GAO: Consultants help states increase Medicaid reimbursement
In a report requested by Senate Finance Committee chairman Chuck Grassley, R-IA, the Government Accountability Office says 34 states as of 2004 used contingency-fee consultants to implement projects in order to maximize federal Medicaid reimbursements.
GAO (formerly the General Accounting Office) analysts looked at five categories of Medicaid claims — targeted case management services, rehabilitation services, supplemental payment arrangements, school-based services, and administrative costs. The agency reported that in Georgia and Massachusetts, the two states that were reviewed, contingency-fee consultants developed projects in all five categories. From those and other projects, for state fiscal years 2000 through 2004, Georgia obtained an estimated $1.5 billion in additional federal reimbursements, while Massachusetts took in an estimated $570 million. The two states paid contingency fees of more than $90 million.
GAO recommended that CMS improve oversight of contingency-fee projects and states' reimbursement-maximizing methods. CMS said its initiatives substantially respond to the recommendations and the states said their projects comply with the law. GAO said additional actions are still needed.
Over the past few years, the GAO reported, states' claims in some of the five categories examined have grown substantially in dollar amounts. During fiscal years 1999 through 2003 combined federal and state spending for targeted case management increased by 76%, from $1.7 billion to $3 billion, across all states.
"We identified claims from projects developed by contingency-fee consultants that appeared to be inconsistent with current CMS policy, claims that were inconsistent with federal law, and claims from projects that undermined the fiscal integrity of the Medicaid program," the GAO told Grassley.
Concerns identified in two of the five categories of claims reviewed were:
1. Targeted Case Management. Consultants in Georgia and Massachusetts helped the states maximize federal reimbursements by claiming costs for targeted case management services that, under state plan amendments approved by CMS before 2002, appear to be inconsistent with CMS' current policy, which does not allow federal Medicaid reimbursement for targeted case management services that are an integral component of other state programs providing the services. For example, GAO said, Georgia and Massachusetts claimed and received federal Medicaid reimbursement for targeted case management services for youths in the states' juvenile justice systems.
2. Rehabilitation Services. Georgia's consultant helped the state increase federal reimbursements for rehabilitation services provided through state agencies by $58 million during state fiscal years 2001 through 2003. The consultant suggested that two state agencies that pay private facilities for providing room and board, rehabilitation, and other services to children in state custody base claims for Medicaid reimbursement on the private facilities' estimated costs, instead of what the agencies actually paid the facilities. The agencies increased the amount claimed for reimbursement without increasing payments to the facilities. In some cases, GAO said, the amount state agencies claimed for rehabilitation services alone exceeded what they paid for all the services the facilities provided to children.
The report identified two factors shared by projects where claims are at high risk of creating a problem: 1) projects are in Medicaid claims categories where federal policy has been inconsistently applied, is evolving, or is not specific; and 2) Medicaid payments are made in many cases to state and local government agencies as Medicaid providers, a mechanism that can facilitate an inappropriate shift of state costs to the federal government.
According to GAO, the two states reviewed and the federal government provided limited oversight to ensure the appropriateness of the projects and associated claims developed with assistance from contingency-fee consultants.
"Georgia's and Massachusetts' oversight efforts were limited and insufficient to prevent problematic claims associated with contingency fee projects," the report said. "CMS relies primarily on the states and its own financial oversight activities to ensure the appropriateness of consultant projects and claims. Although CMS has periodically identified concerns with contingency-fee projects to maximize federal reimbursements, the agency has not routinely collected information to identify such projects and claims, and it was unaware of many of the specific projects that we reviewed. Our findings illustrate the urgent need to address broader oversight and financial management issues not limited to situations involving contingency-fee consultants."
GAO recommendations
To help remedy the situation, GAO recommended that the CMS administrator: 1) routinely request that states disclose their use of contingency-fee consultants when submitting state Medicaid documents such as state plan amendment proposals, cost allocation proposals, and expenditure reports; and 2) enhance CMS review of state Medicaid documents in which states have used a contingency-fee consultant and take appropriate action to prevent or recover federal reimbursements associated with unallowable claims.
