The federal government doled out nearly $100 billion in what it calls “improper” Medicaid payments in 2021 — accounting for approximately one-fifth of all Medicaid payments, according to estimates.
The figure represents Washington’s latest accounting of payments that didn’t meet the various requirements for the Medicaid program, which the federal government runs jointly with the states and allows millions of low-income people access to healthcare.
The numbers were similarly high in 2020, with around $86.5 billion in Medicaid payments deemed improper, or just over 21%.
The figures have sparked concern and outrage from both right-leaning advocacy groups and lawmakers in recent years as the reported rates of improper payments have spiked. In December 2020, nine Republican senators, including Sen. Ron Johnson, wrote to the Trump administration saying that year’s rate “validated [their] prior concerns regarding the rapid growth of Medicaid abuse and misspending following the passage and implementation of Obamacare.”
But critics say the numbers don’t tell the whole story — and that political figures have sometimes taken them out of context to undermine a growing government program they have long opposed.
“For those who are not fans of Medicaid, these estimates are red meat,” Andy Schneider, a professor and Medicaid expert at Georgetown University, wrote that month. Nevertheless, some problems exist, he said, and state officials are working on fixes — “not cooking the books to fabricate inflammatory claims.”
The debate around the data underscores the complexity of the problems facing the U.S. healthcare system, as well as the vastly different views on how to improve it.
Medicaid provides healthcare coverage to nearly 80 million people, more than 30 million of which are children. The number of adults enrolled in the program has sharply risen in recent years, in part due to the COVID-19 pandemic, as well as Medicaid expansion under the Affordable Care Act.
Improper payments are not synonymous with fraud and abuse, according to experts and the federal agency that oversees Medicaid and produces the data. “Instead, improper payments are payments that did not meet statutory, regulatory, administrative, or other legally applicable requirements and may be overpayments or underpayments,” the Centers for Medicare and Medicaid Services says. Improper payments also include payments that may have been valid but where there was not enough information on file at the time of the review to confirm they were made correctly, according to the CMS.
Schneider and others who study Medicaid say the stunning statistics are evidence of a swelling Medicaid regime with outdated and wildly varied state systems for tracking data. “This is Medicaid, and any student of the program will tell you that if you’ve seen one Medicaid program, you’ve seen one Medicaid program,” Schneider told the Washington Examiner in an email.
Moreover, federal officials have been using new criteria to audit Medicaid eligibility in recent years, making it challenging to compare current rates with those of years past.
The figures have nevertheless attracted scrutiny from government watchdogs looking to ensure that billions in taxpayer dollars are being spent and tracked properly. In February, the inspector general for the U.S. Department of Health and Human Services released a report summarizing its past audits to help the CMS “in achieving greater efficiencies in its operation of the Medicaid program.”
The inspector general’s analysis sampled four states (New York, California, Colorado, and Kentucky) and “found that these States did not always determine Medicaid eligibility” for both newly eligible individuals and those who qualify under old rules “in accordance with Federal and State requirements.”
Those states “made Federal Medicaid payments on behalf of newly eligible beneficiaries totaling almost $1.4 billion for more than 700,000 ineligible or potentially ineligible beneficiaries,” the report read. “We also estimated that the 4 States made Federal Medicaid payments on behalf of non-newly eligible totaling more than $5 billion for almost 5 million ineligible or potentially ineligible beneficiaries.”
The inspector general made 31 recommendations, the report said, and the four states agreed with all of them. However, 15 have yet to be implemented. As of late 2020, the CMS had also failed to adopt fully 89 of more than 300 recommendations from the U.S. Government Accountability Office, the agency says on its website, and “several major steps remain to improve program integrity.”
The CMS reported actual monetary losses — cases where officials determined a payment was, in fact, erroneously made, were around $11 billion last year. Though it represents a small fraction of total Medicaid spending, it remains a cause for concern, experts say.
“Instead of twisting the [audit] results to fit an erroneous narrative of rampant beneficiary fraud, we should acknowledge that mistakes will be made and act to reduce identified errors collaboratively,” Kelly Whitener, another professor and Medicaid expert at Georgetown University, wrote in 2019.
Spokespeople for Johnson and the CMS did not return requests for comment.
NAVIGATING FRAUD IN AN ANTIQUATED SYSTEM
When Parker Gilkesson started working in social services in 2016, she had recently graduated from Howard University, where she studied child and maternal health. She wanted to help those in need — particularly in the black community.
Working in North Carolina, she was a front-line caseworker for Medicaid and two other programs, reviewing and determining whether clients were eligible for the services.
She quickly discovered problems in the system, however. For one, there was an outsize focus on fraud, she said, which was uncommon, with overwhelmed caseworkers fearing for their jobs if they missed just one overpayment.
