Procurement of Michigan School-Based Medicaid Consulting Services

Pursuant to a congressional request, GAO reviewed the process used by eight Michigan school districts to contract for Medicaid consulting and billing services, focusing on whether the process used by the school districts complied with Department of Health and Human Services (HHS) procurement regulations.

GAO noted that: (1) the procurement for the 1998 contracts to Deloitte Consulting LLC did not adhere to standards in the HHS regulations; (2) these standards are applicable to the procurement for these services only if the state claims the costs as a cost of the Medicaid program in order to receive federal matching funds; (3) although the school districts included this fee in their claims to the state of Michigan, the state has yet to formally submit the claims to the Health Care Financing Administration (HCFA) as a cost of the Medicaid program; (4) the state of Michigan requested an opinion from HCFA as to whether such a claim would be allowable; (5) in response, the HCFA regional office rendered an opinion that Deloitte's fee under the contracts would not be an allowable cost because the procedures used to select Deloitte did not meet the HHS procurement regulations; (6) the state then requested that HCFA's central office reconsider the regional office decision; and (7) HCFA is waiting for the results of GAO's investigation before taking further action.