Medicaid is a health care program jointly funded by the federal government and states to provide care for certain low-income individuals. The federal government oversees states’ Medicaid programs, and typically pays from 50 to 83 percent of each state’s allowable Medicaid costs. Medicaid enrollees are entitled to receive a range of medical services, including hospital care, physician services, laboratory and other diagnostic tests, prescription drugs, dental care, and long-term care services. In addition, Medicaid provides assistance to low-income elderly individuals who are also eligible for Medicare, called “dual eligibles.”This assistance can include covering Medicare premiums and cost sharing. MSIS is a national Medicaid eligibility and claims data set, and is the federal source of Medicaid expenditure data that can be linked to a specific enrollee. State Medicaid agencies are required to provide CMS, through MSIS, quarterly electronic files approximately 45 days after a quarter has ended. These files contain: (1) persons covered by Medicaid, known as “eligible files”; and (2) adjudicated claims, known as the “paid claims file,” for medical services reimbursed by the Medicaid program. Each state’s eligible file contains one record for each person covered by Medicaid for at least 1 day during the reporting quarter. Individual eligible files consist of demographic and monthly enrollment data. Paid claims files contain information on medical service-related claims and capitation payments. MSIS data include enrollees’ eligibility status for Medicaid and the Children’s Health Insurance Program (CHIP), types of services received by enrollees, and expenditure data. MSIS data are used for policy analysis, program utilization, and forecasting expenditures. However, MSIS data are not used to determine the federal share of Medicaid expenditures, and are not used by the states to manage the daily operations of their Medicaid programs. The CMS-64 data set contains program-benefit costs and administrative expenses that are not linked to individual enrollees. State Medicaid agencies submit this information 30 days after a quarter has ended by means of the Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program—also known as the form CMS-64—within the Medicaid Budget and Expenditure System. CMS-64 data are reported at a state aggregate level, such as a state’s total expenditures for such categories as inpatient hospital services and prescription drugs. Therefore, unlike MSIS, these data do not include individual expenditure data on the state’s enrollees or the services they received under Medicaid. Also unlike MSIS, CMS-64 contains expenditures that are not linked to specific enrollees, such as supplemental payments including Disproportionate Share Hospital (DSH) payments. CMS-64 data are the most-reliable and most-comprehensive information on Medicaid spending. Agency officials review expenditures submitted through CMS-64, and use the data to compute the federal financial participation for each state’s Medicaid program costs. Our reports have demonstrated the need for CMS to improve its oversight of this growing, complex program. In particular, federal internal-control standards, as documented in GAO’s Standards for Internal Control in the Federal Government, state that program managers need both operational and financial data to determine whether they are meeting their goals for accountability and efficient use of resources in order to make operating decisions, monitor performance, and allocate resources. Pertinent information should be identified, captured, and distributed in a form and time frame that permits people to perform their duties efficiently. These reports have also identified shortcomings with the MSIS and CMS-64 data sets, particularly in two areas: Medicaid program integrity and supplemental payments. See GAO, National Medicaid Audit Programs: CMS Should Improve Reporting and Focus on Audit Collaboration with States, GAO-12-627 (Washington, D.C.: June 14, 2012). including its expenditures and audit outcomes, program improvements, and plans for effectively monitoring the program. We also recently reported that the accountability and transparency of supplemental payments have been lacking using CMS-64. Specifically, our work found that states reported $32 billion in DSH and non-DSH Medicaid supplemental payments during fiscal year 2010. However, the exact amount of supplemental payments is unknown using CMS-64 because not all states reported their non-DSH supplemental payments separately from their regular payments. In an earlier report, we also found that information on non-DSH supplemental payments was incomplete because states did not provide full information to CMS regarding these payments. We noted that until reliable and complete information on states’ supplemental payments is available, federal officials overseeing the program and others will lack the information they need to review payments and ensure that they are appropriately spent for Medicaid purposes. MSIS Medicaid expenditure amounts nationwide were generally less than CMS-64 amounts. For fiscal years 