The state’s clunky and antiquated computer programs didn’t help, either. The program she used was from the early 1990s, she said, and had been purchased from overseas, meaning IT problems weren’t quick fixes.
“We had to input the wrong information to get the right output. So everything you’re capturing is incorrect,” Gilkesson, who now works as a senior policy analyst at the Center for Law and Social Policy, told the Washington Examiner. “And that’s all the state could afford at the time.”
Then, there was what Gilkesson called the “black box,” a part of the computer system that accepted verification information from applicants, such as proof of income. “It was always known it may go through, it may not, it may be lost,” she said. “And if that happens, it’s as if you never submitted anything at all.”
Missing documents are a major factor driving up improper payment rates, according to the CMS’s data. In 2021, 89% of improper payments were caused by insufficient documentation, representing more than $87 billion in payments. Of those, more than half were related to eligibility determination.
Gilkesson said the realities of living in poverty posed challenges for those trying to submit verification documents as well. “Some people still are challenged with transportation and have difficulty getting into the office and have to take days off,” she said. “It’s especially been a challenge for people who don’t have access to the internet.”
Jack Rollins, the director of federal policy at the National Association of Medicaid Directors, said the problems described by Gilkesson are true for other states as well and that there needs to be a mechanism for updating improper payment data after the audit process, as states sometimes subsequently find the right documentation.
Rollins said updating computer programs has also proved costly and complicated. Some state programs continue to use coding language from the 1970s known as COBOL, and there may be “one state employee that really understands it.” The language hasn’t been taught in most coding classes for decades.
Last year, a conservative-leaning organization known as the Americans for Prosperity Foundation sued the CMS under the Freedom of Information Act for state-by-state data on improper payments, resulting in the figures being released for the first time earlier this year.
The CMS’s FOIA office previously told the group that the agency “receives a very high volume of FOIA requests” and that “unusual circumstances,” such as the volume of the potentially responsive records, could affect its ability to fulfill the request in the required time. The federal government has been plagued by problems processing FOIA requests, with some lasting up to five or six years.
“Finally opening the books of state-level improper payments is critical to ensuring CMS and states are protecting American taxpayers and Medicaid’s long-term fiscal stability,” Kevin Schmidt, the group’s head of investigations, said at the time.
The group opposes Medicaid expansion, and some statements the group released lack some context about the causes behind the rate increases.
“According to CMS reports, the Medicaid overpayment rate ballooned from 9% in 2018 to 21% in 2020,” the group said in a previous release. In the 2020 report, the CMS said that year’s figures couldn’t be compared to those before 2019, though, because that’s when it implemented a key change in the eligibility rules it uses to audit payments.
That audit program, known as PERM (or Payment Error Rate Measurement), is what produces improper payment rates each year and works on a three-year cycle. “CMS paused PERM eligibility reviews from 2015 to 2018, as states were implementing new rules under the Affordable Care Act for determining eligibility for many beneficiaries,” the agency said.
Schmidt disagrees. In an email, he said: “CMS under the Obama administration canceled eligibility audits for FY2014-2017 and instead just rolled over the last pre-Obamacare eligibility rate into its national rate. So I disagree that it’s not comparable because it’s essentially comparing a pre-Obamacare rate to a post-Obamacare rate. For another comparison, the improper payment rate in 2013, pre-Obamacare’s Medicaid expansion, was just under 6% for a total of $24 billion. Whichever way you look at it, improper payments rates are rising at an alarming rate.”
Schmidt also said the reason the Americans for Prosperity Foundation got involved is that the “CMS refused to release state-level data it uses to create its national number, despite multiple congressional requests for the data. As a result of our efforts, CMS relented and published this important state-level data.”
Jessica Schubel, a senior policy analyst at the Center on Budget and Policy Priorities, said that “most eligibility errors reflect paperwork problems or other procedural mistakes that can easily occur when eligible people enroll.”
For instance, an incorrect code (where a “state inadvertently assigns the parent eligibility code to an eligible child”) is considered an improper payment, Schubel wrote in 2020. In another example, a caseworker could fail to save documents showing how they verified eligibility, or the system could fail to do so.
Overall, the data and documentation problems within the Medicaid system mean that assessing the actual fraud rate is challenging. “I don’t know anyone who knows the answer. I certainly don’t,” Schneider, the Georgetown professor, said when asked what he believed the actual fraud levels were.
All he knows, he said, is that “the rate of fraud varies from state to state” and “most of the state and federal government’s losses from Medicaid fraud are attributable to providers or managed care plans, who receive Medicaid payments, and not to applicants or beneficiaries, who don’t.”
“Of the 77 million Medicaid beneficiaries as of November 2021, 33 million, or over 40%, were children,” he said. “Few of whom would even know what fraud was, much less commit it.”
