The Centers for Medicare & Medicaid Services (CMS) announced that CMS’ aggressive corrective actions led to an estimated $20.72 billion reduction of Medicare Fee-for-Service (FFS) improper payments over seven years.
Improper payments are payments that do not meet CMS program requirements. Improper payments can be overpayments or underpayments, or payments where insufficient information was provided to determine whether a payment is proper or not. Most improper payments involve situations where a state or provider missed an administrative step. While fraud and abuse may lead to improper payments, it is important to note the majority of improper payments do not constitute fraud, and improper payment estimates are not fraud rate estimates, according to a press release from CMS.
The 2021 Medicare FFS estimated improper payment rate (claims processed July 1, 2020 to June 30, 2021) is 6.26% ̶ an historic low. This is the fifth consecutive year the Medicare FFS improper payment rate has been below the 10% threshold for compliance established in the Payment Integrity Information Act of 2019. Due to CMS corrective actions, the agency saw key successes in inpatient rehabilitation facility claims, with a $1.81 billion decrease in estimated improper payments from 2018 to 2021.
Durable Medical Equipment (DME) claims saw a $388 million reduction in estimated improper payments since 2020 due to a nationwide expansion of prior authorization of certain DME items as well as the Targeted Probe and Educate program.
The Payment Error Rate Measurements (PERM) program uses a 17-states-per-year, 3-year rotation to identify and measure improper payments in Medicaid and the Children’s Health Insurance Program (CHIP). These include payments where a small administrative step was missed – such as after documentation was verified, it was not properly saved. All 50 states and the District of Columbia are reflected in the national Medicaid and CHIP improper payment rates reported, as that rate includes findings from the most recent 3 years of measurements (2019, 2020, and 2021).
This year’s PERM results show that the 2021 Medicaid improper payment rate was 21.69%, and the CHIP improper payment rate was 31.84%. In the 2021 national Medicaid rate, 88% of improper payments were due to insufficient documentation. The majority of insufficient documentation errors represent situations where the required verification of eligibility data, such as income, was not appropriately documented.