In 1965, Title XIX of the Social Security Act established the Medicaid program to provide health care coverage to low-income individuals. Over time it has developed into one of the nation’s largest payers for health care, covering one out of five Americans. In FY 2017, the jointly funded program accounted for 9.5% of federal spending. Because of Medicaid expansion and climbing health care costs, the program has become an even greater component of state budgets. To ensure that the program meets its goals and objectives, legislatures and plan administrators are working to improve program integrity by resolving its vulnerabilities and reducing improper payments.

COB Difficulties

There are presently 56 unique Medicaid programs and each state is responsible for administering its program while remaining compliant to federal guidelines. These broad requirements give states the flexibility to determine covered populations, services, delivery models, and methods of payment. In addition, states can also test and implement approaches outside of federal standards by securing Section 1115 waivers.

While the option to customize individual programs aids states in meeting their individual needs, complications emerge in the Coordination of Benefits (COB) and Third Party Liability (TPL), which is “the legal obligation of third parties to pay part, or all of the expenditures for medical assistance furnished under a Medicaid state plan.”

Factors like the complexity of COB and TPL, the constant flux of the Medicaid population, and uncoordinated eligibility data between federal and state systems leave the Medicaid program vulnerable to improper payments.

Medicaid Expansion Creates Added Complexity

Medicaid expansion has experienced intense debate after the Affordable Care Act modified Medicaid eligibility in 2010. Two years later, the Supreme Court found expansion to be optional and since then 37 states have opted to expand their eligibility requirements. While more individuals are eligible for coverage, the increased population size has also added to the complexity of the program and highlighted the need for improved program integrity and recovery processes. Existing vulnerabilities, such as improper payments, must be addressed with effective cost avoidance measures to help ensure the program’s sustainability.

$36.2 Billion In Improper Payments

A High-Risk Issue from the Government Accountability Office (GAO) reported, “Medicaid covered about 75 million people in fiscal year 2018, at an estimated cost of $629 billion–$ 393 billion of which was paid by the federal government. CMS has projected that Medicaid spending will grow at an average rate of 5.7 percent per year from fiscal years 2017 through 2026. In fact, Medicaid spending is expected to reach $1 trillion by fiscal year 2026.”

The GAO estimated that improper payments made up 9.8 percent ($36.2 billion) of Medicaid spending in 2018.

The Medicaid program has been on the GAO’s high-risk list since 2003 due to the lack of federal oversight, it’s size, and the complexity of the program. As health care costs rise and program eligibility expands, it is becoming a major expenditure for the federal government and state budgets. Lawmakers and administrators need to focus on cost avoidance and recovery methods by implementing technology solutions in order to save money.