Congress’s Government Accountability Office (GAO) has once again identified Medicare and Medicaid as a ‘high risk‘ programs, and while it has improved in recent years in areas of payment reform, program management and integrity, and patient care and safety, these programs still have a long way to go.

At the beginning of every new Congressional session, the GAO issues its High Risk Report. This year’s report contains 30 areas in the federal government and predictably Medicare and its accompanying half-trillion budget is near the top of the list. According to the GAO, Medicare is on the list because:

In 2012, the Medicare program covered more than 49 million elderly and disabled beneficiaries at an estimated cost of $555 billion, and reported improper payments estimated to be more than $44 billion. The Centers for Medicare & Medicaid Services (CMS), which administers Medicare for the Department of Health and Human Services (HHS), is responsible for implementing payment methods that encourage efficient service delivery, managing Medicare to provide efficient and cost-effective services to beneficiaries, safeguarding the program from loss, and overseeing patient safety and care. Like health care spending in general, Medicare spending has grown faster than growth in the economy for many years. In the coming years, continued growth in the number of Medicare beneficiaries and program spending will create increasing challenges for the federal government

Medicaid is on the list because of “its size, growth, diversity of programs, and concerns about the adequacy of fiscal oversight, which is necessary to prevent inappropriate program spending,” the GAO wrote, adding:

This federal and state program covered acute health care, long-term care, and other services for about 70 million low-income people in fiscal year 2011; it is one of the largest sources of funding for medical and health-related services for America’s most vulnerable populations. Medicaid consists of more than 50 distinct state-based programs. The federal government matches state expenditures for most Medicaid services using the Federal Medical Assistance Percentage, a statutory formula based in part on each state’s per capita income. Medicaid is a significant expenditure for the federal government and the states, with total expenditures of $436 billion in 2011. The Centers for Medicare & Medicaid Services (CMS) in the Department of Health and Human Services (HHS) is responsible for overseeing the program at the federal level, while states administer their respective programs’ day-to-day operations.

While both programs have accomplished much in recent years to reduce overall risk, the GAO summarized what remains to be done. For Medicare:

To refine Medicare payment methods to encourage efficient provision of services, CMS should

  • ensure the implementation of an effective physician profiling system, to help support use of value-based modifiers;
  • develop and implement approaches to identify self-referred claims, reduce payments to recognize efficiencies achieved when the same provider refers and provides the service, and take steps to ensure the appropriateness of service provision;
  • cancel the current MA Quality Bonus Demonstration and implement the quality bonus payment provisions in PPACA, as amended; and
  • improve the accuracy of the adjustment of payments to MA plans for diagnostic coding differences, such as by using more current data in determining the amount of the adjustment.

To improve program management, CMS should

  • improve the cost-effectiveness of recovery of payments made improperly because Medicare was the secondary payer in situations involving non-group health plans, and decrease the reporting burden for non-group health plans while improving communication with plans’ stakeholders.

To enhance program integrity, CMS should

  • improve the structure and processes related to use of prepayment controls and assess the feasibility of increasing contractors’ incentives for their use, and
  • develop or finalize schedules and plans for its information technology efforts related to improper payments and fraud; define quantifiable benefits, measurable performance targets, and goals for these efforts; and use the targets and goals to determine their effectiveness.

To improve oversight of patient care and safety, CMS should

  • provide coverage for preventive services recommended by the Preventive Services Task Force, as appropriate, considering cost-effectiveness and other criteria;
  • strengthen oversight of nursing home complaint investigations by improving the reliability of its complaints database and clarifying guidance for its state performance standards; and
  • use strategic planning to guide and gauge the progress of its planned efforts to meet the goals of the Five-Star Quality Rating System for nursing homes.

And for Medicaid:

Congress, HHS, and CMS have taken steps to improve the fiscal integrity of Medicaid, and CMS has implemented certain GAO recommendations, such as improving the information collected on certain supplemental payments and issuing guidance to states to better prevent payment of improper claims. However, more federal oversight of Medicaid’s fiscal and program integrity is needed. For example, CMS oversight of program integrity has been challenged by data systems that do not provide reliable, complete, and timely data. States also have key roles in reducing improper payments to providers in developing, implementing, and evaluating the effectiveness of corrective plans to reduce improper payments.

CMS should also continue taking steps to improve oversight of Medicaid managed care payment rate-setting and Medicaid supplemental payments. In November 2012, GAO suggested that Congress require CMS to take certain steps to improve the transparency of and accountability for Medicaid non-DSH supplemental payments, including requiring improved reporting and independent audits of these payments. In addition, GAO’s suggestion that Congress require HHS to improve the criteria and methods used to ensure the budget neutrality of Medicaid demonstrations remains valid.