Kusserow on Compliance: GAO calls for CMS to mitigate program risks in managed care

·       Medicaid enrollment in managed care rose in three years from 35 to 55 million beneficiaries

·       $170 billion Medicaid managed care is half of total federal Medicaid expenditures

·       CMS is not doing enough to ensure accuracy in payments


Congress called for the Government Accountability Office (GAO) to conduct a study of the Payment Error Rate Measurement (PERM), which  measures the accuracy of capitated payments for managed care, including CMS’s and states’ oversight. Driving this inquiry was the rapid growth of Medicaid managed care enrollment, which increased by 56 percent in three years, jumping from covering 35 million beneficiaries to 54.6 million beneficiaries. Federal Medicaid managed care expenditures last year were $171 billion, almost half of the total for Medicaid. The GAO focused on weaknesses in oversight, given the recent rapid growth. The GAO reviewed program integrity risks reported in 27 federal and state audits and investigations over a five year period; federal regulations and guidance on the PERM; and the CMS’s Focused Program Integrity Reviews. The GAO also contacted program integrity officials in the 16 states with a majority of 2016 Medicaid spending for managed care. The GAO found:

  1. Ten of 27 federal and state audits and investigations identified about $68 million in overpayments and unallowable MCO costs, not accounted for by PERM estimates.
  2. Another investigation resulted in a $137.5 million settlement.
  3. CMS does not have a process to track managed care overpayments and cannot determine whether states considered those overpayments when they set capitation rates.
  4. CMS is not doing enough to ensure that states are adequately paying managed Medicaid companies and that the plans are making correct payments to providers.
  5. The managed care component of the PERM neither includes a medical review of services delivered to enrollees, nor reviews of MCO records or data.
  6. CMS and states have updated regulations, focused reviews, and used federal program integrity contractors’ audits of managed care services, however, some of this is only recent, and it may not fully address risks across all states.
  7. CMS does not ensure identification and reporting of overpayments to providers and unallowable costs by MCOs.

The GAO called for CMS to consider and take steps to mitigate the program risks that are not measured in the PERM, such as overpayments and unallowable costs. Such an effort could include actions such as revising the PERM methodology or focusing additional audit resources on managed care. The GAO also recommended CMS expedite the release of planned guidance and requirements for states to report to the CMS overpayments made between managed-care providers and plans.





Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2017 Strategic Management Services, LLC. Published with permission.