OIG says lack of clear rules caused states to overdraw $130M in Medicaid funds

A combination of out-of-date regulations and confusion over a lack of guidance from federal officials led two states to overdraw more than $130 million in Medicaid funds and another to use Medicaid funds for unrelated expenditures, according to a new report from the Office of Inspector General.

The Centers for Medicare & Medicaid Services (CMS) has not issued guidance instructing states on the appropriate extent and timing of Medicaid withdrawals, nor has the agency clarified the "as needed" language, the report says. As a result, the OIG says, the two states it looked at in the report--Alabama and Maryland--withdrew approximately $130 million in Medicaid funds that they have not yet refunded.

Alabama recently received approval to provide Medicaid coverage through private managed care plans.

One state--Illinois--did refund the government, but withdrew $60 million more than was needed. The report said this is because CMS has also failed to issue guidance for states regarding the process for reconciliation, which would identify and resolve any difference between the amounts withdrawn and the net expenditures. Both Alabama and Maryland reconciled their amounts; however, the procedures that the two states used did not match each other. And because of the lack of reconciliation procedures, Illinois used Medicaid funds to pay for non-Medicaid expenditures, which could have been for transportation, education and pensions, OIG reports.

To address these issues, the report recommended that CMS:

  • Issue guidance that clarifies existing requirements and provides further interpretation of the "as needed" language as it relates to the withdrawal of Medicaid funds
  • Publish regulations that are consistent with the Treasury provisions and educate states about them
  • Publish and enforce formal guidance so that states are aware of the appropriate account from which to withdraw or return funds
  • Require states to reconcile total federal Medicaid funds withdrawn with the federal share of net expenditures and issue appropriate reconciliation guidelines

CMS generally agreed with the report's points, but noted that while it considers state-based reconciliations a "best practice," it does not have the authority to require or enforce those reconciliations.

To learn more:
- here is the OIG report

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