Improper payments and fraud continue to be chronic and costly difficulties for Medicaid and other government-funded programs. The GAO defines improper payments as payments that should not have been made or that were made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements. According to the GAO, the federal government loses between $233 billion and $521 billion annually to fraud alone.
Since FY 2003, executive branch agencies have reported increasing improper payment estimates totaling approximately $2.7 trillion. In fiscal year 2023 alone, federal agencies reported $236 billion in improper payments across 71 programs. While the FY 2023 estimate represents an $11 billion downturn from the previous year, this reduction is credited to temporary flexibilities granted during the COVID-19 PHE. These measures, such as relaxed eligibility requirements for Medicaid beneficiaries and providers, minimized instances of improper payments under the altered criteria.
Medicaid's High-Risk Status
Medicaid has been on the GAO's High-Risk List since 2003 due to vulnerabilities in payment integrity. In FY 2023 alone, HHS estimated that Medicaid improper payments totaled $50 billion. According to HHS, the leading contributors to these payments are missing or insufficient documentation, particularly in validating beneficiary eligibility and payments to ineligible beneficiaries or ineligible services.
Actions and Legislative Efforts to Reduce Improper Payments:
CMS has made some progress in identifying these susceptibilities. For instance, CMS collaborated with states and audit contractors to improve oversight of healthcare companies contracted to manage healthcare services for Medicaid beneficiaries. Investigations rose from 16 between 2016 and 2018 to 893 between 2019 and 2021, uncovering significant overpayments.
Over time, several legislative efforts have been aimed at curbing fraud, waste, and abuse. Despite these pieces of legislation, Medicaid continues to lose billions of dollars because of payments made in error. The measures directed by the legislation are costly and primarily revolve around compliance and reporting rather than reducing improper payments.
Remaining Challenges:
The GAO identified several areas for improvement, including:
Provider Screening and Enrollment Requirements
The GAO suggested CMS review state compliance with screening and enrollment requirements and monitor noncompliance yearly. While CMS has provided technical assistance, further action is needed to assess and address all states' compliance.
Medical Reviews for Improper Payments
The GAO advised CMS to strengthen Medicaid's medical review processes to identify the root causes of improper payments and implement corrective actions. As of March 2024, HHS disagreed with this recommendation and does not plan to implement it.
Compliance with the Payment Integrity Information Act of 2019
Medicaid was deemed compliant with PIIA criteria in FY 2023. However, it was not fully compliant in fiscal years 2021 and 2022.
Considerable gaps remain in addressing improper payments and fraud. By fully implementing GAO recommendations and enhancing oversight, federal agencies and programs like Medicaid can better safeguard taxpayer dollars, reduce waste, and improve operational efficiency. Nevertheless, to prevent improper payment rates from rising even more, agencies should look to innovate data solutions to identify and prevent fraud, waste, and abuse.
