Detailed Information on the
Medicaid Assessment

This long-term measure tracks the number of States participating in the Medicaid Quality Improvement Program (MQIP), which is a CMS program that provides technical assistance to States to bolster their targeted health quality improvement projects. State participation is voluntary. By working with CMS, States will be provided opportunities to receive technical assistance to help them achieve improvements in health care quality for Medicaid beneficiaries, improving the value of Federal and State expenditures. CMS will track State participation in quality improvement efforts and disseminate tools to provide guidance in achieving objectives in areas of evidence-based care, health disparities and program evaluation. CMS will encourage State's use of nationally recognized measure sets and work to expand measure sets applicable to Medicaid populations. CMS has established the goal that at least 8 States will participate in CMS quality improvement efforts and demonstrate improvements in State assessment of quality by 2008, at least 10 States by 2010, and 13 States by 2013. These results will be used as the building blocks for the development of a national framework for Medicaid quality. This framework will be developed in collaboration with States and key stakeholders.

This measure is under development. The Medicaid Integrity Group (MIG) will develop the specifications and statement of work for Medicaid Integrity Contractors (MICs), who will assist in identifying overpayments, procure and negotiate the contracts, evaluate contractor performance, coordinate regional office activities, and coordinate audit collections. Among other activities, the MIG will also provide program integrity training to State program integrity units, produce best practices guidance and other resource material for the States and for CMS, and conduct State program integrity oversight activities. The MIG will hire 100 FTEs to assist in the work of the group. This group will also serve as a central clearinghouse for all MIC reports, provide statistical support for planning and implementation activities, coordinate with the Office of Financial Management in CMS on a national combined database of Medicaid/Medicare claims data, and research emerging fraud practices and trends.

Baseline data will be established for new PART measures, with the goal of tracking and reporting on these measures on a regular basis. These performance measures without baselines include: 1) the national payment error rate, which is intended to assess the percentage of Medicaid improper payments, including inadvertent errors, denied payments, and payments for unsupported or inadequately supported claims. Data will be derived from sample claims and cases in a subset of 17 Medicaid States each year. Exact targets will be developed thereafter; 2) the number of States that demonstrate improvement to access and quality health care. CMS will track the number of States participating in the Medicaid Quality Improvement Program, and will monitor and record State improvement efforts. These results will be used as the building blocks for the development of a larger, national-level quality framework; and, 3) the return on investment (ROI) for the Medicaid Integrity Program (MIP), which has a goal of greater than 100 percent within its first year. The ROI will be calculated on an annual basis and will be expressed as a percentage, the numerator of which will include annual total Federal dollars of identified overpayments in accordance with the relevant Medicaid overpayment statutory and regulatory provisions. The denominator will include annual Federal funding of the Medicaid Integrity Contractors.

Measure: National Medicaid Payment Error Rate

Explanation:This Performance Measure is under development and is intended to assess the percentage of Medicaid improper payments, including inadvertent errors, such as duplicate payments and miscalculations; denied payments; payments for unsupported or inadequately supported claims. It is expressed based on a sampling of States; the numerator is the number of improper payments and the denominator is the total number of payments. A component error rate for Medicaid fee-for-service comprised of the measurement in 17 States will be reported in 2007. Data will be derived from sampled claims and cases in a subset of 17 Medicaid States each year. Exact targets will be developed thereafter, with the goal of realizing a reduction in payment error rates.

Measure: Number of States that demonstrate improvement related to access and quality health care

Explanation:This long-term measure tracks the number of States participating in the Medicaid Quality Improvement Program (MQIP). MQIP is a CMS program that provides technical assistance to States to bolster their targeted health quality improvement projects. State participation in MQIP is voluntary. CMS plans to use State participation in MQIP to assess State quality improvement projects. These results will be used as the building blocks for the development of a larger, national-level quality framework.

Measure: Percentage of beneficiaries in Medicaid Managed Care Organizations

Explanation:This is an efficiency measure. The numerator is number of beneficiaries in Medicaid Managed Care (Managed Care Organizations (MCOs) + Health Insurance Organizations (HIOs)) and the denominator is the total number of beneficiaries. There is evidence that enrollment in MCOs and HIOs increases efficiency, management and delivery of care. For example, the July 2004 study conducted by the Lewin Group "Medicaid Managed Care Cost Savings: A Synthesis of 14 State Studies" found that State programs achieved savings ranging from 2 to 19 percent in the Managed Care setting. Also see the Evidence section in question 3.4.

Measure: Percentage of beneficiaries who receive home and community-based services

Explanation:This is an outcome measure. The numerator is the number of beneficiaries who receive home and community-based services. The denominator is the total number of beneficiaries eligible for institutional level of care. There is evidence that home and community-base care is more cost-effective than institutional care. For example, a Georgetown University report indicated lower per capita costs for home health aides for the home and community based beneficiaries than per capita costs of semi-private rooms for nursing home beneficiaries. Additionally, GAO found that the shift in home and community-based care has allowed some States to provide services to more people with the same dollars available. (See Evidence section on question 4.3 for illustrative cost-effectiveness studies).

Measure: Percentage of Medicaid Section 1115 demonstration budget neutrality reviews completed out of total number of operational demonstrations for which targeted budget neutrality reviews are scheduled

Explanation:This measure is under development. The numerator is the number of completed budget neutrality reviews for approved 1115 demonstrations scheduled for targeted review in a particular year. The denominator is the total number of approved 1115 demonstrations scheduled for targeted review in that same year. Under Section 1115 of the Social Security Act, the HHS Secretary has the authority to grant waivers of Medicaid statute so that States can test innovative reforms, such as new healthcare delivery systems. The Administration maintains a policy that any State demonstration should be budget neutral; the demonstration should not create new costs for the Federal government. CMS is responsible for reviewing State compliance with budget neutrality for Medicaid waivers.

Measure: Prevalence of Restraints in Nursing Homes

Explanation:This is a proxy measurement for quality of nursing home care. The numerator is the number of long-term (more than 90 days) residents in daily physical restraints. The denominator is the total number of long-term residents. The prevalence of physical restraints, which restrict freedom of movement or normal access to one's body, is an accepted indicator of quality of care and may be considered a quality of life measure for nursing home residents. The use of physical restraints can cause incontinence, pressure sores, loss of mobility, and other morbidities.

