Medicaid payments need more oversight-US watchdog

Wed Aug 4, 2010 7:03pm EDT

(Repeats to detach from story filed prematurely)

By Jon Lentz

WASHINGTON Aug 4 (Reuters) - U.S. Medicaid payments to private insurers need greater oversight to ensure that rates are appropriate, according to a report from the Government Accountability Office released on Wednesday.

Medicaid, administered by the states with reimbursements from the federal government, increasingly relies on insurance companies like UnitedHealth Group Inc (UNH.N) and Coventry Health Care Inc CVH.N to deliver its services. In 2007 more than $62 billion was spent on managed care.

Under a managed care model, a fixed rate is charged for a set of services instead of a fee for every service.

But, according to the report, managed care rates for the government's health insurance program for the poor are reviewed infrequently or without enough data in some states.

"Medicaid could be overpaying in some cases and underpaying in others," Senator Charles Grassley, the most powerful Republican on the Finance Committee, said in a statement.

Grassley said the Centers for Medicare and Medicaid Services (CMS), which oversee the program, were not adequately checking on it.

"In a program that spends hundreds of billions of dollars, that's a problem," he said.

"The report talks about the need to prevent overpayments," said Robert Zirkelbach, a spokesman for the industry group America's Health Insurance Plans. "But the real concern in the states today is that payments are not keeping up with rising medical costs, and that has a potential to put at risk the coverage beneficiaries rely on today."

Singling out the states of Nebraska and Tennessee, the GAO report said the Centers for Medicare and Medicaid Services had not completed a full review of Nebraska's rate setting since 2002. Tennessee received about $5 billion in annual federal funds for rates that were not certified by an actuary or assessed for compliance, the report noted.

The report by the GAO, the nonpartisan investigative arm of Congress, prompted CMS to require regional offices to use a checklist when they review the setting of rates.

The report recommended that CMS track rates in each state and set clearer standards for rate reviews.

The GAO also recommended using information such as studies or periodic audits to make sure the data used to set rates is accurate. (Reporting by Jon Lentz)

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