CMS is not adequately overseeing the hundreds of millions of dollars being spent on administrative costs to implement Medicaid work requirements, according to a report released Thursday by the Government Accountability Office (GAO).
CMS has approved Medicaid work requirements in a total of nine states since January 2018. Several of the work requirements have been challenged in court, and a federal judge in U.S. District Court for the District of Columbia has blocked the requirements from being enforced in Arkansas, Kentucky, and New Hampshire. Indiana currently is the only state actively implementing Medicaid work requirements, though those requirements also are being challenged in court.
For the report, requested by Rep. Frank Pallone (D-N.J.) and Sen. Ron Wyden (D-Ore.), GAO examined the administrative costs of Medicaid work requirements in five states—Arkansas, Indiana, Kentucky, New Hampshire, and Wisconsin. According to the Kaiser Family Foundation, Wisconsin has not yet implemented its requirements.
GAO also assessed how CMS has overseen the administrative costs associated with the requirements. To gather data for the report, CMS reviewed documents related to state work requirements and interviewed state and federal Medicaid officials.
GAO found that the administrative costs to implement the work requirements in at least five states have ranged from $6.1 million to $271.6 million:
However, GAO said CMS has not adequately reviewed the administrative costs of the work requirements to ensure the costs are appropriate and will not increase federal spending. For example, GAO found CMS did not require states to submit projections of the administrative costs of Medicaid work requirements when seeking federal approval for the demonstrations. As a result, GAO said CMS is unable to assess whether Medicaid work requirements will be budget neutral or raise federal spending.
GAO also found that the approvals may conflict with current CMS regulations. For instance, GAO found that Kentucky officials had received CMS approval for federal funding at a 90% match rate for a contract, which included activities to help Medicaid beneficiaries find employment, but 2018 CMS guidance states federal funds cannot be applied to help beneficiaries with job training or other employment services.
According to GAO, CMS has not assessed whether the agency's procedures are appropriate for overseeing the administrative costs of Medicaid work requirements since CMS started to approve the demonstrations with work requirements.
GAO concluded, "Without requiring states to submit projections of administrative costs in their demonstration applications, and by not considering the implications of these costs for federal spending, CMS puts its goals of transparency and budget neutrality at risk."
GAO recommended CMS take three steps to address the costs of Medicaid work requirements and other demonstrations. Specifically, GAO recommended that the CMS administrator:
- Account for the administrative costs of work requirements and other demonstrations when determining whether a demonstration is budget neutral;
- Assess the risks of providing states with federal funds to administer work requirements and respond to risks by improving oversight procedures; and
- Require states to calculate, submit, and publicize projections for the administrative costs of work requirements or other demonstrations when seeking federal approval.
CMS did not concur with the recommendations. CMS said the agency's current procedures are appropriate based on the level of financial risk to the federal government.
CMS told GAO, "HHS experience with administrative costs under the Medicaid program suggests that we can expect administrative costs over the life of a demonstration to be a relatively small portion of the total cost. Therefore, we believe making this information available as a part of the transparency requirements would add little to no value to informing stakeholders about the potential critical impacts of a state's section 1115 demonstration application."
Wyden and Pallone in a statement said the GAO report shows the administration is "allowing states to waste taxpayer dollars in the pursuit of ideological changes to Medicaid that hurt vulnerable Americans" (Haefner, Becker's Payer Issues, 10/11; Armour, Wall Street Journal, 10/10; KTVZ, 10/10; Romoser, Inside Health Policy, 10/10 [subscription required];) Campo-Flores/Armour, Wall Street Journal, 10/13; KFF brief 10/9).