Measure: Percentage of States that survey all nursing homes at least every 15 months

Explanation:This is a proxy measure for quality of care. The numerator is the number of States that survey all nursing homes at least every 15 months. The denominator is the total number of States. To ensure appropriate compliance with state-directed quality standards, all States must perform health and safety inspection surveys of their nursing home facilities.

Measure: Percentage of States that survey all home health agencies at least every 36 months

Explanation:This is a proxy measure for quality of care. The numerator is the number of States that survey all home health agencies at least every 36 months. The denominator is the total number of States. To ensure appropriate compliance with directed quality standards, all States must perform health and safety inspection surveys of their home health agencies.

Measure: Percentage of States for which CMS makes a non-delivery deduction from the State's subsequent year survey and certification funds

Explanation:This is a proxy measure of CMS' oversight and enforcement toward improving health quality in nursing homes and home health agencies. The numerator is number of States for which CMS makes a deduction. The denominator is the total number of States that fail to conduct all statutorily-required surveys. Although all States are required to perform surveys, not all achieve 100%. A deduction equal to 75% of the estimated cost of the uncompleted nursing home or home health surveys is taken from the State Survey Agency's subsequent year's funding. The deduction cannot exceed 2% of the State's current survey and certification budget.

Measure: Medicaid Integrity Program, Percentage Return on Investment

Explanation:This measure is under development. The numerator will include annual total Federal dollars of identified overpayments in accordance with the relevant Medicaid overpayment statutory and regulatory provisions. The denominator will include the annual federal funding of the Medicaid Integrity Contractors (MICs). The Medicaid Integrity Program was established in 2005 and helps prevent, detect and reduce fraud, waste, and abuse in Medicaid. Once the program is established, resources committed, and the MICs procured and in operation, the ROI performance measure is expected to be greater than 100 percent. The Return on Investment (ROI) for this program will be calculated on an annual basis

Is the program purpose clear?

Explanation: The purpose of Medicaid is to provide medical assistance on behalf of families with dependent children and of aged, blind, or individuals with disabilities, whose income and resources are insufficient to meet the costs of necessary medical acute care and long-term care services. States have the option to participate in this State-Federal partnership and have the flexibility to design a program that meets the specific needs of its population within statutory guidelines.

Evidence: Medicaid was created in 1965 as a jointly funded Federal-State (including the District of Columbia and the Territories) health care insurance program for certain low-income families, the indigent aged, and individuals with disabilities. State participation in the Medicaid Program is voluntary; however, all States have participated since 1982. The number of Medicaid enrollees in FY 2005 was 49.1 million. It is estimated that there will be 51.6 million enrollees in FY 2006 and an estimated 52.8 million enrollees in FY 2007. 1) See Title XIX of the Social Security Act, 42 U.S.C. 1396, www.ssa.gov/OP_Home/ssact/title19/1900.htm; 2) HHS Budget In Brief, Fiscal Year 2007.

Does the program address a specific and existing problem, interest, or need?

Explanation: State Medicaid programs are the primary source of health care to address the needs of poor families, the aged, the blind, and individuals with disabilities. Without Medicaid, States would either have to provide 100 percent of the cost of care for this population or this population would have to go without necessary medical care. Historically, State budgets could not support their constituents' medical and health care needs. According to a 2006 study by AcademyHealth, "there is a well-documented connection between insurance coverage and access to care and health. Had public programs such as Medicaid and SCHIP not enrolled more people in recent years, the growth in the uninsured would have been even greater."

Evidence: Prior to the enactment of Medicaid, the Federal government did not subsidize health insurance programs that provided insurance coverage to low-income families, seniors, and individuals with disabilities. The most recent estimate by the US Census's Current Population Survey found that in 2004 there were 45.8 million individuals without health insurance. According to the most recent data available, Medicaid served 49.1 million people in fiscal year 2005. Medicaid plays a huge role in insuring the nation's 39 million low-income children and some of their parents, covering about one in every 4 children in the United States. Nearly two-thirds of all Medicaid enrollees are in low-wage working families; Medicaid also pays for six out of every ten beds in nursing homes. Additional evidentiary support: 1) Title XIX of the Social Security Act, 42 U.S.C. 1396, www.ssa.gov/OP_Home/ssact/title19/1900/htm; 2) State of the States, AcademyHealth, January 2006, www.statecoverage.net; 3) HHS Budget In Brief, Fiscal Year 2007; 4) U. S. Census Bureau, Current Population Survey, 2005 Annual Social and Economic Supplement, Table HI08, http://pubdb3.census.gov/macro/032005/health/h08_000.htm, Fiscal Year 2003 Medicaid Statistical Information System.

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: Medicaid is the sole Federal-State partnership program that provides medical assistance on behalf of families with dependent children and of aged, blind, or individuals with disabilities, whose income and resources are insufficient to meet the costs of necessary medical acute care and long-term care services. Although there is no statutory provision that precludes Medicaid from paying Federal matching funds to States to cover individuals who might otherwise be covered either by State-funded or employer-sponsored insurance, Medicaid's structure is designed to provide coverage for the uninsured or coordinate and complement, not duplicate, other forms of health care coverage.

