Medicaid Money Wasted in 2013: $14.4 Billion
Policy + Politics

Medicaid Money Wasted in 2013: $14.4 Billion


The federal and state governments are struggling to keep track of payments made through Medicaid’s managed care program—which resulted in at least $14.4 billion in improper payments last year.

A new report by the Government Accountability Office said the government “did not closely examine the payments” going to managed care organizations (MOC’s), which include nursing homes, that work with state Medicaid agencies to provide services to beneficiaries.

Related: Feds Blow $100 Billion Annually on Incorrect Payments

GAO said the billions in wrong payments were made for treatments or services not covered under the program, not necessary, or billed for but never provided.

Currently about 50 million people receive benefits through managed care organizations instead of the traditional fee-for-service method where providers are paid for each service. MOC spending makes up about 27 percent of federal spending on the $430 billion-a-year program. Last year, Medicaid covered a total of 72 million Americans.

Medicaid recipients getting care through MCO’s are growing at an increasingly fast rate.  As the baby boom ages in to nursing homes and other dependent care, this could become a fiscal crisis. The more the MCO system is used, the more the auditors say it will be vulnerable to fraud since “neither the federal nor state governments are “well positioned to identify improper payments” due to the “size and diversity” of program.

Related: U.S. Health Care: Worst Bang For Your Buck

They suggested that it’s likely to get worse now that 25 states have expanded their Medicaid programs under the Affordable Care Act, with several more states likely to follow suit. Under the law, states that expand Medicaid receive 100 percent reimbursement rate from the federal government for managed care organizations for the next two years.

GAO said that because state and federal governments have recovered "only a small portion" of the wrongly paid money, they should ramp up their oversight of the managed care organizations or even more Medicare dollars will be “vulnerable to improper payments.”

Right now, the Centers for Medicare and Medicaid Services requires states to audit their managed care payments, however they are not required to audit the “appropriateness” of these payments.

According to the GAO, states have not begun to closely examine program integrity in Medicaid’s managed care. The auditors say they should start.

Medicaid is hardly alone in making billions in improper payments each year. In 2013, Medicare’s Private Fee-For-Service Plans overpaid $34.6 billion to billers. And a 2012 report from the Office of Management and Budget estimated that the federal government as a whole pays about $100 billion in improper payments each year.

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