U.S. GAO Urges Medicaid Fraud Protection Efforts In Territories

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Pacific Islands Development Program, East-West Center With Support From Center for Pacific Islands Studies, University of Hawai‘i

Oversight body concerned about fraud, waste, abuse of federal funds

By Fili Sagapolutele

PAGO PAGO, American Samoa (The Samoa News, May 12, 2016) – The US Government Accountability Office, the investigative arm of the US Congress, has recommended that the federal Center for Medicaid and Medicare Services (CMS) develop a cost-effective approach to protecting the US territories’ Medicaid programs from fraud, waste and abuse.

The recommendation followed a GAO review last year of Medicaid and the state Children’s Health Insurance Program (CHIP) in the five territories, including American Samoa. The GAO’s 40-page review report, dated Apr. 8 this year was released to Congressional requesters, who sought information on the characteristics of the territories’ Medicaid and CHIP programs and oversight of these programs.

In the report, publicly released on Monday this week, GAO says that due to the flexibility territories have in administering their Medicaid and CHIP programs, the territories’ program eligibility and benefits not only reflect their unique circumstances, but also differ from one another and from the states.

On the issue of Medicaid eligibility, the report says that, unlike the states and other territories, American Samoa does not determine eligibility for its Medicaid program on an individual basis.

Instead, it presumes that all individuals with incomes at or below 200% of the federal poverty level (FPL) are eligible, the report says, which estimates that 88% of the population — or 40,515 — were enrolled in the program in 2015.

GAO also noted that temporary increases in federal funding have enabled the territories to increase Medicaid and CHIP spending, and avoid federal funding shortfalls.

Most notably, the federal Patient Protection and Affordable Care Act (aka Obamacare) appropriation of an additional $7.3 billion in Medicaid funding for the territories — available for expenditure through at least fiscal year 2019 — provided them flexibility in terms of when they choose to draw down the additional funds.

"American Samoa officials said they plan to use some of their PPACA funds to pay for services provided by new providers, thereby expanding access to services beyond the island’s only hospital," says GAO, adding that our PPACA allotment is $198 million, with only 23% of monies expended as of last year.


"Despite temporary increases in Medicaid funding, GAO found little assurance that territory Medicaid funds are protected from fraud, waste, and abuse," the report says.

With the exception of Puerto Rico, the territories have not established program integrity units, which are dedicated to identifying and reducing improper payments, it says, adding that the Medicaid director for each territory is responsible for program oversight.

Citing CMS officials, GAO says the territories have not established separate program integrity units because they lack adequate funding and personnel to do so, and funds spent on such an oversight effort would reduce the amount of funds available for the provision of health care services.

"Further, an American Samoa official said the territory is very interested in undertaking program integrity efforts, but is unable to hire additional staff to do so because of budgetary constraints," GAO says.

The report further notes that the territories’ incomplete service-level expenditure reporting also contributes to limited assurance of Medicaid program integrity.

As with states, different reporting requirements exist for fee-for-service and managed care spending in the territories. According to CMS officials, the health care delivery systems in American Samoa, CNMI, Guam, and the U.S. Virgin Islands are entirely fee-for-service, and therefore these territories are required to report service-level spending on the CMS-64 — a statement of expenditures data.

CMS officials told GAO that CMS-64 is the only data source for Medicaid and CHIP spending in these territories, underscoring the importance of accurate service-level expenditure reporting for territories’ program integrity efforts.

However, GAO says it reviewed the territories’ Medicaid spending for fiscal year 2014 and found that none of the territories had reported service-level spending for all the Medicaid benefits they covered.

Specifically, for the benefits GAO reviewed, American Samoa, CNMI, and Guam reported service-level spending for 24%, 55%, and 63%, respectively, of the Medicaid benefits they covered. According to GAO, this limited reporting is the result of various circumstances.

For example, Medicaid enrollees in American Samoa are serviced by a single hospital that reports costs by only three mandatory benefits — inpatient hospital services, outpatient hospital services, and emergency services for certain legalized aliens and undocumented aliens.

A footnote in the report says American Samoa has also reported expenditures for prescription drugs for individuals enrolled in both Medicaid and Medicare — an optional benefit — on its CMS-64.


Despite acknowledging the territories’ limited resources, GAO said CMS provides limited assurance and oversight to support program integrity efforts in the territories, and undertakes limited efforts of its own in this regard.

Without additional effort by CMS, there is limited assurance that territories have the capacity to identify fraud, recover improper payments, or provide complete information on program spending, it says.

To ensure the appropriate level of Medicaid program integrity oversight in the territories, GAO recommends that CMS reexamine its program integrity strategy and develop a cost-effective approach to enhancing Medicaid program integrity in the territories.

Such an approach could select from a broad array of activities, including—but not limited to—establishing program oversight mechanisms, such as requiring territories to establish a Medicaid Fraud Control Unit (MFCU) or working with them to obtain necessary exemptions or waivers from applicable program oversight requirements.


GAO provided a draft of the report to the US Department of Health and Human Services - which has jurisdiction over CMS - for a response, which concurs with the recommendation.

"Given the limited funding and personnel, many territories still face challenges addressing Medicaid program integrity and they must work to find a balance between applying funds to providing services and program integrity efforts," the department says.

However, it says the department is actively working with territories to strengthen program integrity and will work with the Medicaid officials in the territories "to determine the feasibility and potential effectiveness of enhancing program integrity activities, including but not limited to establishing an MFCU, or by obtaining necessary justification from the territory that an MFCU is not warranted."

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