Evidence: Additional evidentiary support: 1) Title XIX of the Social Security Act, 42 U.S.C. 1396a, www.ssa.gov/OP_Home/ssact/title19/1900/htm; 2) CRS Report for Congress, Medicaid: A Primer, Updated March 29, 2006, Congressional Research Service, The Library of Congress; 3) Trends in U.S. Health Insurance Coverage, 2001-2003, Center for Studying Health System Change, www.RWJf.org/researchdetail.jsp?id=1412&ia=132; 4) State of the States, AcademyHealth, January 2006, www.statecoverage.net.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: The current Medicaid statutory and regulatory-structure has design flaws. For example, Medicaid is designed as an open-ended entitlement program. The Federal government matches all allowable State dollars spent on Medicaid, regardless of the amount. Specifically, Medicaid's open-ended financing structure encourages States to maximize the Federal matching dollars they receive without a State contribution through existing loopholes and thereby shift a larger portion of Medicaid costs to the Federal government. As a result of program design and oversight issues, since 2003, GAO has identified Medicaid as a "high-risk" program subject to fraud, waste, abuse, and mismanagement. The open-ended financing structure also creates incentives for States to shift costs to Medicaid that may not be appropriate. For example, States have taken advantage of Medicaid's reimbursement and financing structure by claiming Federal reimbursement for costs related to other non-Medicaid social programs, such as costs related to foster care and juvenile justice. Medicaid has a history of fraud and abuse. Many issues have arisen due to deficiencies in Medicaid's program structure, and have prompted Congressional and Executive intervention. The most notable financing schemes in Medicaid history involved provider taxes and donations, disproportionate share hospital (DSH) payments, and upper payment limits (UPL). All of these financing schemes serve as examples of States attempting to maximize Federal reimbursement. They have caused explosive growth in Federal spending (by billions of dollars annually) and threatened the financial stability of Medicaid. Today, States still have financial incentives and opportunities to continue Medicaid maximization schemes, in part because of intergovernmental transfers (IGTs). IGTs are money transfers between governmental entities within a State. A State may use IGTs for legitimate Medicaid purposes; for example, to collect funds from local governments to help finance the State share of Medicaid costs. States also use IGTs for questionable purposes, such as to recycle Federal Medicaid payments through State and local government providers. The passage of the Deficit Reduction Act of 2005 (DRA) helped curb some of these questionable practices, but financing schemes still exist, allowing States to avoid paying the statutory match rate and effectively shift a larger portion of Medicaid costs to the Federal government.

Evidence: GAO reports identify financing schemes that leverage federal funds inappropriately. GAO reports focus on inappropriate billing by providers serving program beneficiaries. Additional evidentiary support: 1) High Risk Series: An Update. GAO-05-207. January 2005. http://www.gao.gov/new.items/d05207.pdf. 2) Medicaid Program Integrity: State and Federal Efforts to Prevent and Detect Improper Payments.GAO-04-707. Washington, D.C.: July16, 2004. 3) Medicaid: Intergovernmental Transfers Have Facilitated State Financing Schemes. GAO-04-574T. Washington, D.C.: March 18, 2004. 4) Medicaid: Improved Federal Oversight of State Financing Schemes Is Needed. GAO-04-228. Washington, D.C.: February 13, 2004. 5) Medicaid Financial Management: Better Oversight of State Claims for Federal Reimbursement Needed. GAO-02-300. Washington, D.C.: February 28, 2002. 6) Medicaid: HCFA Reversed Its Position and Approved Additional State Financing Schemes. GAO-02-147. Washington, D.C.: October 30, 2001. 7) Medicaid: State Financing Schemes Again Drive Up Federal Payments. GAO/T-HEHS-00-193. Washington, D.C.: September 6, 2000. 8) Medicaid: States Use Illusory Approaches to Shift Program Costs to Federal Government. HEHS-94-133. Washington, D.C.: August 1, 1994. 9) U.S. General Accounting Office, Major Management Challenges and Program Risks: Department of Health and Human Services, GAO-03-101, pp 27-29 10) Urban Institute, States' Use of Medicaid Maximization Strategies to Tap Federal Revenue: Program Implications and Consequences, June 1, 2002 11) Title XIX of the Social Security Act, 42 U.S.C. 1396a, 1396n, www.ssa.gov/OP_Home/ssact/title19/1900.htm.

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: Medicaid is a health insurance program jointly administered by the Federal government and States. The program is designed to ensure that the Federal government provides matching funds to States for statutorily defined medical services, and that the medical services are provided only to eligible Medicaid beneficiaries. To ensure that only eligible services are provided to eligible beneficiaries, Medicaid is administered to beneficiaries based on income and resource requirements established in statute. By law, a State is required to screen applicants to determine if their income and resources fall within the requirements for Medicaid eligibility. To guarantee that Medicaid providers are properly paid, Medicaid has a retrospective payment structure. A State can only submit a claim to the Federal government after a beneficiary receives a medical service. This provides the Federal government an opportunity to verify the validity of a claim - that is, to ensure the services provided were consistent with Medicaid statute and regulation - before it provides reimbursement to the State. The program design allows the Federal government to confirm that medical services have been provided to Medicaid beneficiaries within statutory and regulatory guidelines. In addition, this system allows the Federal government to scrutinize expenditures for compliance with all statutory and regulatory requirements and to identify problematic claims. Federal funds may be deferred if an expenditure is questionable and disallowed if found to be inappropriate. This payment design feature enables States to furnish medical assistance to the target Medicaid population while providing for Federal oversight to ensure accuracy of the services provided and payment for these services.

Evidence: Additional evidentiary support: 1) Title XIX of the Social Security Act, 42 U.S.C. 1396a, www.ssa.gov/OP_Home/ssact/title19/1900.htm; 2) CRS Report for Congress, Medicaid: A Primer, Updated March 29, 2006, Congressional Research Service, the Library of Congress.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: Medicaid has two long-term performance measures, one of which directly reflects the purpose of the program. This measure tracks State participation in quality improvement efforts. It is part of CMS' "Medicaid Quality Improvement Program," a national initiative to help States achieve safe, effective, efficient, and patient-centered care. This measure is necessarily an output measure because there are currently very few national standards for quality-based outcome measures. Generally speaking, the industry practice is to use output or process measures as proxy measures for quality, such as the number of well-child visits per year. CMS plans to use these State-level quality improvements from this initiative as the building blocks for the development of a larger, national-level quality framework. Currently, States develop and collect their own quality data absent any collaboration with the Federal government. States and the Federal government will participate in the identification and collection of relevant quality information, which will serve as the basis for uniform national process and outcomes based measures. This measure represents CMS' efforts to establish performance measures among States consistent with the purpose of Medicaid, which is to provide quality health care to low-income beneficiaries.

