Improper Medicare payments down $20.7B since 2014, CMS data show

Medicare spending costs money
The 2021 Medicare fee-for-service estimated improper payment rate—for claims processed between July 1, 2020, and June 30, 2021—is 6.26%, representing a historic low, the Centers for Medicare & Medicaid Services said. (Getty/zimmytws)

The number of improper payments made under Medicare fee-for-service declined by $20.72 billion since 2014, according to new figures from the Biden administration.

The Centers for Medicare & Medicaid Services (CMS) said the data, released Monday, are the result of "aggressive corrective actions" to root out the cause of improper Medicare fee-for-service payments, which can include over- or underpayments to providers in addition to fraud. 

“The continued reduction in Medicare fee-for-service improper payments represents considerable progress toward the Biden-Harris Administration’s goal of protecting CMS programs’ sustainability for future generations. We intend to build on this success and take the lessons we’ve learned to ensure a high-level of integrity across all of our programs," said CMS Administrator Chiquita Brooks-LaSure in a statement.

Most improper payments involve situations where a state or provider missed an administrative step, CMS officials said. While fraud and abuse may lead to improper payments, it is important to note that the vast majority of improper payments do not constitute fraud, and improper payment estimates are not fraud rate estimates.

Jonathan Blum, CMS principal deputy administrator and chief operating officer, said "only a small fraction of improper payments" represent a payment that should not have been made—and an "even smaller percentage represent actual cases of fraud.”

RELATED: CMS: Estimated improper Medicare payments down $15B since 2016

The 2021 Medicare fee-for-service estimated improper payment rate—for claims processed between July 1, 2020, and June 30, 2021—is 6.26%, representing a historic low, CMS said. This is the fifth consecutive year the Medicare fee-for-service 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 several areas; inpatient rehabilitation facility claims saw a $1.81 billion decrease in estimated improper payments from 2018 to 2021. 

Durable medical equipment claims saw a $388 million reduction in estimated improper payments since 2020 due to a nationwide expansion of prior authorization of certain durable medical equipment items as well as CMS' targeted probe and educate program.

The fiscal year 2021 Part C improper payment estimate reported is 10.28%. The FY 2021 projected Part D improper payment rate is 1.58%. The slight increase is likely due to year-over-year variability, CMS said.

CMS completes PERM's new eligibility reviews for Medicaid and CHIP

This year’s Payment Error Rate Measurements (PERM) results show the 2021 Medicaid improper payment rate was 21.69%, and the Children's Health Insurance Program 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.

“CMS is taking an agency-wide approach to addressing improperly documented payments,” said Dan Tsai, deputy administrator and director at CMS' Center for Medicaid and CHIP Services, in a statement. “CMS is committed to lowering the improper payments rate by focusing on documentation and information-sharing efforts. In Medicaid, that means working closely with states to implement best practices and ensure they maintain the proper documentation.”

CMS officials said the agency has undertaken an effort to assess all improper payment programs to evaluate the best way to distinguish true improper payments from potentially proper payments, specifically focusing on errors due to inadequate documentation errors.

“We are committed to protecting our programs’ sustainability, and CMS’ work to reduce improper payments will continue to focus on developing and implementing policies to ensure payments are made correctly,” said Dara Corrigan, CMS deputy administrator and director of the Center for Program Integrity.