GAO Finds Gaps in CMS Review of Managed Care Rates

Cheryl Clark, August 9, 2010

The Centers for Medicare & Medicaid Services has not adequately reviewed state programs to assure that they set appropriate Medicaid managed care contract rates, according to a report from the U.S. Government Accountability Office.

The federal agency found "significant gaps" in CMS's oversight of Tennessee's and Nebraska's rate setting practices.  Since each state's Medicaid population's health needs vary, each state must set health plan Medicaid rates that are appropriate to cover that state's eligible population. 

In the case of Tennessee, CMS had not reviewed the state's rate setting practices for multiple years "and only determined that the state was not in compliance with the requirements through the course of GAO's work."

Tennessee had received approximately $5 billion a year in federal funds for rates that GAO determined had not been certified by an actuary, in violation of regulatory requirements.

In the case of Nebraska, CMS had not completed a full review of that state's rate setting since the actuarial soundness requirements went into effect, "and therefore may have provided federal funds for rates that were not in compliance with all the requirements."

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