A Look at the New GAO Report on MCO Payment Error Rates

GAO got intrigued by the amazingly low Payment Error Rate report for MCOs (0.3%) vs fee for service (10%). A report released in early May suggests the calculations for FFS and Managed Care are not comparable. Further- the managed care calculation does not go into much detail at all in reviewing charts or even data from MCOs to see if benefits were reimbursed in accordance with policy. We touched on this report in the 6/11/2018 news show.

Summary from report –

What GAO Found
The Centers for Medicare & Medicaid Services’ (CMS) estimate of improper payments for Medicaid managed care has limitations that are not mitigated by
the agency’s and states’ current oversight efforts. One component of the Payment Error Rate Measurement (PERM) measures the accuracy of capitated
payments, which are periodic payments that state Medicaid agencies make to managed care organizations (MCO) to provide services to enrollees and to cover
other allowable costs, such as administrative expenses. However, the managed care component of the PERM neither includes a medical review of services
delivered to enrollees, nor reviews of MCO records or data. Further, GAO’s review of the 27 federal and state audits and investigations identified key
program risks.

• Ten of the 27 federal and state audits and investigations identified about $68 million in overpayments and unallowable MCO costs that were not accounted
for by PERM estimates; another of these investigations resulted in a $137.5 million settlement.

• These audits and investigations were conducted over more than 5 years and involved a small fraction of the more than 270 MCOs operating nationwide as
of September 2017.

To the extent that overpayments and unallowable costs are unidentified and not removed from the cost data used to set capitation rates, they may allow inflated
MCO payments and minimize the appearance of program risks in Medicaid managed care.


Here’s the actual report –


2018 05 GAO rpt on MMC PERM 691618


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