WASHINGTON – As the United States Senate debates a massive expansion of Medicaid in the health care reform legislation, Senator Chuck Grassley said today that two new Government Accountability Office (GAO) reports demonstrate the challenges already facing the federal-state health care program.
“Medicaid is an important program to many people, but its fiscal house must get in order as we trim budgets and debate a trillion dollar health care bill,” Grassley said. “These reports show that the American taxpayer could be taken for a ride by a program that appears to have a little accounting of billions of dollars that are made to hospitals and have yet to accurately determine the costs for prescription drugs.”
Grassley said that the reports emphasize that the Medicaid program has a problem managing the cost to the American taxpayer. One report emphasized that neither the federal government nor the state Medicaid programs can adequately explain where money is going and if it’s being spent appropriately. The second report indicated that Medicaid has not yet been able to negotiate drug prices effectively for the federal government.
“With the Medicaid program making payments and not knowing if the money is spent appropriately, it’s ludicrous that Congress is considering proposals to expand the program by 15 million people and $374 billion,” Grassley said.
The first new report is titled “Medicaid: Ongoing Federal Oversight of Payments to Offset Uncompensated Care" (GAO-10-69). In this report, the GAO examined four states’ calculations of 2006 disproportionate share payments, which are payments to help hospitals that serve a large number of low-income patients and disabled patients through the Medicaid program. GAO found that two of the four states’ hospital-specific disproportionate share payment limits for 2006 were not calculated appropriately.
In November of 2003, Congress passed the Medicare, Medicaid, and Prescription Drug Improvement Act (MMA), which added a provision requiring states to audit their DSH programs. Specifically, this language required states to annually: report each facility that received a DSH payment; and obtain an independent certified audit of their DSH programs to verify DSH payments are made within hospital-specific DSH limits. The first audits and reports, as required by Congress in 2003, were due to the Centers for Medicare and Medicaid Services this month (December 2009). Unfortunately, on July 27, 2009, amidst a health care reform debate where verified data relating to the uninsured, hospital costs, and government payments are absolutely critical, the Centers for Medicare and Medicaid Services issued a letter to all state Medicaid directors stating, “…CMS will not find a state to be out of compliance with the DSH reporting and auditing requirements for the initial (2005 and 2006) Medicaid State plan rate years until December 2010,” which leaves another year that Medicaid dollars go unchecked.
The second report is titled “Medicaid Outpatient Prescription Drugs: Second Quarter 2008 Federal Upper Limits for Reimbursement Compared with Average Retail Pharmacy Acquisition Costs” (GAO-10-118R). Since Congress required the Medicaid programs to begin paying for prescription drugs using Average Manufacturer Price in the Deficit Reduction Act of 2005, states and pharmacies have struggled to estimate the impact that the new pricing structure will have. In this report, the GAO compared second quarter 2008 Average Manufacturer Price and retail pharmacy acquisition cost for a sample of 83 drugs. The GAO found that the Average Manufacturer Price would have been lower than average retail pharmacy acquisition costs, in general, for most of the drugs in the sample and in the national aggregate.