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Senators call for improved Medicaid oversight

GAO finds Centers for Medicare and Medicaid Services is inconsistently reviewing whether state payment rates are actuarially sound.

Senate Finance Committee leaders Wednesday called on the Centers for Medicare and Medicaid Services to improve oversight of how states determine payment rates for their managed Medicaid programs, after a Government Accountability Office report found that CMS was inconsistently reviewing if the payments were actuarially sound.

"To protect Medicaid, we need to ensure states are paying an appropriate price for the benefits private plans deliver. This report makes clear that we don't have enough information to guarantee that prices are accurate and that Medicaid is protected," said Finance Committee Chairman Max Baucus, D-Mont., who called on CMS to be more aggressive in their oversight.

Finance ranking member Chuck Grassley, R-Iowa, agreed.

"Medicaid could be overpaying in some cases and underpaying in others," Grassley said. "CMS isn't checking behind adequately to know either way. In a program that spends hundreds of billions of dollars, that's a problem. "

In Medicaid managed care programs, states contract with health plans to pay a fixed monthly rate per enrollee that covers most health services. Since 2002, CMS has had a rule requiring states to document how they set plan payment rates and have an actuarial certification of rates.

GAO's findings are significant in the run-up to implement the healthcare law, as Medicaid is expected to provide insurance coverage to an estimated 16 million adults and reduce the number of uninsured, low-income Americans by 45 percent by 2019. Nearly half of Medicaid enrollees, over 20 million people, were covered under managed care programs in 2008, and the managed care plans garnered $62 billion in federal and state spending in 2007.

The GAO report, which was mandated in the 2009 Children's Health Insurance Program reauthorization, found Tennessee's managed care Medicaid rates had not been reviewed by CMS for several years, despite receiving $5 billion a year in federal funds. GAO also found that CMS had never fully reviewed if Nebraska's rates were actuarially sound since the agency required states to document such information.

For Medicaid Health Plans of America CEO Thomas Johnson, GAO's report confirms concerns the group, which represents a national coalition of Medicaid health plans, has had for nearly a decade.

"We would like to see more transparency and consistency," in the ways states determine what to pay managed care plans, said Johnson, "especially given the fiscal pressures that states are under."

"CMS really took a hands-off approach," to oversight of the states' rate-setting processes, said Johnson, but he noted that his organization wanted to move forward to improve the existing system.

CMS largely agreed with GAO's findings and said the agency was working to address problems.

"By the time GAO had initiated this review, CMS had identified these inconsistencies as a concern, and had begun developing a plan for corrective action," CMS' Andrea Palm said in a letter responding to GAO's report.