Hatch: GAO Report Confirms Need for Structural Reforms to Medicaid

Utah Senator Says, “This report exposes problems with massive expansions of a program that already yields billions of dollars in waste, let’s act now and implement robust, structural reforms that will preserve the long-term viability of this safety net program for the most vulnerable Americans.”

WASHINGTON – U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, today said a new Government Accountability Office (GAO) report that found billions of wasteful dollars in the Medicaid program demonstrates the clear need for concrete, structural reforms that will help guarantee the system’s long-term solvency. The report, which was requested by Hatch, found billions in unaccountable Medicaid dollars for fiscal year (FY) 2009.

“The President’s $2.6 trillion health law – the cornerstone of his domestic agenda – "covered" half its newly insured through Medicaid, already an unsustainable, budget-busting entitlement program,” said Hatch, whose Committee has jurisdiction over the Medicaid program.  “But as demonstrated by the nonpartisan GAO, the Obama Administration once again bit off more than they can chew and remains woefully unprepared for the largest expansion of Medicaid in history.  This report exposes problems with massive expansions of a program that already yields billions of dollars in waste, let’s act now and implement robust, structural reforms that will preserve the long-term viability of this safety net program for the most vulnerable Americans.”

States report two sets of data to the federal government for purposes of the Medicaid program: CMS-64 data, which is usually reported on time, aggregates state expenditures for purposes of getting payments from the federal government, and MSIS data, which is routinely 3 years late in coming, represents how the money was spent on individual beneficiaries.  The CMS-64 and the MSIS databases are off by about 10 percent every year, and while some of the differences can be accounted for, there are billions of Medicaid dollars unexplained every year.  

Key findings from the GAO Report follow:

• In 2009, $43 billion could not be traced directly back to Medicaid beneficiaries: “In fiscal year 2009, the difference between MSIS and CMS-64 was $43 billion. Much of the difference was primarily the result of the different designs of each data set. CMS uses MSIS data for beneficiary-specific expenditures, while CMS-64 data are used to compute the federal financial participation for each state’s Medicaid program costs. However, even after adjusting for DSH payments, Medicare premiums, prescription drug rebates, and Medicaid health insurance payments, differences remain. In fiscal year 2009, total MSIS expenditure data, after adjustments, showed MSIS at 94 percent of CMS-64 expenditures, which left billions of dollars unexplained.”

• States are generally 3 years late in telling the federal government how they spent Medicaid money: “The 3-year lag in states’ reporting of MSIS data prevents its use for timely oversight of beneficiary-related utilization and other spending trends. For example, identifying a difference in hospital expenditures between MSIS and CMS-64 is of limited use when detected 3 years later. If states were meeting the current requirement of providing MSIS data 45 days after each quarter, then such comparisons could provide more useful and timely information.”

• Medicaid continues to be an easy target for waste, fraud, and abuse – a program in dire need of reform not a massive expansion: “Medicaid is on GAO’s high-risk list because of vulnerabilities to waste, fraud, abuse, and mismanagement.”   “This is critical given that Medicaid, a program that GAO identified on our high-risk list, has among the highest estimated improper payments of any federal program reporting such data.”  

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