May 13,2015

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Nonpartisan Government Watchdog Calls for More Transparency and Accountability in Medicaid Demonstration Program Funding

GAO: “The bases for HHS’s decisions involving tens of billions of Medicaid dollars are not transparent to Congress, states, or the public.”


WASHINGTON – A report released today from the nonpartisan Government Accountability Office raises concerns about the lack of transparency and accountability in the administration’s spending on Medicaid demonstration programs. House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Senate Finance Committee Chairman Orrin Hatch (R-UT) requested the review of Medicaid 1115 demonstration programs to determine how money that would otherwise be spent on health coverage for the most vulnerable populations is being allocated for other, potentially unrelated, purposes. The GAO raises questions about HHS’s lack of criteria for determining how to allocate this money and found that many of the programs approved for this funding actually help middle class Americans and are duplicative of other federal programs.

The GAO found, “In 5 states, HHS approved expenditure authorities allowing the states to spend $9.5 billion in Medicaid funding during their current demonstration approval periods (about 2 to 5 years) to support about 150 state programs that would not otherwise have been eligible for federal Medicaid funding.”

The GAO found that HHS does not have specific criteria for determining qualified demonstration programs. However, in responding to congressional questions about this GAO report, the Centers for Medicare and Medicaid Services explained that for the purposes of 1115 demonstrations, the agency defines ‘low-income’ as individuals or families with income at or below 250% of the federal poverty level. CMS did not express concern that state health programs receiving funding through demonstrations likely duplicate other federal programs and grant opportunities. Additionally, “HHS’s approval documents are not always clear as to what, precisely, approved expenditures are for and how they will promote Medicaid objectives. For example, HHS’s approvals in three states authorizing the use of federal Medicaid funds for more than half of the state programs GAO reviewed lacked clear information on how the programs would promote Medicaid objectives, such as how they would benefit low-income populations.”

The report continued, “Several state programs approved for federal Medicaid funds in these states appeared, on their face, to be only tangentially related to improving health coverage for low-income individuals.”

GAO concludes, “Without clear criteria for assessing how proposed expenditure authorities states are seeking will promote Medicaid objectives, and without clear documentation of the application of these criteria, the bases for HHS’s decisions involving tens of billions of Medicaid dollars are not transparent to Congress, states, or the public.”

The report explains, “GAO reviewed approval documents for new, extended, or amended section 1115 demonstrations approved by HHS in all 25 states with approvals between June 2012 and October 2013, and interviewed HHS officials.”

Read the complete report online here.