Recent reports from the HHS OIG and the Louisiana Auditor General have indicated a high rate of Medicaid improper payments due to incorrectly determining Medicaid eligibility. The Senate Finance Committee wrote CMS on March 1st to inform the agency of their concerns over the apparent lack of effort in recouping misspent federal money within the Medicaid programs. They stressed, “that the government needs to do more to uphold Section 1903(u) and safeguard the integrity of the Medicaid program.”

The letter stated, “The apparent lack of effort in recouping misspent federal money is problematic. Recent reviews by HHS OIG of beneficiaries made newly eligible by the Patient Protection and Affordable Care Act, also known as Obamacare, found more than seven percent of beneficiaries were potentially ineligible in Kentucky, more than 25 percent were potentially ineligible in California, and more than 30 percent were potentially ineligible in New York. In Louisiana, a state Department of Health audit found an astounding 82 percent of recipients ineligible in a random sample… Furthermore, if states accidentally enroll  an individual  as an expansion enrollee instead of a traditional enrollee, states are perversely, and significantly, rewarded for their error, unless the federal government subsequently takes action to recoup those mistakenly paid funds.”

As a result, CMS is in the process of performing audits on the Medicaid plans of California, New York, Kentucky, and Louisiana. While the agency will not have the authority to recoup improper payments identified by the audits, the audits will, “determine whether beneficiary eligibility was adjudicated appropriately for the new adult group and whether services for beneficiaries in the new adult group were assessed the correct Federal Medical Assistance Percentage (FMAP).”


Despite not having the authority to recover payments made in error, there have been regulatory changes made recently that could allow for some form of reclamation. CMS Administrator, Seema Verma, also stated that “CMS does have authority to issue disallowances, and, in certain circumstances, states are required to return overpayments.”  This authority is part of the Payment Error Rate Measurement program (PERM) that begins in 2022.

Additionally, CMS is also increasing its oversight in regards to eligibility determinations for expansion populations. The agency will seek states to provide, “documentation to clearly articulate how individuals in the Medicaid adult group are accurately determined, categorized, and claimed in state systems to ensure that claims are appropriately applied to the correct eligibility category and ultimately reported at the proper FMAP rate.”

Medicaid improper payments are threatening the integrity of the program and lawmakers are concerned. The Senate Finance Committee reached out to the Centers for Medicare and Medicaid Services to address the problem. As a result, CMS is performing a number of audits to ensure that the proper adjudication processes are in place and that states are compliant.