Medicaid Watchdog Flags Flaws in Payment Oversight That Could Miss Millions in Waste

A new federal report raises concerns that the government may be underestimating how much money is improperly spent through Medicaid managed care, potentially leaving millions of taxpayer dollars vulnerable to waste. Although official estimates suggest nearly no errors in state payments to managed care plans, the Government Accountability Office (GAO) says the current review methods overlook key risks—particularly how those plans then pay providers.

About 75 percent of Medicaid beneficiaries are enrolled in managed care, where states pay private insurance companies a fixed monthly amount to deliver care. The Centers for Medicare & Medicaid Services (CMS) checks whether these state payments align with contracts and approved data systems. In 2024, this process again resulted in an improper payment estimate of close to 0 percent for managed care. However, the GAO found that this figure does not reflect payments from those plans to medical providers, which may include billing for services never rendered or lacking proper documentation.

State auditors and the Department of Health and Human Services’ Inspector General have also flagged cases where providers were paid for undelivered services or where states made duplicate payments for individuals assigned more than one ID number. These types of errors are not captured in the official CMS estimate, which focuses only on the initial transaction between states and insurers.

To strengthen oversight, CMS has ramped up its auditing activity. Between October 2021 and February 2025, the agency completed nearly 900 audits of providers and initiated 155 audits of managed care plans, uncovering over $33 million in overpayments. CMS is working to recover nearly $23 million in federal funds from that total. Still, the GAO warns that relying solely on limited audits and narrow reviews may fail to detect the full scale of financial risks.

The GAO has recommended several reforms that remain unimplemented. These include analyzing whether to expand recovery audits to managed care, sharing findings from state-level reviews to improve federal oversight, and collecting more accurate information on how states fund their share of Medicaid payments. Without these steps, gaps in the current system may continue to allow improper spending to go unchecked.

Article by multiple contributors, based upon information from a GAO press release (GAO-25-107770), issued by the U.S. Government Accountability Office

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