CMS offers solutions as improper Medicaid payments skyrocket

Improper Medicaid payments hit $30 billion last year, according to the CMS. Now, the agency is giving states tools to address the issue.

Medicaid's improper payment rate was 9.8% for 2015, nearly double what it was in 2013. The agency is anticipating the rate to hit 11.5% this year.

“States are facing greater challenges keeping pace with stricter enrollment requirements, tracking providers who have been excluded from other states' or federal health care programs, and generally adapting to changing regulations for qualifications of certain provider types,” CMS said in an alert.

An improper payment can occur when funds go to the wrong recipient, the right recipient receives the incorrect amount of funds, documentation is not available to support a payment or the recipient uses funds in an improper manner. The tally also includes fraudulent claims.

To educate states about the issue, the agency is using a new tool known as E-Alerts, which informs relevant stakeholders of a concern and the factors that may be causing it. In Tuesday's alert, the agency also outlined possible solutions.

The increase in improper payments is likely due to several factors. The biggest one is that millions of people have joined Medicaid as a result of expansion under the Affordable Care Act. That creates more opportunities for inaccurate payments or for people to potentially defraud the program, said Troy Barsky, a partner at the law firm Crowell & Moring. Barsky was previously CMS' director of the division of technical payment policy.

States might also be working out the kinks of new Medicaid eligibility systems that they began to install in 2012 ahead of the Affordable Care Act. In 2011, the CMS raised the matching rate to 90% from 50% for money that states could spend on building eligibility and enrollment systems.

Others questioned if the rate of improper payments truly has increased as dramatically as the CMS suggests. For years, the CMS just didn't have the ability to track the rate of improper payments as closely as states could, but ongoing technical modernization efforts at the agency may be changing that. So it's possible better tracking has resulted in a more accurate picture of inappropriate payments, according to Sheree Kanner, former general counsel for the CMS and current partner at Hogan Lovells.

Another issue is that CMS' improper payment figures may not adequately address questionable billings that have already been corrected by the states, said Tony Rodgers, a principal at the firm Health Management Associates and former deputy administrator for strategic planning at the CMS.

States are likely to be pleased with the solutions outlined to curb improper payments. While not necessarily new ideas, this is believed to be the first time all the possible solutions were outlined in a single document.

“Given all the new requirements in the ACA and elsewhere, it's very helpful to have them in a centralized place and to remind everyone about available resources,” said Matt Salo, executive director of the National Association of Medicaid Directors.

While widely accepted as solid ideas, there is the possibility that some of them could be harder lifts than others due to resources. For instance, one idea is that state agencies conduct site visits to verify legitimate provider addresses.

“Most states simply don't have the staff to conduct site visits,” Rodgers said. Many states cut back on Medicaid staff during the downturn in 2008 and have yet to fully recover.

Others might be nervous about implementing some of the ideas for fear they might scare off legitimate providers that are willing to take low reimbursement for Medicaid beneficiaries.

“States also have to struggle with the fact that the vast majority of providers are good,” said Kip Piper, a Washington-area consultant and former senior official at the CMS.

“When new program integrity safeguards are put in place, they often fall on all the providers, not just the bad actors. So there is a strong push back,” Piper said.