Thu Aug 19, 2004

WASHINGTON, Aug 19 (Reuters) - The U.S. government may not be spending enough on oversight of state activities that uncover and deter fraud in the Medicaid health program, according to a congressional watchdog agency report released Thursday.

The Government Accountability Office said fraud and abuse in the health program for the poor has led to "substantial" financial losses for states and the federal government, which jointly fund Medicaid.

While states have implemented programs to uncover abuse and reduce their Medicaid costs, the federal government has not committed enough resources to overseeing those activities relative to the risk of financial loss, the GAO said.

The GAO found that the federal Centers for Medicare & Medicaid Services in the Health and Human Services Department allocated $26,000 and eight staffers to oversee program integrity activities in all 50 states and Washington, D.C. in fiscal 2004.

Those resources allow the Medicaid agency to review eight states per year, and at that pace a second round of reviews would not happen before fiscal 2007, the GAO said.

"This level of effort suggests that (the Centers') oversight of states' Medicaid program integrity efforts may be disproportionately small relative to the risk of serious financial loss," the report said.

The Centers for Medicare and Medicaid, in a comment letter, said the GAO did not assess the agency's full range of oversight activities and instead focused only on oversight of state "program integrity" activities.

But the GAO said both financial management and program integrity oversight are important, and staff in those sections are not interchangeable.

Medicaid has become a gigantic cost for states, accounting for the second-largest portion of state budgets behind elementary and secondary education. In fiscal 2002, Medicaid benefit payments hit $244 billion, with the federal government paying for $139 billion of that total.

To uncover fraud, GAO said 29 states have conducted on-site inspections of high-risk providers, 13 have conducted criminal background checks and 25 require providers to periodically reapply for enrollment in Medicaid.

Most states also use advanced technologies to deter abuse.

For its part, the federal Medicaid agency has activities in place to support states' program integrity actions, but there is little oversight, the report said.

The federal government has provided information and training for states and funded a pilot project that measures payment accuracy rates and another that analyzes billing patterns. Reviews of state programs, according to the GAO, are infrequent and limited in scope.