When a state recovers a Medicaid overpayment, part of the money belongs to the federal government, and the Department of Health and Human Services’ Office of Inspector General says South Carolina did not report about $108.6 million of that federal share. The audit, report number OAS-25-04-114, covers collections in the Medicaid and Children’s Health Insurance Program (CHIP) that were subject to the higher federal match Congress approved during the COVID-19 emergency. It was issued September 30 and posted October 2.
Auditors found that South Carolina “did not accurately calculate and report the Federal share of approximately $108.6 million” in those collections. They told the state to adjust its future reports to the Centers for Medicare and Medicaid Services (CMS) and refund the amount.
How a recovered overpayment turns into a federal debt
Medicaid is paid for jointly. Washington reimburses each state for a percentage of what it spends, called the Federal Medical Assistance Percentage, or FMAP. When a state recovers an overpayment or receives a refund, that money reduces the net spending the state reports, and the federal funding for the quarter drops with it. CMS tells states to work out the federal share of a collection using the FMAP in effect when the original spending was reimbursed, or the one in effect when the refund came in.
The complication in this audit is that the percentage changed. As the Medicaid.gov page on ending the emergency puts it, Congress authorized a temporary 6.2 percentage point increase in the Medicaid match, and states that took it had to keep nearly all enrollees covered until the continuous enrollment condition ended on March 31, 2023. The inspector general’s report says CHIP received a separate increase of 4.34 percentage points.
A state that collects money on a claim paid at the higher percentage owes Washington a larger share of it. The audit asked whether South Carolina calculated and reported that federal share correctly. For about $108.6 million in collections, auditors concluded it did not.
The $108.6 million is the figure that matters here, and what South Carolina actually refunds can differ from it because the state agreed with three of the four recommendations.
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What the auditors recommended
The report lists four recommendations. The first is to adjust future reports to CMS and refund the federal share of the approximately $108.6 million in underreported collections, a total that includes $8.6 million tied to first-quarter collections, when the increased match applied. The $8.6 million is roughly 8 percent of the total. The second is to write down policies for reporting amounts that agree with the state’s accounting records. The third is to write down policies for calculating the federal share correctly when the match changes unexpectedly or retroactively. In practice, 6.2 percentage points means the federal government covered 6.2 cents more of each Medicaid dollar than it normally would, so a collection tied to that spending carries a correspondingly larger federal portion.
The report page does not describe the fourth recommendation; the full text sits in the PDF report the inspector general posted with it. The page also does not give the audit period, the types of collections involved or the reasons the underreporting happened.
What South Carolina agreed to
South Carolina concurred with three of the four recommendations and described steps it has taken or plans to take. The report page does not say which recommendation the state did not concur with, and it does not say the state disputed the finding itself.
The finding is an accounting dispute between the state and CMS, which administers Medicaid and CHIP. The report page describes no change to benefits, eligibility or coverage for people enrolled in South Carolina’s programs.
A pattern the inspector general had already seen
This is not the first audit on the subject. The report says a prior inspector general audit found that some states kept the difference between the federal share worked out at the increased percentage and at the regular one, and that audit recommended CMS recoup $61.8 million in Medicaid overpayments. The South Carolina amount alone exceeds the $61.8 million that earlier audit recommended CMS recoup, and the audit asks the same question about one state.
Where the full South Carolina audit and others are posted
The inspector general posts every audit, with a PDF of the full report and a shorter highlights document, in its public reports listing. The South Carolina report is filed there under COVID-19 and managed care, with CMS as the HHS agency involved. Anyone who wants the audit period and the collection types the summary page leaves out can open the full report from that listing.
The questions the full report can answer are the ones the summary page leaves open: which recommendation South Carolina did not accept, how CMS will treat the refund, and over what period the underreporting built up. CMS is the agency that receives the adjusted reports and the refund if the state carries out the first recommendation.
The $108.6 million, the $8.6 million tied to first-quarter collections and the 6.2-point match are all stated in the inspector general’s audit, OAS-25-04-114.
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This article was produced with AI assistance and reviewed by The Financial Wire’s editorial team.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
