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GAO: Puerto Rico spent most of its ’18 Medicaid budget on contractors

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The U.S. Government Accountability Office (U.S. GAO) released a report urging the Centers for Medicare & Medicaid Services (CMS) to crack down on Puerto Rico’s procurement process, as in 2018 the Commonwealth paid contractors almost all of its Medicaid spending, or 97% of its $2.5 billion budget.

The GAO’s recommendation of a “risk-based oversight approach” by the CMS received the backing of the US Department of Health and Human Services.

“States and US territories paid contractors about half of their Medicaid spending for health care and other services in 2018,” the GAO said. “We found that the CMS does not oversee contracting in Puerto Rico, where former officials face allegations of contract fraud. We found that Puerto Rico did not always take steps to ensure competition or to lower the risk of fraud, waste, and abuse.”

“We recommended CMS begin risk-based oversight of contracting in Puerto Rico,” the agency said.

In its report, the GAO found that like other US territories and states, Puerto Rico implements major functions of its Medicaid program by procuring services from contractors, such as the delivery of managed care services to Medicaid beneficiaries.

“In 2018, procurement costs represented $2.4 billion of Puerto Rico’s $2.5 billion in total Medicaid expenditures. A 2019 federal indictment alleging Puerto Rico officials unlawfully steered Medicaid contracts to certain individuals has raised concerns about Puerto Rico’s Medicaid procurement process, including whether this process helps ensure appropriate competition,” the GAO said.

The CMS, within the US Department of Health and Human Services, is responsible for overseeing the Medicaid program. CMS requires states and territories to use the same process for Medicaid procurements as they do for their non-federal procurements.

“However, CMS has not taken steps to ensure Puerto Rico has met this requirement. Instead, CMS has relied on Puerto Rico to oversee the territory’s procurement process and to attest to its compliance,” the GAO said.

“CMS approved Puerto Rico’s attestation of compliance in 2004 and has not required subsequent updates. CMS officials told GAO that states and territories are in the best position to ensure compliance with their respective procurement laws,” it added.

The GAO went on to say that it, and others, “have found that competition is a cornerstone of procurement. Using competition can reduce costs, improve contractor performance, curb fraud, and promote accountability.”

“GAO reviewed selected Puerto Rico Medicaid procurements against federal procurement standards designed to promote competition and reduce risks of fraud. States and territories are generally not required to meet such standards. However, GAO and others have found that such standards can indicate whether a state’s or territory’s procurement process includes necessary steps to achieve fair competition,” it added.

In its assessment, GAO found that seven of the eight selected Puerto Rico procurements skipped over key steps to promote competition and mitigate the risk for fraud, waste, and abuse, underscoring the need for federal oversight.

“The requests for proposals for two of the three competitive procurements GAO reviewed did not include certain information on factors used to evaluate proposals and make awards. In contrast, Puerto Rico’s managed care procurement — the largest procurement reviewed —included this information,” the GAO saids.

It further noted that none of the five noncompetitive procurements it reviewed documented circumstances to justify not using competitive procurements, such as a lack of competition or an emergency.

“Puerto Rico officials explained that territorial law allows noncompetitive procurement for professional services regardless of circumstances,” it said.

“Because CMS does not oversee Puerto Rico’s procurement process, the agency lacks assurance that Puerto Rico’s Medicaid program is appropriately managing the risk of fraud, waste, and abuse. Procurements that did not include important steps to promote competition could have unnecessarily increased Medicaid costs, reducing funding for Medicaid services to beneficiaries,” it noted.

The GAO conducted this study following a 2019 federal indictment alleging fraudulent Medicaid procurements in Puerto Rico, which has raised questions about the program’s oversight.

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This story was written by our staff based on a press release.
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