States that do not present valid encounter data may lose federal funding.

The Office of the Inspector General recommended that the Centers for Medicare & Medicaid Services withhold federal funds from states that do not accurately report encounter data under their Medicaid managed care plans, according to a July report.

The office examined third-quarter fiscal year 2011 Medicaid Statistical Information System claims for 38 states with managed care programs. Around 70% of Medicaid beneficiaries receive services through managed care. Encounter data is information about the services provided to those beneficiaries in a Medicaid managed care program, which the government says is necessary for quality assurance and to prevent waste and abuse.

A 2009 OIG report found 15 states were not reporting encounter data to MSIS. In the latest report, eight of the 38 states did not report encounter data by the required deadline: Kansas, Massachusetts, Nevada, North Carolina, Pennsylvania, South Carolina, Utah and West Virginia. Another 11 states did not report data for all Medicaid managed care plans.

For five states — Missouri, New Mexico, Oregon, Virginia and Wisconsin — the OIG could not access encounter data because of blank, invalid or “dummy” plan identifications.

In 2011, CMS began a new national Medicaid dataset called Transformed Medicaid Statistical Information System. Most states were expected to start reporting to T-MSIS by this year.

The OIG recommended CMS withhold federal funds from states that do not submit encounter data, and that data should be more carefully monitored. CMS should validate that states are submitting encounter data with valid plan IDs, and provide feedback to states on how to improve the data.