Improper Medicaid payments expand after ObamaCare and pandemic, studies find

As Medicaid rolls have ballooned – becoming the most expensive item in most state budgets – so have improper payments largely driven by ineligible patients that states have been reluctant to remove, according to data released by the Foundation for Government Accountability, a watchdog group.  

As of December 2021, Medicaid had 91 million enrollees – a boost of 18 million people in two years, meaning that a quarter of Americans are on Medicaid, according to the FGA. Of those, 17 million people were ineligible.  

The number of people on Medicaid, a joint federal and state health insurance program for the poor, has increased almost two and a half times what it was in 2000, putting an accumulated $700 billion strain on state budgets. Much of the increase came after the Medicaid expansion from the Affordable Care Act – better known as ObamaCare – that grew the program by 80% since 2013, according to the FGA findings.  

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"What’s interesting is that most of the improper payment rates are pre-COVID, so we may not know how high the number really is yet," Hayden Dublois, deputy research director for the Foundation for Government Accountability, told FOX Business. "It’s not a clear red state, blue state divide, but the two highest states for improper payments are states that expanded Medicaid under ObamaCare." 

The FGA released two recent reports about why this has become such a problem with suggestions about what states can do.  

More than one in five, or 22%, of Medicaid dollars are improperly spent, and that is overwhelmingly due to ineligible people on Medicaid, according to one of the FGA reports.  

A sampling of states shows some higher than the national average. Ohio’s Medicaid improper payment rate is double the national average at 44%, and 98% of that is caused by ineligible patients.   

Illinois isn’t far behind, with 37%, of which 95% is caused by ineligible patients. In Missouri, a third of the payments are improper, with 70% driven by eligibility errors. For Kansas, it’s 28% improper payments – not that far out of sync with the national average – but the cause is 99% ineligibility errors.   

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Congress passed and former President Trump signed the Families First Coronavirus Response Act, which gave a 6.2% increase in traditional Medicaid funding to states during the COVID-19 pandemic. The extra money was conditioned that states could not change eligibility, adjust the enrollment process, or remove enrollees from the program whether eligible or not until the pandemic is over.  

"According to data from 17 states, roughly 90 percent of all new enrollees during the COVID-19 pandemic are no longer eligible for Medicaid," one of the FGA reports says. "This means that up to 17 million enrollees nationwide were ineligible by the end of 2021." 

The FGA has called for states to remove ineligible enrollees – noting that it posed a minimal risk and that the Centers for Medicare and Medicaid Services would not "claw back," or require states to pay back money from previous cycles. 

The Medicaid website states that if a state opts out of the extra COVID-19 money requirements it will only lose the extra federal funding for the quarter in which it opts out and remaining quarters until the pandemic end. But it will not have to return the money. FGA urges states, since they face little risk, to work at removing ineligible enrollees from the program.  

"CMS has also never stated that locking ineligible enrollees onto the program is an ongoing condition that could be used to punish a state retroactively," one of the FGA reports continues.  

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A Centers for Medicare & Medicaid Services spokesperson told FOX Business the agency is committed to transparency and "protecting our program sustainability for future generations." 

"Improper payment rates are often tied to routine or minor documentation errors and do not necessarily indicate fraud. While any improper payment is unacceptable, the vast majority of improper payments are made with respect to people who may be eligible for care but for whom the state or a provider furnished insufficient documentation to discern if the payment was proper," the spokesperson said in an emailed statement. "For example, improper payments include both overpayments made by Medicaid, as well as underpayments. Both can result from a variety of circumstances that do not involve fraud – including services with incomplete documentation or insufficient documentation to affirmatively validate that the required verification of eligibility data, such as income, was completed." 

The CMS spokesperson added that Medicaid is working on regular reporting similar to what helped to reduce improper payments in Medicare, the federal health insurance program for the elderly.  

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"CMS will continue to work with state Medicaid agencies to apply lessons learned from their successful reduction of Medicare Fee-for-Service (FFS) improper payments," the spokesperson said.