CMS Announces New Medicaid Program Integrity Initiatives

The Centers for Medicare and Medicaid Services (CMS) recently issued a press release outlining several new initiatives designed to enhance Medicaid program integrity efforts. These initiatives include increasing audits of state claims for federal match funds and medical loss ratios, increasing audits of beneficiary eligibility determinations, and optimizing state claims and provider data. This announcement followed CMS’ decision to overhaul the Medicaid Program Integrity Manual and the transition of federal audit and investigationity

Medicaid is jointly administered and funded by the federal and state governments. Historically, states have taken the lead in spearheading Medicaid program integrity efforts such as audits, investigations, exclusions, and prosecutions. These actions are generally performed by state Medicaid Fraud Control Units (MFCUs) and similar entities tasked with ferreting out waste, fraud, and abuse in the Medicaid program.

In 2005, Congress passed a law creating the Medicaid Integrity Program and dramatically increased available resources to combat fraud, waste, and abuse. Among other things, this new law also required CMS to engage private contractorsto review provider claims, audit providers, identify overpayments, and perform provider education. Despite the proliferation of Medicaid audit contractors, a 2012 report released by the Office of Inspector General of the U.S. Department of Health and Human Services concluded that Medicaid audit contractors were not particularly effective.

In 2016, CMS announced that it would consolidate the functions of Medicare Zone Program Integrity Contractors (ZPICs) and Medicaid Program Integrity Contractors (MICs) into entities known as Unified Program Integrity Contractors (UPICs). As of June 2016, contractors for all five UPIC jurisdictions went online.

New CMS Initiatives

The new program integrity efforts announced by CMS largely focus on the ways in which the states administer their own Medicaid programs.

  1. Audits of State Claims for Federal Match Funds and Medical Loss Ratios

CMS will conduct reviews of some states based on the amount of money spent on clinical services and quality improvement versus administration and profit. These audits will be tailored to issues previously identified by the OIG and Government Accountability Office (GAO) along with “other behavior previously fund harmful to the Medicaid program.”

  1. Audits of

CMS will launch audits in certain “high risk” states to examine how those states determine beneficiaries are eligible for Medicaid.

  1. Enhance Medicaid Claims and Provider Data

CMS will utilize “advanced analytics” to overhaul Medicaid claims and provider data for use in further program integrity efforts. This will presumably allow CMS and the states to more quickly identify program vulnerabilities and other gaps in joint program integrity efforts.

These new initiatives appear primarily designed to put pressure on states to shore up their existing program integrity functions. For example, CMS noted in the press release that its regulations allow it to issue potential allowances to states based on Payment Error Rate Measurement (PERM) findings beginning in 2022. In addition, a recent reportissued by the U.S. Senate Committee on Homeland Security and Government Affairs found, among other things, that the national Medicaid improper payment rate increased from $14.4 billion in 2013 to $37 billion in 2017. Medicaid providers should therefore expect that state-level agencies will ramp up their own audits, investigations, reviews, and prosecutions in response to pressure from CMS and Congress.


While CMS’ new Medicaid program integrity initiatives will not directly affect the day-to-day operations of providers, they will ultimately have the effect of instigating increased audits, terminations, exclusions, and prosecutions. Medicaid providers should review their compliance plans and aggressively implement proactive compliance efforts in areas related to enrollment, billing, coding, and documentation. Medicaid providers who find themselves the target of state agencies or UPICs should consult with experienced and qualified legal counsel.

Adam Bird is a partner in the healthcare practice group at Calhoun Bhella & Sechrest LLP. Please contact him at (202) 804-6031 or to set up a consultation. 


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