To strengthen CMS' overall financial management of state Medicaid activities, GAO recommended five actions for the CMS administrator: 1) require that states identify in Medicaid documents arrangements or claims for payments that involve payments to units of state or local government, such as state and local government-owned or operated facilities; 2) enhance CMS' review of states' Medicaid documents, specifically reviewing payments states make to units of government, including the methodology behind payment rates to government units and the basis for any related claims, and take appropriate action to prevent or recover unallowable claims; 3) establish or clarify and then communicate CMS policies on targeted case management, supplemental payment arrangements, rehabilitation services, and Medicaid administrative costs, and then ensure that policies are applied consistently across all states; 4) ensure that states submit cost-allocation plans as required and establish a procedure for their prompt review; and 5) follow up with states' associated claims covered in the report and recover federal reimbursements of unallowable claims as appropriate in Georgia and Massachusetts.
CMS said the GAO report did not accurately reflect its many activities already taken to address the issues raised and that many of the recommendations already are being followed. In its comment on the CMS response, GAO acknowledged the agency has taken important actions in recent years to improve Medicaid financial management, but also noted it has raised concerns about certain inappropriate financing methods in high-risk areas for many years, that some prior recommendations remain open, and that problems remain.
"In addition to the important steps CMS has taken in recent years to improve its policies and oversight, we believe that more can and should be done to better ensure the program is operating as Congress intended, that is, as a shared federal-state partnership providing health care resources for covered services for eligible beneficiaries," GAO said.
Officials from Georgia and Massachusetts told GAO of the importance of contingency-fee contracts and states' use of consultants in helping secure resources they otherwise would not have. Massachusetts said that seeking federal resources for people in need when those resources are lawfully available is a fiscally responsible thing for states to do. Georgia said Medicaid's complexity compels states to turn to expert consultants for assistance and said the report inaccurately suggests that states' use of contingency-fee consultants is somehow illegitimate.
"We acknowledge that use of contingency fee contracts is allowed under law and that states can employ consultants for a number of valid Medicaid purposes, and our report has made these points," GAO said. "Our key findings, however, focus on the need to ensure that financing methods and associated claims that stem from contingency-fee projects are consistent with federal law, policy, and the fiscal integrity and federal-state partnership of the Medicaid program. Our work identified concerns with claims from contingency-fee projects that were problematic in these respects."
On receiving the report, Mr. Grassley said, "It's alarming to find that a majority of states use contingency-fee consultants to increase the federal dollars they claim from Medicaid and that these increases are often achieved through schemes of questionable legality. Medicaid dollars should not be lining the pockets of consultants who plot new ways to exploit the system."
Meanwhile, concerns such as these and other criticisms of the Medicaid program and its administration haven't translated into negative public opinion about the program. A Kaiser Family Foundation study found that while two-thirds of the public think their state has major budget problems, a substantial majority is reluctant to cut Medicaid to balance state budgets, and a majority think the federal government should maintain (44%) or even increase (36%) federal spending on Medicaid. Only 12% of respondents favored some sort of Medicaid cut.
Nearly three-quarters of the adults surveyed said Medicaid is a "very important government program," ranking it close to Social Security (88%) and Medicare (83%) in the public's mind, equal to federal aid to schools (74%), and above defense and military spending (57%).
A majority of Americans (56%) report having some interaction with Medicaid, either having been enrolled themselves at some point (16%) or knowing a friend or family member who has received health coverage or long-term care assistance through the program (40%). Also, if they needed health care and were eligible, 78% of respondents said they would be willing to enroll in Medicare.
"We expected Medicaid to be relatively unpopular with the public, much like welfare was," said Kaiser vice president and director of public opinion and media research Mollyann Brodie. "But we found that Medicaid ranks closer to popular programs like Medicare and Social Security in the public's mind. The fact that so many Americans have had some kind of contact with Medicaid themselves or through family and friends is one factor that could help explain this result."
[Download the GAO report from www.gao.gov/cgi-bin/getrpt?GAO-05-748. Contact Ms. Brodie at (202) 347-5270.]
In a report requested by Senate Finance Committee chairman Chuck Grassley, R-IA, the Government Accountability Office says 34 states as of 2004 used contingency-fee consultants to implement projects ...You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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