Evidence: Current long-term performance metrics, which are also GRPA goals, focus on both the financing structure of Medicaid as well as improving access and quality. Evidentiary support includes: 1) FY 2006 Revised Final GPRA Annual Performance Plan; 2) FY 2007 GPRA Annual Performance Plan, Centers for Medicare & Medicaid Services, Baltimore, MD; 3) Center for Medicaid and State Operations: Value-Based??Results-Driven??Healthcare: The Medicaid/SCHIP Quality Initiative, August 2005; 4) Medicaid Quality Website: http://www.cms.hhs.gov/MedicaidSCHIPQualPrac.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: Medicaid long-term performance measures are still under development, and baselines for these efficiency and output measures have not been established. Absent baseline measures for the current two long-term measures, Medicaid cannot receive full credit for this score.

Evidence: The quality performance measure does not have an end-target. States will begin participating in the quality initiative in 2008, and CMS will need additional time to increase State participation and determine an appropriate national quality framework. While the goal is to increase State participation in quality improvement initiatives, it is unclear what and how information will be utilized on a macro-level to improve health quality. The payment error rate measurement is also under development. While reducing this error rate is a target goal, a specific percentage reduction cannot be established until the baseline is developed. Evidentiary support includes: 1) Medicaid Improper Payment Rate, Interim Final Rule http://a257.g.akamaitech.net/7/257/2422/01jan20051800/edocket.access.gpo.gov/2005/pdf/05-19910.pdf. 2) Quality reporting activities are outlined in 42 CFR 438, Subparts D and E. 3) FY 2007 GPRA Annual Performance Plan, Centers for Medicare & Medicaid Services, Baltimore, MD.

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: The long-term goals of Medicaid address two key areas: 1) improving the quality of health care in Medicaid, and 2) improving the administration and financing practices of Medicaid. Medicaid has annual performance measures supporting the long-term objectives of improving quality and administration. For example, the prevalence of nursing home restraints is a proxy indicator of health care quality provided in nursing homes.

Evidence: There are eight annual performance measures. Of these eight measures, four of the measures contribute to the long-term goal of improving the quality of care within specific areas of Medicaid. These four annual metrics assess the quality of care in nursing homes and home and community-bases services, as well as identify how well CMS administers certain aspects of nursing home and home health programs. CMS is pursuing a long-term measure that will serve as the basis for identifying national, quality process and outcome measures. Currently, it is standard practice for Medicaid stakeholders, including the National Committee for Quality Assurance (NCQA) that assess quality of care, to use output or process measures for health care quality. Until outcome measures are developed and finalized, the annual measures in the PART are necessarily output quality measures. Therefore, CMS is in line with current industry activity and is taking steps to move to the forefront. Evidentiary support includes: 1) See Performance Measures Section; 2) Strategic goals of CMS, as outlined by Administrator McClellan, located at http://www.cms.hhs.gov/MissionVisionGoals/; 3) The existing GPRA plan in the FY 2007 Congressional Justification for the Centers for Medicare & Medicaid Services -- FY 2005 Annual Performance Report. Evidentiary support includes: 1) See Performance Measures Section; 2) Strategic goals of CMS, as outlined by Administrator McClellan, located at http://www.cms.hhs.gov/MissionVisionGoals/; 2) 3) The existing GPRA plan in the FY 2007 Congressional Justification for the Centers for Medicare & Medicaid Services -- FY 2005 Annual Performance Report.

Does the program have baselines and ambitious targets for its annual measures?

Explanation: Specific targets are aggressive and ambitious for each of the annual measures.

Evidence: Baseline measures have been established for all but two of the eight annual performance measures. All targets for each of these measures reflect a commitment to continuous improvement. Specifically, many of the annual metrics that focus on improving the quality of care in nursing homes and home and community-based services target a 5 percent improvement year-over-year. Other metrics that focus on CMS oversight, such as the review of 1115 waiver budget neutrality reviews, are moving in the direction toward 100 percent compliance with review practices. Annual measures that have no baselines have been recently developed. The Agency has also developed three new measures that for the first time will assess efficient use of services in Medicaid Managed Care Organizations and Home and Community-Based health services. A new measure has also been developed to assess the return on investment in the Medicaid Integrity Program. Two of the measures are included in the existing GPRA plan in the FY 2007 Congressional Justification for the Centers for Medicare & Medicaid Services. The additional measures will be included in the FY 2008 GPRA report.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: Medicaid has established valuable partnerships at the Federal, State, and organizational level to carry out the goals of the Medicaid program. For example, Medicaid collaborates with CDC on such issues as the Vaccine for Children Program, EPSDT, and lead screening. The agencies work together to respond to issues that arise regarding vaccine administration fees, and areas related to coverage determination in EPSDT. CMS follows CDC's recommendations related to lead screening and immunization schedules. In the area of quality improvement, the Federal government serves as facilitator, convener and technical support specialist. CMS has also effectively partnered with the Agency for Health Care Quality and Research on many collaborative projects. The most notable being the Medicaid Medical Directors Learning Network in which Medicaid Medical Directors from all across the country are brought together to disseminate best practice information on access, quality and evidence-based coverage decisions. CMS also works with the National Association of State Medicaid Directors to fulfill the vision on the Medicaid Quality Strategy. The strategy was presented at their last annual meeting. Additionally, CMS has already traveled to or conducted conferences with five of the ten regions to discuss the quality strategy with the States. CMS is also working with States on quality improvement efforts related to managed care regulations specified in 42 CFR 428 Subparts D and E. Lastly, CMS partners with external organizations. Examples include CMS' partnership with the Centers for Health Care Strategy on the development of information on best practices in pay-for-performance.

Evidence: By design, the States develop their own Medicaid programs with Federal government oversight. There are several articles in Statute under the 1864 Agreement with the Secretary of HHS and the State Survey Agency that illustrate the commitment of these parties to work toward any long term or annual goal of the program. Examples of required collaboration include data collection and reporting. Furthermore, the Social Security Act statute at 1919(b) sets forth specific requirements relating to the quality of life, and quality assessment and assurance for nursing facility services. In addition, in the Act at 1919(c) there are requirements relating to residents' rights - it states that a nursing facility must protect and promote rights of each resident to specifically be free from restraints. CMS' mission, priority document and nursing home action plan for 2006 remain clear that the goals around restraints (see under Quality Improvement) continue toward greater levels of collaboration and commitment to maximize performance.

