With far-reaching implications for states, providers, and health plans, the Deficit Reduction Act (DRA) dramatically increased the role of the federal government to combat Medicaid fraud and abuse. Together with a substantial increase in funding for federal contractors and staff, the DRA gives the Centers for Medicare and Medicaid Services (CMS) new, potentially massive authority in areas previously managed exclusively by state Medicaid agencies.

New Federal Authority in Medicaid:

Under the DRA, Congress mandates that “States must comply with any requirements determined by the Secretary (of Health and Human Services) to be necessary for carrying out the Medicaid Integrity Program….” This new, open-ended authority to impose directives on state Medicaid agencies – and, via states, on health plans, health care providers, and Medicaid fiscal agents – will be implemented by CMS through new rules and instructions.

Key Components of Medicaid Integrity Program:

The Medicaid Integrity Program (MIP) includes:

  • New Congressional appropriation starting at $5 million this year, $50 million a year in FY 2007 and 2008, and $75 million annually thereafter.
  • Creation of the Medicaid Integrity Group (MIG) within CMS’ Center for Medicaid and State Operations (CMSO), with 100 new federal staff. This is in addition to 100 auditors CMS added recently to crack down on controversial state financing practices.
  • A series of new federal contractors, collectively known as Medicaid Integrity Contractors (MICs), to audit Medicaid providers and health plans, identify inappropriate payments, and educate providers and plans on proper claiming.

CMS, after consulting with the National Association of State Medicaid Directors (NASMD), developed a 37-page plan detailing the initiative.

The DRA also boosts Medicaid anti-fraud funding for the HHS Office of the Inspector General and the Program Integrity Group in CMS’ Office of Financial Management (OFM). The OIG gets an additional $25 million a year from FY 2006 through 2010. The DRA also created a new position of Medicaid chief financial officer within CMS.

The Medicaid Integrity Program is in addition to the Medicaid Payment Error Rate Measurement (PERM) initiative I reported on last week.

Perspective:

Overall, the Medicaid Integrity Program holds the promise of saving taxpayer dollars. Like much of American health care, Medicaid is certainly rife with waste, fraud, and abuse. And it’s reasonable for the federal government, which covers about 55% of Medicaid costs nationally, to take a more hands on role in combating Medicaid fraud and abuse. However, the MIP creates many challenges for CMS and states, with a high risk of conflict, confusion, overlapping bureaucracy, and worse. This is especially so if CMS fails to work with states as genuine partners and leverage the expertise of state staff.

Learn More:

The Kaiser Commission on Medicaid and the Uninsured recently released an excellent report on key issues raised by the Medicaid Integrity Program. This report, which will be followed by a more detailed study later this year, does a good job describing many of the challenges, conflicts, and potential unintended consequences of the MIP.

The Government Accountability Office (GAO) has long been critical of both CMS and states on issues involving Medicaid financial management. After passage of the DRA, the GAO released its ideas for how CMS should implement the Medicaid Integrity Program and make best use of staff and contractors. A June 2006 GAO report assessed CMS’ ability to “identify and address emerging issues that put federal Medicaid dollars at risk.