Improving Medicaid Cash Management Will Reduce Federal Interest Costs

GAO reviewed the state systems for recovering Medicaid overpayments to providers and for returning the federal share of these overpayments to the Department of Health and Human Services (HHS).

GAO found that over $11 million in Medicaid and other program funds were in non-interest-bearing checking accounts in three states. Because the banks had use of this money, the federal and state governments lost incurred interest of over $1.3 million. One of the banks involved reported earning $512,000 on the Medicaid funds it held for an 11-month period. Some states drew federal funds in excess of current disbursement needs, invested the balances, and retained the interest earned. States had not returned the federal share of $23 million it identified as uncollected overpayments. The time that elapsed between when states made cash collections and when they returned the federal share enabled states to earn substantial amounts of interest on federal funds.

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) 275-6195