Medicaid's Quality Control System Is Not Realizing Its Full Potential

Based on data from the Medicaid Quality Control (MQC) Program, the Health Care Financing Administration (HCFA) estimates that about $1.2 billion in erroneous Medicaid payments are made annually. GAO reviewed the program because it is a primary means of identifying actions needed to reduce erroneous Medicaid payments.

The MQC fiscal disallowance designed to encourage lower error rates has not totally achieved the desired results. Their size represents such a potentially severe penalty for missing errorrate targets that the States generally have resisted citing errors, often based on their interpretations of HCFA regulations. The HCFA reactions to this resistance and its attempts to ensure defensible error rates have created an adversary relationship between it and the States. MQC reviewers correctly worked most of the cases; however, GAO found enough errors, unreviewed claims, and questionable practices to cast doubt on the accuracy of the base period error rates. Because the MQC system deals with relatively small samples of cases, even one case incorrectly reviewed can potentially have a significant effect on a State. HCFA has not provided effective leadership or clear direction for the MQC corrective action program. Consequently, it is not as effective as it could be. The data produced from the MQC system have been of limited value to States in their corrective action because: (1) the claims processing data are outdated before they are available and do not report problems on some types of claims; (2) claims paid because of retroactive eligibility are never reviewed; (3) the eligibility data overstate the potential savings from correcting errors and thus complicate the corrective action process; and (4) the review criteria do not identify all program weaknesses and the third-party data do not evaluate States' third-party recovery efforts.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Michael Zimmerman Team: General Accounting Office: Human Resources Division Phone: (202) 275-5365