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: CMS funds evaluations on the effectiveness of the Medicaid Program. These unbiased studies are conducted on an as needed basis and are sufficient in quality and scope.

Evidence: CMS funds many evaluations and partners with numerous outside entities, including the Urban Institute and Mathematica, to study program areas such as increasing efficiency of administration or identifying potential areas of fraud and abuse. For example, CMS funded a series of evaluations of State Medicaid Reform Demonstrations. These Evaluations resulted in thirty-two reports on such topics as commercial plans in Medicaid Managed Care, access to care for Medicaid beneficiaries with disabilities, effects of Managed Care on children, utilization and quality of care for SSI adults and children, and the health care experiences of Medicaid beneficiaries with mental illness. CMS also funded a nationwide evaluation of Medicaid Competition Demonstrations and an evaluation of 1915(b) waivers. CMS uses many independent evaluations authored by outside stakeholders. CMS relies on these studies to improve administrative efficiencies or address areas requiring corrective action such as improving managed care administration under Medicaid waivers. Evidentiary support includes: 1) "A Cross-State Report on Ten State HIFA Demonstration Programs", Final Report, August 2005. Conducted by The Urban Institute; Westat. 2) "Moving to Medicaid Managed Care: Lessons from State Experiences Under the Section 1115 Waiver Authority: Final Report", September 2004. Conducted by The Urban Institute; RTI International; Center for Health Economics Research; Mathematica Policy Research, Inc. http://www.cms.hhs.gov/DemonstrProjectsEvalRepts/downloads/SecondFiveStates_FinalReport.pdf 3) Behavioral Health Services Under Medicaid Managed Care in Nine States: Issues of Contracting, Delivery, and Coordination of Care: Final Report", March 17, 2003; 4) Commercial Plans in Medicaid Managed Care: Understanding Who Stays and Who Leaves in a Changing Market: Final Report", September 2004; 5) Removing the Barriers: Modifying Telephone Survey Methodology to Increase Self-Response Among People with Disabilities: Final", August 27, 2004; 6) Estimating the Impacts of Medicaid Managed Care on Medicaid SSI Beneficiaries: A National Study: Final Report", September 2004; 7) Access, Utilization and Quality of Care for Adults with Medicaid and SSI due to Severe Mental Illness across Five Regions: Final Report", September 24, 2004.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: The answer to this question is N/A because Medicaid is an entitlement program and is governed by entitlement authority through mandatory appropriations. OMB Circular A-11 defines entitlement authority as "the authority payments to persons or Federal entities who meet the requirements established by law." The Federal government is obligated to make a payment so long as the claim meets Medicaid statutory and regulatory requirements. Medicaid budgetary resources are dictated by statute and are not linked to specific performance goals. There is no cap on Federal matching payments to States, with only a few limited exceptions (i.e., five U.S. territories, including U.S. Virgin Islands, Guam, American Samoa, Commonwealth of Puerto Rico, and the Commonwealth of Northern Marianas).

Evidence: Evidentiary support includes: 1) Title XIX of the Social Security Act, www.ssa.gov/OP_Home/ssact/title19/1900.htm; 2) OMB Circular A-11. 3) CMS Financial Report, Fiscal Year 2004, Centers for Medicare & Medicaid Services, Baltimore, MD.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: Medicaid has developed and set targets for the long-term quality goal which recognizes and supports flexibility in Medicaid program design while moving toward a broad framework of quality that can support States in their efforts to provide access to quality health care. Additionally, Medicaid has demonstrated adequate progress on the PERM: 1) an interim final rule with comments has been published and 2) a component rate for Medicaid fee-for-service comprised of the measurement in 17 States will be reported in 2007. These long-term measures are underdevelopment and will help to provide strategic guidance to address the deficiencies in Medicaid financial management and measurement of quality of health services provided.

Evidence: The CMS quality goal proposes to facilitate efforts of multiple States impacting thousands of beneficiaries. Medicaid quality improvement efforts require not only supporting State efforts but also developing partnerships and working collaboratively with other Federal agencies, multiple external alliances and professional organizations. Medicaid also has a long-term measure to assess improper payments. This is an important measure that focuses on payment practices between the States and the Federal government.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: Medicaid does not collect performance information on its partners and use it to manage and improve the program. CMS has a number of performance measures that are under development. Once performance baselines are established, CMS may start to use this information to manage the program. For example, the newly established performance measure, percentage of budget neutrality reviews completed, will assess State compliance with waiver guidelines. CMS will use this information to manage State compliance with the waiver process. At this time, CMS is not using performance data to adjust program priorities or allocate resources.

Evidence: See performance measures in section 2. See performance measures in PARTweb.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: Neither Federal managers nor States are held accountable for Medicaid costs or performance results. Medicaid is a joint Federal-State partnership, administered by States. Each participating State establishes its Medicaid reimbursement rates for medical services. States are primarily responsible for controlling costs by setting rates and deciding on cost containment strategies. However, the Federal government does not have authority to impose requirements on States to lower costs. If States are experiencing high cost growth, the Federal government will continue to provide reimbursement, consistent with Medicaid statute. By law, the Federal government is required to provide a Federal match for all Medicaid-eligible claims. Claims are denied only if the State submits non-Medicaid-eligible claims. Federal managers are not held accountable for Medicaid costs. States are not required to submit performance measure data. Finally, States directly manage the development and collection of performance data, and are not required to report on their results.

Evidence: Section 1905 of the Social Security Act, which outlines the Federal government's role in the Medicaid payment structure.

Are funds (Federal and partners') obligated in a timely manner, spent for the intended purpose and accurately reported?

