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GAO Raises Concerns about State Medicaid Funding

In a report today, the U.S. Government Accountability Office (GAO) found that states’ reliance on funds from health care providers and local governments to finance Medicaid has increased in recent years and recommended better oversight of such practices.

The GAO report, the subject of a House Committee on Oversight and Government Reform hearing this morning, found that in fiscal year 2012, states used funds from health care providers and local governments to finance 26 percent, or more than $46 billion, of the total nonfederal share of Medicaid payments. The GAO did note that most of the nonfederal share of Medicaid funding came from state general funds. State reliance on funds from health care providers and local governments increased by more than 21 percent from state fiscal years 2008 through 2012, GAO reported.

GAO, which examined selected financing arrangements in California, Illinois, and New York, raised several concerns about its findings, including that data needed for overseeing Medicaid payments are lacking. Specifically, GAO said, federal payment data do not capture, on a provider-specific basis, certain large supplemental payments states often make and generally lack information on provider ownership. The GAO also found that at the state level, preliminary results in the three selected states suggest that payment data primarily maintained by states are “not always reliable and can be challenging to obtain and assess.”

As it has in similar previous reports, GAO recommended that the Centers for Medicare & Medicaid Services (CMS) improve Medicaid payment oversight and develop a data collection strategy to improve the transparency of state financing methods.

In testimony at the House hearing this morning, Cindy Mann, director of the CMS Center for Medicaid and CHIP Services, detailed at length measures the agency takes to “ensure appropriate financial management mechanisms are in place to ensure dollars are spent appropriately.” She pointed out that states are specifically permitted in statute to source the non-federal share of Medicaid spending through the mechanisms GAO reviewed and that during the economic downturn, “some states relied less on state general funds and more on other sources of funds, consistent with federal law. This allowed funding for Medicaid services to be available even when state tax revenues were constrained.”


About the Author

Graziano is senior director of communications for America's Essential Hospitals.

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