raise Cost and Oversight Concerns. GAO-08-87. Washington, D.C.: January 31, 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 Demonstration Waivers: Lack of Opportunity for Public Input during Federal Approval Process Still a Concern. GAO-07-694R. Washington, D.C.: July 24, 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 and SCHIP: Recent HHS Approvals of Demonstration Waiver Projects Raise Concerns. GAO-02-817. Washington, D.C.: July 12, 2002. Medicaid: Additional Actions Needed to Help Improve Provider and Beneficiary Fraud Controls. GAO-15-313. Washington, D.C.: May 14, 2015. Medicaid Information Technology: CMS Supports Use of Program Integrity Systems but Should Require States to Determine Effectiveness. GAO-15-207. Washington, D.C.: January 30, 2015. Medicaid: Additional Federal Action Needed to Further Improve Third- Party Liability Efforts. GAO-15-208. Washington, D.C.: January 28, 2015. Medicaid Program Integrity: Increased Oversight Needed to Ensure Integrity of Growing Managed Care Expenditures. GAO-14-341. Washington, D.C.: May 19, 2014. Medicaid: CMS Should Ensure That States Clearly Report Overpayments. GAO-14-25. Washington, D.C.: December 6, 2013. Medicaid: Enhancements Needed for Improper Payments Reporting and Related Corrective Action Monitoring. GAO-13-229. Washington, D.C.: March 29, 2013. Medicaid Integrity Program: CMS Should Take Steps to Eliminate Duplication and Improve Efficiency. GAO-13-50. Washington, D.C.: November 13, 2012. National Medicaid Audit Program: CMS Should Improve Reporting and Focus on Audit Collaboration with States. GAO-12-814T. Washington, D.C.: June, 14, 2012. Program Integrity: Further Action Needed to Address Vulnerabilities in Medicaid and Medicare Programs. GAO-12-803T. Washington, D.C.: June 7, 2012. Medicaid: Federal Oversight of Payments and Program Integrity Needs Improvement. GAO-12-674T. Washington, D.C.: April 25, 2012. Medicaid Program Integrity: Expanded Federal Role Presents Challenges to and Opportunities for Assisting States. GAO-12-288T. Washington, D.C.: December 7, 2011. Fraud Detection Systems: Centers for Medicare and Medicaid Services Needs to Expand Efforts to Support Program Integrity Initiatives. GAO-12-292T. Washington, D.C.: December 7, 2011. Fraud Detection Systems: Centers for Medicare and Medicaid Services Needs to Ensure More Widespread Use. GAO-11-475. Washington, D.C.: June 30, 2011. Medicare and Medicaid Fraud, Waste, and Abuse: Effective Implementation of Recent Laws and Agency Actions Could Help Reduce Improper Payments. GAO-11-409T. Washington, D.C.: March 9, 2011. Medicaid Managed Care: CMS’s Oversight of States’ Rate Setting Needs Improvement. GAO-10-810. Washington, D.C.: August 4, 2010. Medicaid: Alternative Measures Could Be Used to Allocate Funding More Equitably. GAO-13-434. Washington, D.C.: May 10, 2013. Medicaid: Prototype Formula Would Provide Automatic, Targeted Assistance to States during Economic Downturns. GAO-12-38. Washington, D.C.: November 10, 2011. Medicaid: Improving Responsiveness of Federal Assistance to States during Economic Downturns. GAO-11-395. Washington, D.C.: March 31, 2011. State and Local Governments: Knowledge of Past Recessions Can Inform Future Federal Fiscal Assistance. GAO-11-401. Washington, D.C.: March 31, 2011. Recovery Act: Increased Medicaid Funds Aided Enrollment Growth, and Most States Reported Taking Steps to Sustain Their Programs. GAO-11-58. Washington, D.C.: October 8, 2010. Medicaid: Strategies to Help States Address Increased Expenditures during Economic Downturns. GAO-07-97. Washington, D.C.: October 18, 2006. Federal Assistance: Temporary State Fiscal Relief. GAO-04-736R. Washington, D.C.: May 7, 2004. Medicaid Formula: Differences in Funding Ability among States Often Are Widened. GAO-03-620. Washington, D.C.: July 10, 2003. Medicaid: Overview of Key Issues Facing the Program. GAO-15-746T. Washington, D.C.: July 8, 2015. Medicaid: A Small Share of Enrollees Consistently Accounted for a Large Share of Expenditures. GAO-15-460. Washington, D.C.: May 8, 2015 2015 Annual Report: Additional Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits. GAO-15-404SP. Washington, D.C.: April 14, 2015. High-Risk Series: An Update. GAO-15-290. Washington, D.C.: February 11, 2015. Medicaid: Federal Funds Aid Eligibility IT System Changes, but Implementation Challenges Persist. GAO-15-169. Washington, D.C.: December, 12, 2014. Medicaid Payment: Comparisons of Selected Services under Fee-for- Service, Managed Care, and Private Insurance. GAO-14-533. Washington, D.C.: July 15, 2014. Prescription Drugs: Comparison of DOD, Medicaid, and Medicare Part D Retail Reimbursement Prices. GAO-14-578. Washington, D.C.: June 30, 2014. Medicaid: Assessment of Variation among States in Per-Enrollee Spending. GAO-14-456. Washington, D.C.: