Are Medicaid IT Systems the Weak Link in Detecting Improper Payments?

States aren't doing enough to prove that their Medicaid information systems can detect improper payments -- for medically unnecessary treatments, services not covered by Medicaid or services billed for but never provided, according to a new Government Accountability Office report. 

The Centers for Medicare and Medicaid Services estimated that $14.4 billion -- 5.8 percent -- of Medicaid payments in 2013 were made improperly, but states still don't have a good system for reporting on how their information management technology is helping track the flubbed payments, GAO said. Medicaid is a joint federal-state program providing health care coverage to low-income patients, overseen by CMS within the Department of Health and Human Services.

The 10 states GAO examined had systems in place for managing Medicaid claims -- some implemented more than 20 years ago -- but the "effectiveness of the systems for program integrity purposes is unknown," the report said.

Only three states examined had established ways to measure the financial benefits of their systems in preventing and detecting improper payments -- how much money was saved or recovered -- according to the report, which analyzed quarterly data from the Medicaid administrators.

With expenditures of about $460.3 billion in fiscal 2013, Medicaid covered about 72 million people; the federal share of spending was about $267 billion, and the state share was $193.2 billion, according to GAO.

"The size and diversity of the Medicaid program make it particularly vulnerable to improper payments," the report said. 

HHS has requested $11.3 billion for its IT budget next year, according to an analysis from Bloomberg -- this is down 10 percent from its 2015 enacted IT budget. This year's request includes $6 billion in state transfers concerning Medicaid management information systems.

GAO recommended CMS require states to measure and report quantifiable benefits of these "program integrity" systems when requesting federal funds. According to the report, CMS concurred with the recommendation. 

The audit, spanning from November 2013 to January 2015, looked at Tennessee, Vermont, Kentucky, Maryland, Mississippi, Virginia, North Carolina, Texas, California and the U.S. Virgin Islands.

California, Mississippi and Virginia had found ways to measure the benefits of their information system, according to GAO. For instance, California administrators provided the results of a routine internal audit, documenting cost reductions; Virginia administrators measured more than $216 million in cost avoidance for FY 2013.

Other states pointed to a lack of data. According to the report, administrators in Texas said data submitted by the managed care organizations listed only the reason for a patient's visit, and whether the provider's claim was paid, but not always diagnostic codes and the amounts paid for a visit.

“What we really found is there's a lot of good efforts, but there's more that could be done," said Carolyn Yocom, director of the health care team at GAO. "Right now, it doesn't appear that states are necessarily fully aware of how well these systems are working." 

She added, "successful [measurement] systems start to find less and less, because less and less is going on."

But without more robust evaluation from states, "CMS officials lack an essential mechanism for ensuring that the federal financial assistance that states receive to help fund these systems effectively supports Medicaid program integrity efforts," the report said. 

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