On June 28, the Government Accountability Office (GAO) released a new report that examined Medicaid financing practices. Specifically, the report looked at states’ efforts to maximize federal reimbursements for their programs. This analysis, which was requested by Senator Charles Grassley (R-Iowa), chair of the Senate Finance Committee, reviews five categories of Medicaid claims that the GAO believes to be problematic: supplemental payment arrangements, school-based services, targeted case management services, rehabilitation services, and administrative costs.
One area of particular concern involves contingency-paid consultants. According to the GAO, in 2004, 34 states used consultants that were paid a share of the money that the consultants secured for states. In contrast, only 10 states contracted with these types of consultants in 2002. This trend highlights two core issues of concern to the GAO. First, the GAO reported that some claims suggested by contingency-fee consultants that were submitted to increase the draw-down of federal dollars may be inconsistent with current Centers for Medicare and Medicaid Services (CMS) policy or with federal law and may undermine the fiscal integrity of the Medicaid program. Second, although the new financing plans pursued by states may be of “questionable legality,” as Senator Grassley stated, it is also a result of poor management by CMS.
The GAO found that “a lack of oversight and clear guidance from CMS has allowed states to develop new financing methods or continue existing ones that take advantage of ambiguity and generate considerable additional federal costs.” According to Mark McClellan, CMS administrator, Congress would have to give the agency specific authority to require states to disclose their use of contingency-fee consultants, which currently it does not have.
This report comes out at an inauspicious time for states as they deal with the fiscal challenges of Medicaid, particularly as the growth of this program continues to outpace revenue growth in states. A recent report issued by the National Governors Association and the National Association of State Budget Officers found that 20 states reported Medicaid shortfalls in 2004 and 25 states have Medicaid shortfalls in 2005, primarily due to enrollment increases. Likewise, the federal-state partnership in Medicaid is under significant scrutiny with the impending $10 billion in reductions to be determined by the newly appointed Medicaid Advisory Commission (see related article, “Medicaid Advisory Commission Members Named”).
The GAO report underscores the underlying federal-state tension: states are struggling to maintain their programs while federal efforts to halt Medicaid maximization strategies are increasing and receiving greater attention.
