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Three Areas of Risk that Contribute to Medicaid Spending Growth

July 27, 2018

Pursuit's Take

GAO identified three broad areas that are contributing to the growth of Medicaid spending, which is projected to exceed $900 billion in fiscal year 2025.

  1. Improper payments, including payments made for services not actually provided. Regarding managed care payments, which were nearly half (or $280 billion) of Medicaid spending in fiscal year 2017, GAO has found that the full extent of program risk due to overpayments and unallowable costs is unknown.
  2. Supplemental payments, which are payments made to providers—such as local government hospitals—that are in addition to regular, claims-based payments made to providers for specific services. These payments totaled more than $48 billion in fiscal year 2016 and in some cases have shifted expenditures from the states to the federal government.
  3. Demonstrations, which allow states to test new approaches to coverage. Comprising about one-third of total Medicaid expenditures in fiscal year 2015, GAO has found that demonstrations have increased federal costs without providing results that can be used to inform policy decisions.
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