«MEDICAID December 2013 CMS Should Ensure That States Clearly Report Overpayments GAO-14-25 December 2013 MEDICAID CMS Should Ensure That States ...»
United States Government Accountability Office
Report to Congressional Requesters
CMS Should Ensure
That States Clearly
CMS Should Ensure That States Clearly Report
Highlights of GAO-14-25, a report to
Why GAO Did This Study What GAO Found States recovered $9.8 million in Medicaid overpayments, but they did not clearly While states and certain federal entities have had long-standing roles report the overpayments and the return of the federal share to the Centers for identifying Medicaid improper Medicare & Medicaid Services (CMS) within the Department of Health and payments, the Deficit Reduction Act of Human Services (HHS). Federal audits initially identified about $20.4 million in 2005 expanded CMS’s role in potential Medicaid overpayments across the 19 states with identified identifying improper payments. As a overpayments from June 2007 through February 2012. Of the $13.3 million in net result, CMS created a national audit overpayments shown below, states recovered $9.8 million and were in the program, which uses federal process of recovering the remaining $3.5 million. States should have reported the contractors to audit state Medicaid return of the federal share for $13.3 million on the line designated for claims and identify overpayments— overpayments identified by national audit program contractors on the CMS-64— payments that should not have been the form that states fill out quarterly to obtain federal reimbursement for Medicaid made or were higher than allowed—to
services. However, states made multiple reporting errors. Specifically:
providers. States are responsible for recovering any identified overpayments • instead of reporting $13.3 million, states reported the return of the federal and reporting the return of the federal share for $12.4 million and did not report the return of the federal share for share of those overpayments to CMS. the remaining $855,000; and GAO was asked to examine states’ • within the $12.4 million that was reported by states, $6.6 million was correctly efforts to recover and report reported on the CMS-64, while the remaining $5.8 million was reported on overpayments identified by federal the CMS-64, but not on the correct line.
audits, and examine CMS’s review of state reporting. This report assesses Overview of Potential Medicaid Overpayments, Reductions, and Recoveries the extent to which: (1) states recovered Medicaid overpayments identified by federal audits and reported the return of the federal share, and (2) CMS reviewed states’ reporting of Medicaid overpayments related to these federal audits. GAO obtained overpayment and recovery data from all states with an identified overpayment and compared this with CMS data; reviewed relevant laws, regulations, and CMS guidance; and interviewed CMS and state officials.
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Page 1 GAO-14-25 Medicaid Overpayments States are responsible for recovering overpayments identified by audits.
Because the federal government matches states’ expenditures for most Medicaid services, a portion of the overpayments are federal dollars that states must return to CMS. States return the federal share by reporting the overpayment amount on the CMS-64—a form that states fill out quarterly to obtain federal reimbursement for services provided under the Medicaid program. 4 Our recent work identified limitations in the effectiveness of NMAP audits and instances where states may have under-reported the recovery of overpayments. 5 To follow-up on our recent work, you asked us to examine states’ efforts to recover and report overpayments identified by NMAP contractors—which we refer to as federal audits—and CMS’s
review of state reporting. This report focuses on the extent to which:
1. states recovered Medicaid overpayments identified by federal audits and reported the return of the federal share, and
2. CMS reviewed states’ reporting of Medicaid overpayments related to these federal audits.
To address both reporting objectives, we collected data on state recoveries and conducted structured interviews with all 19 states that had one or more overpayments identified by federal audits conducted from June 2007 through February 2012. We chose this end date because states should have reported the return of the federal share for their overpayments to CMS by March 2013 when we began our data collection. 6 We compared the data we collected from states on recoveries to the overpayments identified by the federal audits and to the overpayments reported by the states on the CMS-64. We also States report actual expenditures and overpayment amounts on the CMS-64. Generally speaking, the reported overpayments are subtracted from states’ Medicaid expenditures, which forms the basis for computing the federal share of program costs. Throughout this report, we refer to this process as reporting the return of the federal share.
See GAO, National Medicaid Audit Program: CMS Should Improve Reporting and Focus on Audit Collaboration with States, GAO-12-627 (Washington, D.C.: June 14, 2012), and Medicaid Integrity Program: CMS Should Take Steps to Eliminate Duplication and Improve Efficiency, GAO-13-50 (Washington, D.C.: Nov. 13, 2012).
Generally, states have one year from the date of the final audit report to return the federal share, regardless of whether or not the state was successful in recovering the overpayment amount. See 42 U.S.C. § 1396b(d)(2)(C); 42 C.F.R § 433.312.
Page 2 GAO-14-25 Medicaid Overpayments interviewed CMS headquarters staff, including the Medicaid Integrity Group (MIG), the main entity responsible for establishing policies for the NMAP and, through the contractors, conducting the federal audits; the Financial Management Group, which is responsible for reviewing the CMS-64; and the 7 CMS regional offices responsible for overseeing the reporting of overpayments for the 19 states that had an identified overpayment. In addition, we reviewed relevant Medicaid Integrity Program laws and regulations. We also reviewed CMS guidance issued to states on reporting of overpayments from federal audits, including the CMS financial review guide on the CMS-64. 7 We reviewed the state data we collected for reasonableness and verified whether the provider identification, overpayment amount, and audit report’s issuance date was consistent with overpayment data from the federal audits. In four instances, we found differences in the overpayment amount identified by the state and by the federal audits. For these instances, we discussed the differences with the states and CMS and resolved the discrepancies. Based on these checks, we determined that these data were sufficiently reliable for our purposes. We also performed checks of the CMS-64 data, and discussed these data and their internal controls with knowledgeable CMS officials. Because state reporting of overpayments on the CMS-64 was incomplete, we discuss the CMS-64’s data limitations in this report, but did not use these data to report states’ return of the federal share of overpayments. 8 We conducted this performance audit from January 2013 to December 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
See The Centers for Medicare and Medicaid Services, Financial Review Guide for the Quarterly Medicaid Statement of Expenditures (Form CMS-64 Report), February 2012.
