What’s Up With Medicaid’s Sloppy Oversight?

Two U.S. senators are accusing the Centers for Medicare and Medicaid Services (CMS) of poor oversight of taxpayer dollars.

In a letter earlier this month, Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Finance Subcommittee on Health Care Chairman Pat Toomey (R-Pa.) claimed that CMS has not recouped any money lost by Medicaid to error since 1992. The dollars lost are significant: $141 billion – or over $1,000 per U.S. household. They were officially lost to improper payments in 2017 (though the real number is almost certainly much higher), and $36.7 billion was lost in Medicaid alone, nearly 10 percent of the program’s budget.

A committee spokesperson told PJ Media that Grassley "is pushing CMS to act under its current authorities to fix the problem" of not recouping dollars lost through improper payments, "and has asked if it needs additional authorities to get the job done."

"The letter is a fact-finding mission," the spokesperson added. "It’s not the end of Chairman Grassley’s oversight efforts related to this issue." The spokesperson said that senators are relying on a Congressional Research Service report for the claim that CMS has not recouped any lost dollars in 27 years. The spokesperson advised PJ Media to contact Toomey’s office for the report, which I could not find; Toomey’s office did not provide the report prior to publication.

The letter cited a CMS rule on recoupment which, according to the senators, "specifies efforts to actually recoup funding…will not even begin until next year…" The senators were critical of CMS’s focus on prevention instead of recoupment, and asked CMS about details of any recoup attempts since 1992.

CMS responds to senators

A CMS spokesperson did not respond to several questions about CMS’s recoupment efforts. The spokesperson did note that the agency "will respond to the members directly" and outlined several changes CMS Administrator Seema Verma made since late 2017 to improve Medicaid’s "program integrity."

According to the spokesperson, Verma "announced a Medicaid transformation strategy focused on three pillars – flexibility, accountability, and integrity." The spokesperson said Verma implemented new initiatives "designed to improve Medicaid program integrity through greater transparency and accountability, strengthened data, and innovative and robust analytic tools."

"Since Administrator Verma’s arrival in March 2017, there were 212 outstanding GAO recommendations and 373 OIG recommendations across all CMS programs," the spokesperson continued. "Since then, CMS has implemented 92 GAO recommendations and 187 HHS-OIG recommendations, including 65 for the Medicaid program." State audits and nearly $900 million in disallowances were cited as part of CMS’s dedication to program integrity.

CMS is improving its oversight, say watchdog experts

Toomey and Grassley are fighting a battle that is never-ending – trying to stop poor spending of taxpayer dollars. Beyond the ideological and philosophical battles over how and whether to spend taxpayer dollars is the bipartisan goal of ensuring that taxpayer dollars go where they are supposed to go, under the law.

Several bipartisan laws over the last 17 years were supposed to help stop improper payments. The good news is that they have brought greater transparency to the process. The bad news is that we now know how awful federal agencies are at controlling and tracking spending.

Medicaid and Medicare are the leading error-laden programs, at least in terms of dollars lost. Government Accountability Office (GAO) Director of Financial Management and Assurance Beryl Davis and GAO Health Care Director Carolyn Yocom told PJ Media that CMS "has taken steps" toward recouping dollars, "but further efforts are needed to reduce improper payments, to ensure the appropriate use of program dollars, and improve program data."

Yocom and Davis also said that since Medicaid was designated "a high-risk area in 2003," GAO has "made at least 45 recommendations related to improper payments, 17 of which were open as of November 2018." They said improved data, "a fraud risk assessment for Medicaid," and collaboration are three key areas for improper payment reductions in Medicaid.

Yocom and Davis did note that the Medicaid fee-for-service program has decreased its error rate – from 9.27 percent to 7.21 percent – and that improper payment issues are "driven by errors due to state non-compliance with provider screening, enrollment, and National Provider Identifier… requirements."

Medicaid versus corporate profits

Medicaid’s reductions in improper payments is billions of dollars of good news for taxpayers. However, the Mercatus Center’s Veronique de Rugy told Economics 21 in 2017 that it is inefficiencies like improper payments that undermine liberal support for programs like Medicare for All. According to de Rugy, those who "praise the low administration costs of [federal health care] programs" and criticize corporate profits miss how "these low costs are due to the programs’ lack of attempt to end fraud, waste, and abuse."

In 2016, de Rugy went further in comments to the Washington Free Beacon. She noted that the definition of improper payments is narrow, and that expansion of eligibility in programs such as food stamps doesn’t officially count as money improperly spent.

The current definition of improper payments "doesn’t tell you anything about the legitimacy of the part that’s not improperly paid. It’s so incredibly ridiculous," said de Rugy, who last month  charted out the programs with the greatest losses of taxpayer money.

For those who compare Medicaid’s overhead to corporate profits, Just Facts President James Agresti (disclosure: Just Facts is a former client of mine) told PJ Media that "the average profit margin of health insurance companies is about 3 percent," compared to the 2017 error rates of Medicare (eight percent) and CHIP (9 percent), and the 2018 Medicaid error rate that Davis and Yocom cited.

While health care is hardly alone in wasting tens of billions of taxpayer dollars, these programs are the largest segment of the federal budget — and the fastest growing part of the budget. Those who support more money on federal health care programs would be wise to join Grassley, Toomey, Verma, and others in reducing taxpayer waste instead of spending even more money on inefficiency.

Recoupment costs money, but it’s worth it

The real problem with improper payments is not recoupment but the dollars lost on the front end. After all, proper oversight would prevent inefficiencies – though, as former Sen. Tom Coburn (R-Okla.) noted years ago, it is impossible to properly oversee a trillions-dollar federal budget.

Recoupment can total billions each year, as happened under the Obama administration, though such efforts are often expensive. The Congressional Budget Office noted in 2014 that the true return on dollars invested on recoupment and recovery of dollars lost to improper payments and fraud cannot be known because of the deterrence factor inherent in recouping dollars, punishing lawbreakers, and publicizing the punishment of lawbreakers.

Hopefully, Grassley’s letter really is just the start of renewed efforts to stop the loss of federal dollars. America's skyrocketing federal budget is only getting worse, and with Washington unable to enact real reforms in defense and entitlements, making government better and more honest is a great way to save money now and in the future.