The Centers for Medicare and Medicaid Services has been inconsistent in reviewing states’ Medicaid managed care rates, according to the U.S. Government Accountability Office.

The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) requires the GAO to examine the extent to which states’ Medicaid managed care rates are actuarially sound.

State rates must comply with Medicaid managed care “actuarial soundness requirements” issued by CMS in 2002. CMS requires Medicaid rates to be developed in accordance with actuarial principles, appropriate for the population and services, and certified by actuaries.

A state must submit its rate-setting methodology, including a description of the data used to come up with rates, to CMS for approval.

The GAO found gaps in CMS Medicaid rate oversight in several states, including Tennessee and Nebraska.

A GAO team looked at 28 CMS files documenting rate-setting reviews completed as of Oct. 31, 2009.

CMS went without reviewing Tennessee’s Medicaid rate setting for several years, and Tennessee received about $5 billion a year in federal funds for rates that GAO determined had not been certified by an actuary, officials say.

In Nebraska, during the period the GAO covered, CMS had not completed a full review of the state’s rate setting since the actuarial soundness requirements became effective, and Nebraska may have received federal funds for rates that did not comply with all of the requirements, officials say.

GAO says it reviewed documentation of CMS’s oversight efforts from 6 of 10 CMS regional offices and found that the offices varied in the extent to which they tracked state compliance with the actuarial soundness requirements.

As a result of the study, CMS has required regional office officials to use a detailed checklist when reviewing states’ rate setting.

The GAO says additional steps are needed to prevent further gaps in oversight.

In the report, GAO recommends that CMS implement a mechanism to track state compliance with the requirements, clarify guidance on rate-setting reviews, and make better use of information on data quality in overseeing states’ rate setting.

The U.S. Department of Health and Human Services has agreed with the GAO’s recommendations and has described efforts it will make to improve CMS rate oversight.

“To protect Medicaid, we need to ensure states are paying an appropriate price for the benefits private plans deliver,” Senate Finance Committee Chairman Max Baucus, D-Mont., says in a statement. “This report makes clear that we don’t have enough information to guarantee that prices are accurate and that Medicaid is protected.”