CMS Management of States' Medicaid Reporting Fails (Again)

“If you can’t measure it, you can’t manage it,” is a common business axiom. But as federal healthcare reform ramps up to full speed, the U.S. government may find managing state Medicaid supplemental reimbursements a challenge because a study released this week found there is no consistency in how these numbers are reported.

The U.S. Government Accountability Office is Congress’s watchdog agency on federal spending. In a 67-page report released this week, the GAO examined how much states spend on Medicaid supplemental payments, and from all appearances states are spending billions more between the two reporting years, 2006 and 2010.

Not so fast.

What the GAO report really uncovered is that reporting by the states, even on standardized forms, is performed so inconsistently, it could not identify whether supplemental payments increased or not. “States reported $32 billion in Medicaid supplemental payments during fiscal year 2010, but the exact amount of supplemental payments is unknown because state reporting was incomplete.”

This was a similar conclusion that the GAO reached in 2006, the last time it looked at supplemental Medicaid payments reported by the states. After the release of the 2006 report, the federal agency that manages that reporting — the Centers for Medicare & Medicaid Services (CMS) — changed its reporting procedures.

“CMS officials told GAO that they were taking steps to improve states’ reporting of non-DSH supplemental payments, including working with states to train staff on reporting of payments and on identifying and resolving reporting problems,” the GAO report states.

The GAO had been asked to look at two forms of supplemental payments, “disproportionate share hospital (DSH) payments” and “non-DSH payments.” DSH payments are made to hospitals that serve a disproportionate share of low-income and Medicaid patients. “Non-DSH supplemental payments” are made by states under Medicaid Upper Payment Limit (UPL) regulations, which covers the gap between what states’ reimburse under its respective Medicaid program for a service and what federal Medicare reimburses for the same service, usually a higher rate. Unlike DSH payments, states are not required to make non-DSH supplemental payments, and payments are not subject to overall state spending or provider-specific limits.

“For more than a decade, we and others have reported concerns with the oversight and transparency of states’ financing arrangements involving supplemental payments,” the report states. “Our past work had found that the Centers for Medicare & Medicaid Services (CMS) — the agency within the Department of Health and Human Services (HHS) with oversight responsibility for Medicaid — lacked information on the billions of dollars spent on supplemental payments, including the magnitude of payments, how individual states were calculating payment amounts, the providers that received the payments, and the purposes for which they were received.”

What the GAO found was that states reported their supplemental payments as they saw fit, and not even consistently between reporting years. Some states reported DSH and non-DSH payments separately in 2010, but not in 2006; others separated the two in 2006 but not 2010.

Without accurate reporting, CMS cannot manage state Medicaid reimbursement programs, and by extension, Congress’s ability to budget accordingly will be equally hampered. Everyone complains about bureaucracy, but bad bureaucracy is worse. As the US embarks on the biggest transformation and expansion of healthcare in two generations, hard numbers are what we need.