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CMS’s Internal Controls Neglect Payment Accuracy under ACA

By Jacqueline DiChiara

- The internal controls that calculate and authorize financial assistance payments on behalf of the Centers for Medicare & Medicaid Services (CMS) are failing, says a report from the Office of the Inspector General (OIG). Such internal controls did not effectively establish accuracy regarding nearly $2.8 billion in cumulative assistance payments made to insurance companies from January to April of last year under the Affordable Care Act (ACA), confirms the OIG's report.

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“CMS's reliance on issuer attestations did not ensure that advance cost-sharing reduction (CSR) payment rates identified as outliers were appropriate," states the OIG's report. "CMS did not have systems in place to ensure that financial assistance payments were made on behalf of confirmed enrollees and in the correct amounts.”

Federal funds are in danger with the alleged miscalculation and misapplication of financial assistance payments, according to OIG’s sample results, which reviewed a random sample of 100 payee group-months totaling over $300 million reimbursed to issuers of qualified health plans (QHP), of which OIG identified both underpayments and overpayments.

“CMS did not have systems in place for State marketplaces to submit enrollee eligibility data for financial assistance payments, and CMS did not always follow its guidance for calculating advance CSR payments and does not plan to perform a timely reconciliation of these payments,” maintains OIG. CMS does not plan to execute timely payment reconciliation, OIG confirms.

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  • OIG recommends further review and validation

    OIG recommends CMS rectify internal control insufficiencies by mandating its Office of the Actuary to review and validate QHP issuers’ actuarial support for those index rates CMS defines as outliers. Additionally, the implementation of computerized systems to process enrollee confirmation, enrollee eligibility data, and payment information will hinder CMS’s dependence on QHP issuers’ confirmations regarding payment calculation, says OIG. The development of interim reconciliation procedures are also advised to prevent the occurrence of future inappropriate CSR payments.

    CMS comments about the OIG statements

    CMS generally concurs with those recommendations it deems applicable in light of regulatory events, such as a changed CSR rate calculation formula. The OIG report additionally confirms CMS recognizes it has yet to implement a computerized payment system. CMS is testing a pilot program with an objective to obtain individual enrollment data. CMS confirms more clearly executed internal controls require review for financial reporting.

    OIG disagrees with CMS’s statement that no deficiencies were reported, stating CMS failed to maintain enrollment data on an enrollee-by-enrollee basis, which varies substantially. Although OIG claims it could not verify CMS correctly applied the approximate $2.8 billion in financial assistance payments within a four-month period last year, OIG confirms it merely used CMS’s calculation methodology to identify CSR underpayments. CMS confirms it is either addressing or has already addressed OIG’s collective recommendations.

    In light of other CMS news this month reported on RevCycleIntelligence.com regarding the establishment of ICD-10 interactive case studies, the finalization of Accountable Care Organization (ACO) Medicare Shared Savings Program rules, and a recent announcement about $62 billion in Medicare payment data, it is hopeful future actions from CMS will implement payment processes and controls to ease issuers’ financial assistance needs accordingly.