HHS Failed To Show Budget Neutrality Before Approving Florida, Vermont Medicaid Waivers, GAO Report Finds

Main Category: Medicare / Medicaid / SCHIP
Article Date: 05 Mar 2008 - 6:00 PDT

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HHS did not ensure that two Medicaid pilot projects in Florida and Vermont would be budget neutral before approving them, according to a Government Accountability Office report released on Monday, CQ HealthBeat reports. Under federal law, states can obtain a federal waiver for pilot programs to test new ways of delivering care under Medicaid if they can show that spending would not rise faster than it normally would. However, in approving the Florida and Vermont programs, "HHS approved spending limits that were higher than the limits that would have been granted if HHS had held the states to limits based on benchmark growth rates," the report found. In addition, "HHS' basis for approving the higher spending limits was not fully supported by documentation," according to GAO.

HHS approved a $52.6 billion spending limit for a five-year program in Florida, "$6.9 billion more than the documentation supported," according to the report. In Vermont, "HHS approved a $4.7 billion spending limit -- $246 million higher than supported," GAO found. According to the report, HHS "did not ensure that the two demonstrations maintain Medicaid's fiscal integrity. In Florida, HHS allowed the state to establish a spending limit using a historical spending base that included payments HHS had previously identified as problematic."

The report called on Congress to consider requiring HHS to clarify the criteria for reviewing and approving spending limits for pilot project waivers, ensure that "valid methods are used to demonstrate budget neutrality" and document "the basis for any approvals."

Dennis Smith, director of the Center for Medicaid and State Operations at CMS, said that the agency "strongly" disagrees with the conclusions and recommendations of the report, adding that waivers are based on individual states' projected Medicaid growth rates. Smith said the two waivers were for "two of the more innovative" demonstration projects to control spending and expressed concern that states would not pursue cost-saving programs if they are subject to some of the "transparency" proposals. According to Smith, Florida "was extraordinarily concerned about the rate of growth of their Medicaid program." He said, "You have to look at what their program was really growing at," adding, "My understanding is that those rates of growth are (now) lower than" what they otherwise would have been (Reichard, CQ HealthBeat, 3/3).

The GAO report is available online (.pdf).

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