Explanation: Program funds are obligated on a quarterly basis and there are minimal unobligated funds at the end of the year. There are established schedules so that quarterly obligations coincide with program resource needs. Once each State has an approved State Plan, quarterly awards are made to the State for the Federal share of expenditures for services, training, and administration. The initial award is issued at the beginning of the quarter based on the State Medicaid Program's estimate of expenditures for the quarter on the CMS-37, resulting in an increase in the State's letter of credit balance. After the award letter is issued, the funds are electronically transferred into the State's accounts via the Payment Management System by the first day of the respective quarter. Thirty days after the close of the quarter, each of the 51 State Medicaid Programs report actual expenditures for the quarter on the CMS-64. These reports are reviewed by the Regional Offices, who then send a report to the Central Office recommending the award amount. The Central Office monitors States to ensure that they do not spend more than approved. These comparisons allow for timely corrections when funds are not spent as intended. If funds are not expended as intended, reimbursement is deferred while further inquiries are made. If the expenditure is found to be improper, the expenditure is disallowed and the State has to pay back the money by offsetting the next quarter's award. A final grant award is made to reconcile and finalize the quarter. Annual financial management reviews are done by the Regional Offices. Focused financial reviews of identified high risk areas are a key element of the financial management strategy.

Evidence: Forms CMS-37 and CMS-64 and financial management reports are available through the link below. http://new.cms.hhs.gov/MedicaidBudgetExpendSystem/02_CMS64.asp. Additionally, the Office of Inspector General and its contractors complete annual A-133 single audits that may identify impermissible claims. As appropriate, and within statutory timelines, the audit resolution process may result in adjustments through the grant award process. Payment accuracy is measured using a tool developed as a pilot program in 2002 and refined as the Payment Error Rate Measurement (PERM) in 2005. The Administration plans to clarify its policy regarding PERM in an upcoming rule-making, which will outline the requirements, goals and measures for this claims-based review methodology. It is designed to estimate State-specific payment error rates within +/- 3 percent of the true population error rate with 95 percent confidence. Through national aggregation, the State-specific estimates can be used to make national level improper payment estimates for Medicaid and SCHIP that meet confidence and precision requirement of the Improper Payments Information Act of 2002 (IPIA).

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: With respect to IT improvements, each of the 51 State Medicaid Programs does its own contracting, with oversight by CMS. CMS assures efficiencies and effectiveness through the advance planning document and contract approval process. Generally, development costs are matched at 90 percent. The matching drops to 50 percent after completion and until CMS reviews and certifies the completed system, at which point operational costs are then matched at 75 percent. This has allowed approximately 25 States to improve their existing Medicaid Management Information systems (MMIS). In addition, Medicaid includes opportunities for States to provide more cost-effective care. For example, States can provide care through home and community based medical care rather than more expensive institutional based care. States can also deliver services through a managed care system as opposed to a fee-for-service mechanism. These opportunities are examples of how the States and CMS gain efficiencies and enhanced results. Formal assessments of cost effectiveness are contained in waiver applications and are monitored and measured as part of the renewal process.

Evidence: Evidentiary support includes: 1) 42 U.S.C. 1396a; 42 CFR 430.10 et seq; 2) FY 2005 CFO Report, FY 2007 CMS Congressional Justification (CJ); 3) Policy Research Brief, Research and Training Center on Community Living, University of Minnesota: 2002 annual average ICF/MR cost: $85,746; 2002 annual average Medicaid HCBS cost: $37,816; 4) Georgetown University Long-term care financing project, Updated July 2004 Fact Sheet; 2002 annual average per capita nursing home care cost: semi-private room- $52,000 and private room- $61,000; 2002 average annual per capita cost for home health aide- $26,000; 6) "Evaluation of Medicaid Managed Care Programs with 1915(b) Waivers: Final Report", May 1998. Conducted by Research Triangle Institute; Indiana University; Health Economics Research; 7) "Moving to Medicaid Managed Care: Lessons from State Experiences Under the Section 1115 Waiver Authority: Final Report", September 2004. Conducted by The Urban Institute; RTI International; Center for Health Economics Research; Mathematica Policy Research, Inc. 8) Medicaid Managed Care Cost Savings: A Synthesis of 14 State Studies. The Lewin Group. July 2004.

Does the program collaborate and coordinate effectively with related programs?

Explanation: Medicaid has multiple partners, with all related programs, including State Children's Health Insurance Program (SCHIP), Medicare, Social Security Administration (SSA), Agency for Health Care Research and Quality (AHRQ), Administration for Children and Families (ACF), Health Resources and Services Administration (HRSA) Indian Health Services (IHS), and the Centers for Disease Control and Prevention (CDC). Programmatic coordination occurs with each of these Federal partners. Most recently, CMS collaborated with SSA through the implementation of the Part D drug benefit to ensure that prescription drugs are available in a timely manner to beneficiaries eligible for Medicaid and Medicare. This collaboration has resulted in joint planning documents and referral systems for identifying dual eligible populations, whose drug coverage was transferred from Medicaid to Medicare on January 1, 2006. Additionally, Indian Health Services works with CMS to ensure that health care is available to the Native American/Alaska Native population. Medicaid also collaborates with CDC on such issues as the Vaccine for Children Program, EPSDT, and lead screening. The agencies work together to respond to issues that arise regarding vaccine administration fees, and areas related to coverage determination in EPSDT. CMS follows CDC's recommendations related to lead screening and immunization schedules. Medicaid and SCHIP are required by statute and by regulation to coordinate their screening and enrollment in programs to reduce duplication. States are required to screen children for Medicaid and SCHIP eligibility and enroll children in the program for which they are found eligible. States have been encouraged to implement processes for simplifying the eligibility process and numerous states have adopted a single application for both programs. Furthermore, a collaborative effort with the Administration on Aging has resulted in the establishment of The Aging and Disability Resource Center, which is designed to streamline access to long-term care. Medicaid also collaborates with the Agency for Health Care Research and Quality (AHRQ), which has led to meaningful actions in management and resource allocation by establishing a Medicaid Medical Directors Learning Network to share evidence-based information and best practices among the 51 State Medicaid Programs. Additionally, CMS works with the Administration for Children and Families (ACF) on issues related to TANF, adoption, foster care, and other child welfare issues. The Health Resources and Services Administration (HRSA) is another strong partner in the administration of the State Medicaid Programs. HRSA actively participates in the demonstration and waiver approval process, leading to meaningful actions in management and resource allocation.