2007, 2008, and 2009, total expenditures based on MSIS data for the nation were 86, 87, and 88 percent, respectively, of the amounts shown in CMS-64. In fiscal years 2007 through 2009, the difference in Medicaid expenditures between the two data sets decreased from about $46 billion in fiscal year 2007 to $43 billion in fiscal year 2009. For fiscal year 2009, the most-recent and most-complete data available, MSIS showed $323 billion in total expenditures compared with the $366 billion in CMS-64, a difference of $43 billion. (See table 1.) MSIS Medicaid expenditures for individual states were generally less than CMS-64 amounts. In fiscal years 2007 through 2009, states’ MSIS Medicaid expenditures ranged from 59 percent to 120 percent compared with CMS-64. In fiscal year 2009 alone, states’ MSIS Medicaid expenditures ranged from 59 to 119 percent of those in CMS-64. (See fig. 1.) Specifically, MSIS Medicaid expenditures were less than CMS-64 amounts in 40 states. These expenditures were greater than CMS-64 expenditures in 6 states, and were similar to CMS-64 expenditures in 5 states.reported in MSIS and CMS-64 by dollar amount in fiscal year 2009. Some—but not all—factors could be quantified to narrow the difference between MSIS and CMS-64 expenditures. In particular, we adjusted for expenditures that could not be attributed to individual beneficiaries—one of the key differences in the design of the data sets. However, we could not quantify the effect of other factors, such as inconsistent CMS guidance across the two data sets. MSIS is designed to report claims data, and CMS-64 is designed to reimburse states for their federal share of Medicaid expenditures. As we have noted, some expenditures that are required to be reported in CMS-64 do not appear in MSIS, such as when the expenditure is not tied to an individual enrollee’s claim. After adjusting the MSIS data to include expenditures for factors not related to individual enrollees’ claims, Medicaid expenditures for the nation based on MSIS data were 92, 93, and 94 percent of amounts shown in CMS-64 data, respectively, for fiscal years 2007, 2008, and 2009. (See table 2.) For fiscal year 2009, we were able to adjust MSIS data for four factors: DSH payments, Medicare premiums, national and state rebates for prescription drugs, and Medicaid health insurance payments. None of these factors were reported in MSIS because CMS officials indicated they were not attributed to an individual enrollee. DSH payments were included under the hospital expenditure category in CMS-64, but not in MSIS. We adjusted MSIS expenditure data to account for DSH payments to hospitals. For example, in fiscal year 2009, states reported approximately $88 billion in total hospital expenditures on CMS-64, which included approximately $18 billion for DSH payments. Total hospital expenditures in MSIS were at about $53 billion. Adding the $18 billion in DSH payments to total hospital expenditures in MSIS increased the percentage of MSIS expenditures from 60 percent of CMS-64 expenditures to 81 percent. Even after this adjustment, MSIS hospital expenditures are $17 billion lower than those on CMS-64, indicating that there are additional factors that account for the difference in hospital-related expenditures between the two data sets. Medicare premiums were included in CMS-64, but CMS did not require states to report them in MSIS. In addition, Medicaid payments for enrollees with Medicare coinsurance and deductibles are included in MSIS, but within the various service types, and cannot be distinguished from other expenditures. In fiscal year 2009, total expenditures for Medicare as reported on CMS-64 were approximately $11 billion, whereas MSIS expenditures for the Medicare category were $0. Adjusting for the approximately $11 billion reported in fiscal year 2009 for Medicare premiums in CMS-64 increased the percentage of total Medicare expenditures in MSIS from 0 percent of CMS-64 expenditures to 92 percent, or a difference of $908 million. Thus, the primary factor that accounted for the difference in Medicare expenditures between the two data sets can be attributed to the absence of Medicare premium expenditures in MSIS. Prescription drug rebates were included in CMS-64, but CMS did not Prescription drug rebates are require states to report them in MSIS.made by drug manufacturers to states in a lump sum payment for Medicaid enrollees who use specific drugs, and therefore are not connected to individual claims. In fiscal year 2009, total expenditures for the prescription drugs category, as reported on CMS-64, were initially about $25 billion. However, there was a reduction to $16 billion when $10 billion dollars in national and state prescription drug rebates were included. Total prescription drug expenditures in MSIS were approximately $25 billion. Adjusting for the $10 billion reported for prescription drug rebates in CMS-64 decreased the percentage of MSIS expenditures from 161 percent of CMS-64 expenditures to 99 percent of CMS-64 expenditures. Thus, the difference in reported prescription drug expenditures can be almost entirely attributed to the rebates.