A June report from the Office of Inspector General (OIG) for the US Department of Health and Human Services has raised multiple concerns about the federal government’s review of state Medicaid expenditures.

Problems relate to the process that the Centers for Medicare & Medicaid Services (CMS) uses to examine Medicaid expenditures, which are submitted by states at the end of each quarter.  Finding a lack of consistency, the report notes that in five states that were selected, “CMS review work papers were not always clear, accurate or consistent enough to validate that its analysts thoroughly completed all Review Guide steps.”

One of the major issues cited by the OIG was the timely resolution of state expenditures that are deferred because reviewers found that they were missing documentation or weren’t programmatically reasonable or allowable or consistent with “federal laws, regulations and policy guidance.” 

The OIG also raised several other related management issues that were problematic:

• The need to improve analyst training. The report noted that the training manual for the review of state quarterly expenditures had not been updated since 2015. Although it cited monthly update meetings and “on the job training of new analysts,” it suggested that a lack of training contributes to “a lack of clarity, accuracy and consistency in the review work papers from one analyst to another.” 

• Inconsistent adherence to required timelines. While federal regulations set timelines for the resolution of deferred expenditures, CMS policies and procedures were found to stray from the timelines that had been set. For example, states were allowed to extend deadlines for documents that had been requested “well beyond the 120-day limit.” 

• Unresolved deferred payments. According to the report, “As of March 31, 2023, there were 145 unresolved deferred payments, totaling over $1.6 billion associated with 20 unresolved issues. Of these 145 unresolved deferred payments, 118 were related to unresolved issues that began in FY2020 or earlier.” The report noted that “several deferred payments were repeated for multiple quarters over many years without resolutions.”

• Questions related to tracking disallowed payments. While CMS procedures require a Tracking Report of disallowed payments, the report found it “did not contain current, complete, accurate or timely information regarding the status of all disallowed payments.” When the OIG asked CMS for “complete information on disallowed payments” the answer it received was that complete information “would be difficult and require significant time and labor.”  The result, according to the OIG: “We were unable to verify that CMS was properly tracking all unresolved disallowed payments.”

While the documents studied by the OIG were drawn from the quarter that ended on March 31, 2023 – under a different administration – the report recommendations are for improvements that the OIG is asking for now. These include additional training for analysts, better alignment with timelines outlined in federal regulations, and several changes in the process for tracking disallowed payments. 

CMS largely agreed with the recommendations while pointing out in a letter from CMS administrator Dr. Mehmet Oz that technological improvements were already underway.

While it said it intended to develop additional training for CMS expenditure reviewers, it noted that it already provides periodic training for CMS review staff, as well as regular updates to the internal review guide.

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