Evidence: Evidentiary support includes: 1) Regulations at 42CFR 457.80(c) and 457.350 describe requirements for Medicaid and SCHIP program coordination. 2) Section 1905(r)(1) of the Social Security Act requires that immunizations provided to individuals eligible for EPSDT services be provided according to the recommendations of the CDC Advisory Committee on Immunization Practices (ACIP). 3) The OIG report "Ensuring Medicaid Eligibles are not enrolled in SCHIP" (February 2001) found that children in the States they surveyed, were being appropriately enrolled in the programs for which they were determined eligible. 4) Aging and Disability Resource Centers, A Joint Program of the Administration on Aging and the Centers for Medicare & Medicaid Services - Overview, U.S. Department of Health and Human Services (http://www.aoa.gov/press/fact/pdf/fs_aging_disability.pdf). 5) State Practices in Medical Child Support Cross-Program Coordination by Lynne Fender and Jen Bernstein of the Urban Institute for the Assistant Secretary for Planning and Evaluation, HHS, June, 2003 (http://aspe.hhs.gov/hsp/CSE-medsupp03/index.htm#V).

Does the program use strong financial management practices?

Explanation: Medicaid financial statements have not received a clean audit opinion and are not free from material internal control weaknesses. Although Medicaid is taking corrective action to minimize erroneous payments, Medicaid cannot receive full credit for this answer, as the program does not fulfill the Federal auditing requirements.

Evidence: CMS has not resolved all Circular A-133 audit findings on States' Medicaid and SCHIP beneficiary eligibility determinations. As of November 1, 2005, CMS had not resolved eligibility findings in 11 for the 22 FY02 audit reports submitted for resolution or in 25 of the 28 FY03 audit reports. Furthermore, CMS has not resolved the eligibility findings in the 25 FY04 audit reports. The Medicaid and SCHIP eligibility findings were so significant (i.e., material), that they caused some auditors to issue Circular A-133 reports with qualified opinions for six States in FY02 and FY03, and for seven states in FY04. OIG Report, "Resolution of Audit Findings on States' Beneficiary Eligibility Determinations for Medicaid and the State Children's Health Insurance Program," (A-07-06-03073), issued May 2, 2006. http://oig.hhs.gov/oas/reports/region7/70603073.htm

Has the program taken meaningful steps to address its management deficiencies?

Explanation: CMS collects financial information reported on the CMS-37 and CMS-64 forms. This information is used for multiple purposes. With these data, CMS reviews and approves modifications to State Medicaid programs, evaluates Medicaid waivers requests, and reviews expenditures. Through the process of these financial management reviews, CMS is able to identify sources of possible fraud and abuse. CMS can also recognize States' anomalies that may represent billing errors. Through these financial reviews, CMS is able to disallow Federal payment for fraudulent or incorrect claims, thereby correcting management deficiencies. The system of financial management reviews will be strengthened with the establishment of several new performance measures. The annual measure, percentage of completed budget neutrality reviews, represents a new management tool. This measure requires CMS to assess State compliance with waiver guidelines and State management of Federal funds. CMS will use this information to manage State compliance with the waiver requirements. Another annual measure, Medicaid Integrity Program: Percentage Return on Investment, will establish another system for CMS to track the cost effectiveness of money that it spends on fraud and abuse. By measuring the return on investment, CMS will work to correct management deficiencies identified on the State level.

Evidence: See performance measures in section 2. See performance measures in PARTweb.

Does the program have oversight practices that provide sufficient knowledge of grantee activities?

Explanation: The 51 State Medicaid Plans provide detailed information on program activities. Any deviations from the submitted plans must be approved by the Secretary in the form of waivers or State Plan Amendments. The States also submit estimated quarterly expenditure information by completing the form CMS-37 and quarterly actual expenditure data by completing the CMS-64. In addition to these oversight activities, detailed financial management reviews are conducted annually by the Regional Offices. CMS conducts site visits to the States and audits the State's performance using the CMS-37 and CMS-64, as well as the financial management reviews detailed on the work plans. Actual expenditures are tracked on the CMS-64 to verify that funds are used for their designated purpose. If an actual expenditure is questionable, it is deferred while further inquiries are made. If it turns out to be inappropriate, it is disallowed. Each State's Medicaid Management Information Systems (MMIS) is used to report and document the State's use of funds. In addition, 100 FTEs have been assigned to monitor and oversee the use of Federal matching funds. In addition to these 100 FTEs, an additional 100 FTEs are provided for in the DRA to strengthen program oversight under the new Medicaid Integrity Program.

Evidence: Financial management reviews are available on the CMS website (link below). See also CMS-37 forms, CMS-64 forms, and Corrective Action Plan. http://new.cms.hhs.gov/MedicaidBudgetExpendSystem/02_CMS64.asp.

Does the program collect grantee performance data on an annual basis and make it available to the public in a transparent and meaningful manner?

Explanation: Medicaid does not collect grantee performance data on an annual basis that is transparent and meaningful to the public.

Evidence: Transparency and accessibility of Medicaid information remains an issue. While the CMS website includes detailed information on Medicaid expenditures, there are no published detailed performance measures that relate directly to the impact of the program (i.e., quality, and coverage). The CMS website does not summarize and clearly present Medicaid expenditure data in a user-friendly manner. In addition, certain Medicaid data sources (e.g., msis.cms.hhs.gov) are not accessible through CMS' Medicaid home page. Measures on nursing home and home health agencies exist. However, these data represent only one aspect of the entire Medicaid program.

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: Medicaid has long-term performance measures that address the quality of health care services provided to Medicaid populations and the financial management of Medicaid. The existing long-term measures are: 1) percentage of States that demonstrate improvement in Medicaid quality improvement strategies and program evaluations related to access and quality of health care and, 2) the national payment error rate (PERM). Although both measures are underdevelopment, Medicaid has demonstrated adequate progress on both performance measures. For the PERM, an interim final rule with comments has been published. A component error rate for Medicaid fee-for-service comprised of the measurement in 17 States will be reported in 2007. PERM will measure Medicaid fee-for-service in an additional 17 States in 2008 and the final 17 States in 2009.

