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Medicaid states must show that their fixes for eligibility errors will not wrongly deny coverage. GAO found that check missing from all 14 plans it reviewed, and in one state more than 30 percent of sampled denials were errors.

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When a state's Medicaid eligibility reviews find errors, it must send CMS a corrective action plan, and each plan must evaluate whether the fixes could lead to more improper denials. GAO's report released September 17 reviewed the plans of seven states and found that evaluation missing from all 14 plans, while CMS accepted them anyway. It also found CMS does not analyse errors and fixes across states, so one state's lesson does not reach the other 50. The stakes run both ways: GAO counted 2,789 eligibility errors in states' reviews since 2019, most from caseworkers and missing documents, and a separate sample of denials found error rates of 12 percent or more in five of the seven states in at least one year, above 30 percent in one. GAO made two recommendations. HHS agreed with one and said the other was already done; GAO disagreed.

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Medicaid covered 83 million people in fiscal 2024, at a cost of $957 billion. Who gets in is decided case by case in state offices, and mistakes run in two directions. In GAO's words: "Improper approvals can have significant implications for federal and state spending and lead to improper payments, while improper denials could result in people losing coverage for which they are eligible."

The federal system for catching those mistakes watches mainly one of the two.

How the system works

The federal Medicaid agency, CMS, reviews each state's eligibility decisions every three years. When it finds errors, the state must submit a corrective action plan. One thing each plan must contain is an evaluation of whether the fixes will avoid increases in improper denials, meaning that a fix for wrongful approvals must not work by turning away people who qualify.

CMS does not approve or reject these plans. It "cannot reject a proposed CAP, but must work with states to achieve an acceptable CAP."

What GAO found

GAO reviewed seven states' plans from 2019 to 2024.

  • The denial check was never there. "this element was missing from all 14 PERM CAPs we reviewed." One cause: the form CMS gave states had no place to put it until May 2026.
  • The look back was incomplete. Plans must also evaluate whether earlier fixes worked. That evaluation "was incomplete in all seven PERM CAPs we reviewed where such an evaluation was required."
  • CMS accepted them anyway. From the Fast Facts: "CMS provides feedback and oversight of states' plans, but has accepted plans that are missing required information."
  • Nobody compares states. CMS "is not systematically analyzing errors and associated corrective actions across states," so a finding in one year's group of 17 states is not shared with the other 34.

How often denials are wrong

The federal error rate samples only people who were approved. Denials and terminations are checked separately, by states, in the years between federal reviews. In those samples, five of the seven states found errors in 12 percent or more of denials and terminations in at least one year. In one state it was more than 30 percent. GAO does not name that state or say how many people it represents.

Where the errors come from

State reviews since 2019 recorded 2,789 eligibility errors:

Cause Errors States
Missing key documentation 1,230 47
Missed timeliness standards 595 29
A step in the process skipped 527 36
A step done incorrectly 386 42

Nearly 60 percent were caseworker errors, about 20 percent eligibility-system errors, about 6 percent state policy.

The national eligibility error rate peaked at 16.6 percent in 2021, during the pandemic, and was 4.4 percent in 2025. By law CMS should generally reduce federal payments to a state whose rate is above 3 percent. CMS officials told GAO no funds were withheld during the period reviewed.

What happens next

GAO recommended that CMS make sure plans are complete before accepting them, and that it analyse errors and fixes across states and years. HHS agreed with the second. On the first, it asked GAO to consider it done because the form has been updated. GAO declined, noting CMS had accepted incomplete plans after an earlier update: the changes "are not sufficient."

What the report does not show

  • It does not count people wrongly denied or wrongly enrolled.
  • An "error" often means missing paperwork, not that the person was ineligible. The report alleges no fraud.
  • Its plan review covers seven states chosen by GAO, not the whole country.

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