Setting Limits on Medicaid Payments to Government Providers

GAO has reported for more than a decade on varied financing arrangements that inappropriately increase federal Medicaid matching payments. In reports issued from 1994 through 2007, GAO found that some states had received federal matching funds by paying certain government providers, such as county-operated nursing homes, amounts that greatly exceeded standard Medicaid rates. States would then bill CMS for the federal share of the payment. However, these large payments were often temporary because some states required the providers to return most, or all, of the amount. States used the federal matching funds obtained in making these payments as they wished. Such financing arrangements had significant fiscal implications for the federal government and states. The exact amount of additional federal Medicaid funds generated through these arrangements is unknown but was in the billions of dollars.

Because such financing arrangements effectively increase the federal Medicaid share above what is established by law, they threaten the fiscal integrity of Medicaid's federal and state partnership. They shift costs inappropriately from the states to the federal government and take funding intended for covered Medicaid costs from providers, which do not, under these arrangements, retain the full payments. CMS has in recent years significantly enhanced its oversight of these arrangements, ending many it found to be inappropriate. However, states can still pay government providers in excess of their costs of providing Medicaid services, and GAO reported in 2008 that accountability for these supplemental payments was lacking. These inappropriate arrangements were cited as a contributing factor in GAO's decision to add the Medicaid program to its high-risk list of programs. GAO has suggested that Congress consider limiting Medicaid payments to government providers to their actual costs of providing services to Medicaid beneficiaries and that HHS take actions to improve states' reporting of information related to these supplemental payments.

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Medicaid: CMS Needs More Information on the Billions of Dollars Spent on Supplemental Payments

GAO-08-614, May 30, 2008

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 83 pages)   Accessible Text   Recommendations (HTML)

Medicaid Financing: Long-standing Concerns about Inappropriate State Arrangements Support Need for Improved Federal Oversight

GAO-08-650T, April 3, 2008

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 19 pages)   Accessible Text

Medicaid: Improved Federal Oversight of State Financing Schemes Is Needed

GAO-04-228, February 13, 2004

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 94 pages)   Accessible Text   Recommendations (HTML)

Medicaid: States Use Illusory Approaches to Shift Program Costs to Federal Government

HEHS-94-133, August 1, 1994

Summary (HTML)   Full Report (PDF, 26 pages)