The review covered the period May 1978 to August 1979 at the Health Care Financing Administration (HCFA) headquarters in Washington, D.C., and regional offices in Atlanta, New York, and San Francisco. State medicaid agencies involved in the study were located in California, Georgia, Florida, New York, and South Carolina. In fiscal year 1979, expenditures for the medicaid program nationwide totaled $19.7 billion, while expenditures in the five States reviewed totaled $7.9 billion, or 40 percent of the national total. The review found that in the five States at least $222.6 million in substantiated or potential overpayments had been identified but not collected, although much of this amount had been outstanding for several years. The five States had recovered about $18.7 million in medicaid funds which they either had not returned or did not promptly return the Federal share. GAO contends that these conditions resulted because HCFA had not established consistent policies and guidelines for States to use in administering overpayment recovery activities and that HCFA did not have a clear policy explaining when and under what circumstances Federal financial participation in outstanding overpayments would be denied. Moreover, State systems for recovering overpayments and for returning the Federal share of such funds were fragmented, cumbersome, uncoordinated, and slow. Recommendations for HEW to rectify this situation are given. Appendixes present reports of each of the five States' efforts to identify and recover the overpayments and return the Federal share. Footnotes are supplied. (Author summary modified)