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The Government Accountability Office is urging Medicaid overseers to do a better job of recouping overpayments, citing their allegedly lenient oversight of state auditing efforts.

The GAO says the Centers for Medicare & Medicaid Services “may be missing opportunities to collect overpayments” by allowing states to opt out of an auditing program and failing to follow up on internal checks in those states. More efforts to clawback Medicaid funding put providers on edge, who worry they may be caught up in overzealous recoupment attempts and stripped of needed resources.

The federal Medicaid Recovery Audit Contractor Program is meant to help ensure payment accuracy and provide layered oversight, but CMS can exempt states from participating for two years at a time.

The GAO review, which was issued Wednesday, found 34 states and the District of Columbia did not participate in the RAC program during fiscal year 2021. Most states cited having other program-integrity initiatives as the reason for requesting an exemption, the review found.

But GAO said CMS officials failed to set exemption expirations or communicate them to states expiration of its approvals for full exemption from the Medicaid RAC program. Without written procedures or a way to track those expirations, “CMS may not be determining whether states warrant full exemptions and may be missing opportunities to collect overpayments,” GAO said.

Of the 34 states exempted in 2021, GAO found nine didn’t have a documented expiration date, and an additional 18 had expired approvals for exemption. 

In addition to implementing expiration policies, GAO also recommended CMS consider asking states to include managed Medicaid care in their oversight efforts.

“CMS has an opportunity to improve the program by conducting a cost-effectiveness study on including managed care, which is a system in which states make fixed payments to managed-care plans to provide healthcare services,” GAO said. “Since 2011, CMS has not determined whether the inclusion of managed care payments in the Medicaid RAC program would be cost effective. However, states that have elected to use recovery audit contractors to review managed care have reported collecting overpayments, including one selected state that reported collecting more than $177 million in overpayments in one year.”