Evidence: See section 2 for the explanation of the long-term goals. See also attached performance goal table in PARTweb.

Does the program (including program partners) achieve its annual performance goals?

Explanation: Medicaid has eight annual performance measures and demonstrated progress toward achievement of one. The performance measure, prevalence of restraints in nursing homes, was identified in 1996 and the program has largely met its annual targets. The additional seven performance measures were recently identified. Although, these measures are new, the program made adequate progress toward most of these goals. For example, annual baselines and annual targets exist for the percentage of beneficiaries in Medicaid managed care and the percentage of beneficiaries receiving home and community based care. Additionally, annual targets exist for the Medicaid program integrity return on investment and the percentage of 1115 budget neutrality waiver reviews completed.

Evidence: See section 2 for the explanation of the annual goals, targets, and timeframes for Medicaid. See the performance measures in PARTweb; see also FY 2005 GPRA Annual Performance Plan http://www.cms.hhs.gov/GPRA/Downloads/PerformancePlan.pdf

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: Medicaid adopted two performance measures that test the cost effectiveness of providing health services as well as a measure that will determine the return on investment for program integrity activities. These performance measures assess the percentage of beneficiaries in managed care as well as the percentage of beneficiaries receiving home and community based care services. Baselines exist and Medicaid has annual targets in these areas. Evidence indicates that providing medical services through managed care as opposed to a fee-for-service mechanism is more cost effective. Evidence also indicates that providing care to the elderly and disabled in home and community based settings as opposed to institutional settings results in a more cost effective delivery of care. The performance measure to determine the return on investment of program integrity activities is underdevelopment and will measure the return on each Federal dollar invested in these activities to combat fraud and abuse. Also, the long-term performance measure, the Payment Error Rate Measurement (PERM) is underway and will estimate State-specific payment error rates to make national level improper payment estimates for Medicaid and SCHIP.

Evidence: See section 2 for the explanation of the long-term goals. See also attached performance goal table. 1) "Evaluation of Medicaid Managed Care Programs with 1915(b) Waivers: Final Report", May 1998. Conducted by Research Triangle Institute; Indiana University; Health Economics Research. 2) "Moving to Medicaid Managed Care: Lessons from State Experiences Under the Section 1115 Waiver Authority: Final Report", September 2004. Conducted by The Urban Institute; RTI International; Center for Health Economics Research; Mathematica Policy Research, Inc. 3) Policy Research Brief, Research and Training Center on Community Living, University of Minnesota: 2002 annual average ICF/MRcost: $85,746; 2002 annual average Medicaid HCBS cost: $37,816. 4) Georgetown University Long-term care financing project, Updated July 2004 Fact Sheet 2002 annual average per capita nursing home care cost: semi-private room: $52,000 and private room: $61,000; 2002 average annual per capita cost for home health aide: $26,000. 5) GAO Report. Medicaid Long-Term Care: Successful State Efforts to Expand Home Services While Limiting Costs. August 1994.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: State Medicaid Programs are unique in scope and mission and not duplicative nor similar in purpose to other private or government programs. Medicaid consists of 51 separate Medicaid programs governed by Federal statutory requirements, but designed by individual States, the District of Columbia or a Territory to meet the medical needs of its constituents. Each State sets eligibility, coverage, and payment standards. State governments have a great deal of programmatic flexibility to tailor its Medicaid programs to its individual circumstances and priorities. Accordingly, there is wide variation in the unique program designed by each State. Additionally, the 51 Medicaid programs are the only Federal/State programs designed specifically to provide medical assistance to the target populations of families with dependent children and of aged, blind, or individuals with disabilities, whose income and resources are insufficient to meet the costs of necessary medical acute care and long-term care services.

Evidence: Title XIX of the Social Security Act, 42 U.S.C. 1396a

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: CMS routinely contracts for independent evaluations of key program features. Additionally, independent evaluations have been conducted by the GAO and the OIG. There are reports that focus on varying aspects of Medicaid and indicate that certain program features are successful. For example, the OIG found that children eligible for Medicaid were being properly enrolled in Medicaid and not SCHIP. Although certain evaluations find Medicaid effective in specific areas, there are independent reports that find deficiencies in the management of the program as well as fraud and abuse. Many independent evaluations conducted find misuse of Federal funds. For example, Medicaid has been consistently flagged by GAO as a "high-risk" program subject to fraud, waste, abuse, and mismanagement.

Evidence: Evidentiary support includes: 1) The OIG report "Ensuring Medicaid Eligibles are not enrolled in SCHIP" (February 2001) found that children in the States they surveyed, were being appropriately enrolled in the programs for which they were determined eligible. 2) Trends in U.S. Health Insurance Coverage, 2001-2003 - Results from the Community Tracking Study, Robert Wood Johnson Foundation/Center for Studying Health System Change, August 2004, http://www.rwjf.org/research/researchdetail.jsp?id=1412&ia=132. This survey indicated Medicaid plays an important role in lessening the number of uninsured as the percentage of individuals with employer-sponsored insurance declines. Medicaid has been consistently flagged by GAO as a "high-risk" program subject to fraud, waste, abuse, and mismanagement and reports identify schemes that leverage Federal funds inappropriately. In addition, GAO reports focus on inappropriate billing by providers serving program beneficiaries. 3) GAO, Major Management Challenges and Program Risks, http://www.gao.gov/pas/2003/d03101.pdf 4) High Risk Series: An Update. GAO-05-207. January 2005. http://www.gao.gov/new.items/d05207.pdf. 5) Medicaid Program Integrity: State and Federal Efforts to Prevent and Detect Improper Payments.GAO-04-707. Washington, D.C.: July16, 2004. 6) Medicaid Waivers: HHS Approvals of Pharmacy Plus Demonstrations Continue to Raise Cost and Oversight Concerns. GAO-04-480. Washington, D.C.: June 30, 2004. 7) Medicaid: Intergovernmental Transfers Have Facilitated State Financing Schemes. GAO-04-574T. Washington, D.C.: March 18, 2004. 8) Medicaid: Improved Federal Oversight of State Financing Schemes Is Needed. GAO-04-228. Washington, D.C.: February 13, 2004.