See GAO, Medicaid Integrity Program: CMS Should Take Steps to Eliminate Duplication and Improve Efficiency, GAO-13-50 (Washington, D.C.: Nov. 13, 2012).
To initiate recovery of the overpayment, the state sends a demand letter to the provider indicating the amount due as identified in the FAR.
Providers may opt to appeal the findings in the FAR, thus initiating an appeals process that is determined by each state and is subject to the state’s Medicaid program requirements. 10 When the state’s appeals process is complete, that decision determines the final amount owed by the provider. This final amount may be the full overpayment, a reduced amount of the overpayment, or nothing.
The amount of the federal share varies by state. The federal government matches states’ expenditures for most Medicaid services using a statutory formula based on each state’s per capita income. Under this statutory formula, the federal government’s share of Medicaid expenditures—and thus, its share of reported overpayments—can range from 50 to 83 percent.
States may also challenge the findings of a FAR by filing an appeal with the Department of Health and Human Services’ Appeals Board Appellate Division.
42 U.S.C. § 1396b(d)(2)(C); 42 C.F.R. § 433.312. States must return the federal share of the overpayment either when it is recovered or at the end of the one-year period following discovery of the overpayment, whichever is earlier. 42 C.F.R. § 433.320(a). The discovery date for overpayments typically begins on the date of the final written notice of the state’s overpayment determination to the provider.
42 U.S.C. § 1396b(d)(2)(D); 42 C.F.R. § 433.312(b).
Page 4 GAO-14-25 Medicaid Overpayments CMS has had a long-standing requirement that states report overpayments and the return of the federal share on the CMS-64.
Beginning in fiscal year 2010, CMS initiated a more detailed reporting requirement to better track overpayments and the return of the federal share from different types of audits. As a result, CMS required states to report overpayments from federal audits, as well as other sources—such as state audit results, Medicaid Fraud Control Units, and others—on each of the six line items specified for each type of audit. 13 The reported overpayments are subtracted from the states’ Medicaid expenditures, which forms the basis for computing the federal share of program costs.
CMS’s regional offices are responsible for overseeing states’ reporting of overpayments identified in the FARs and receive a copy of the FAR when it is sent to a state in its region. 14 The FAR alerts the regional office of its responsibility for ensuring that the state reports the overpayment identified and returns the federal share at the applicable federal match within one year from the date of the FAR. If the state does not return the federal share of an overpayment within one year, the state will be liable for interest on the federal share of overpayments not recovered and not returned. 15 (See fig. 1.) Specifically, CMS included 6 lines related to overpayment reporting on the CMS 64.9C1, which is a sub-form within the CMS-64. Line 5 on this form is designated for overpayments identified by federal audits conducted by NMAP contractors. For the purposes of this report, we refer to this as line 5 of the CMS-64.
CMS must ensure that state expenditures claimed for federal matching on the CMS-64 are programmatically reasonable and allowable under federal laws, regulations, and policy guidance. To achieve this, CMS relies primarily on its regional offices’ financial and funding staff to perform quarterly reviews and validate state entries on the CMS-64. The 10 regional offices, located throughout the country, validate and audit the reported expenditure data and accompanying detailed information each quarter in their respective states.
42 C.F.R. § 433.320(a)(4). If the state does not return the federal share of an overpayment within one year, CMS issues a demand letter requesting the immediate return of the federal share. If the state still does not return the federal share, CMS then issues a disallowance—which is a letter that specifies, among other things, the amount that is not allowed and the reason for this determination—to the state for the federal share of the overpayment. The state will be liable for interest at the Current Value of Funds Rate, which will accrue beginning on the day after the end of the one year period following discovery of the overpayment until the last day of the quarter for which the state submits a CMS-64 report returning the federal share of the overpayment.
Page 7 GAO-14-25 Medicaid Overpayments state, and officials in 3 states told us that, as a result, certain providers had not yet paid the full amounts owed. In the fourth state, officials told us that the overpayments had not been fully recovered for several reasons, including that (1) some providers had not provided full payment, (2) there were pending appeals, and (3) in one case, state officials were unable to confirm the receipt of the FAR from CMS. As a result, the state had not initiated the recovery process.
States should have reported the return of the federal share for $13.3 million on line 5 of the CMS-64, the line designated for overpayments identified by federal audits. 16 Based on data we collected from the states, we found that states made multiple errors reporting the return of the federal share for overpayments identified by federal audits, as detailed below.
Instead of reporting $13.3 million, states reported the return of the • federal share for $12.4 million, and did not report the return of the federal share for the remaining $855,000.