June 16, 2014. Medicaid: Demographics and Service Usage of Certain High-Expenditure Beneficiaries. GAO-14-176. Washington, D.C.: February 19, 2014. Medicaid: Use of Claims Data for Analysis of Provider Payment Rates. GAO-14-56R. Washington, D.C.: January 6, 2014. Medicaid Managed Care: Use of Limited Benefit Plans to Provide Mental Health Services and Efforts to Coordinate Care. GAO-13-780. Washington, D.C.: September 30, 2013. Medicaid: States’ Use of Managed Care. GAO-12-872R. Washington, D.C.: August, 17, 2012. Medicaid: States’ Plans to Pursue New and Revised Options for Home- and Community-Based Services. GAO-12-649. Washington, D.C.: June 13, 2012. Medicaid and CHIP: Enrollment, Benefits, Expenditures, and Other Characteristics of State Premium Assistance Programs. GAO-10-258R. Washington, D.C.: January 19, 2010.

Summary: The Medicaid program marks its 50th anniversary on July 30, 2015. The joint federal-state program has grown to be one of the largest sources of health care coverage and financing for a diverse low-income and medically needy population. Medicaid is undergoing transformative changes, in part due to PPACA, which expanded the program by allowing states to opt to cover low-income adults in addition to individuals in historic categories, such as children, pregnant women, older adults, and individuals with disabilities. GAO has a large body of work on challenges facing Medicaid and gaps in federal oversight. This report describes (1) key issues that face the Medicaid program based on this work, and (2) program and other changes with implications for federal oversight. GAO reviewed its reports on Medicaid issued from January 2005 through July 2015; reviewed documentation from the Centers for Medicare & Medicaid Services (CMS), the HHS agency that oversees Medicaid; and interviewed CMS officials. GAO identified four key issues facing the Medicaid program, based on prior work. Access to care : Medicaid enrollees report access to care that is generally comparable to that of privately insured individuals and better than that of uninsured individuals, but may have greater health care needs and greater difficulty accessing specialty and dental care. Transparency and oversight : The lack of complete and reliable data on states' spending—including provider payments and state financing of the non-federal share of Medicaid—hinders federal oversight, and GAO has recommended steps to improve the data on and scrutiny of states' spending. Also, improvements in the Department of Health and Human Services' (HHS) criteria, policy, and process for approving states' spending on demonstrations—state projects that may test new ways to deliver or pay for care—are needed to potentially prevent billions of dollars in unnecessary federal spending, as GAO previously recommended. Program integrity : The program's size and diversity make it vulnerable to improper payments. Improper payments, such as payments for non-covered services, totaled an estimated $17.5 billion in fiscal year 2014, according to HHS. An effective federal-state partnership is key to ensuring the most appropriate use of funds by, among other things, (1) setting appropriate payment rates for managed care organizations, and (2) ensuring only eligible individuals and providers participate in Medicaid. Federal financing approach : Automatic federal assistance during economic downturns and more equitable federal allocations of Medicaid funds to states (by better accounting for states' ability to fund Medicaid) could better align federal funding with states' needs, offering states greater fiscal stability. GAO has suggested that Congress could consider enacting a funding formula that provides automatic, timely, and temporary increased assistance in response to national economic downturns. Medicaid's ongoing transformation—due to the Patient Protection and Affordable Care Act (PPACA), the aging of the U.S. population, and other changes to state programs—highlights the importance of federal oversight, given the implications for enrollees and program costs. Attention to Medicaid's transformation and the key issues facing the program will be important to ensuring that Medicaid is both effective for the enrollees who rely on it and accountable to the taxpayers. GAO has multiple ongoing studies in these areas and will continue to monitor the Medicaid program for the Congress. GAO has made over 80 recommendations regarding Medicaid, some of which HHS has implemented. GAO has highlighted 24 key recommendations that have not been implemented. HHS agreed with and is acting on some and did not agree with others. GAO continues to believe that all of its recommendations have merit and should be implemented. HHS provided technical comments on a draft of this report, which GAO incorporated as appropriate.