Improper Payment Rate for Federally Facilitated Exchange Fell Under 1%

The improper payment rate for the federally facilitated exchange (FFE) program was less than 1 percent in 2020, according to the annual 2022 Agency Financial Report from CMS and HHS.

Improper payments are payments that do not meet CMS program requirements, such as overpayments, underpayments, or payments based on insufficient information. The majority of improper payments result from states or providers missing an administrative step and are not due to fraud.

This is the first year CMS has included improper payment rates for the Advanced Premium Tax Credit (APTC) program for the FFE in the Agency Financial Report. The 2022 report provides payment rates for benefit year 2020, which started January 1 and ended December 31, 2020.

The report found that 99.38 percent of payments from the FFE were properly paid, amounting to $41 billion. The improper payment rate was 0.62 percent and amounted to $256 million.

CMS reviewed a stratified random sample of applications to determine if any payments were improper. The main causes of improper payments were manual errors associated with determining consumer eligibility for payments when verification by automated processes was unavailable or insufficient.

CMS attributed the low rate of improper payments to the implementation of automated processes for the FFE program’s eligibility determinations and payments.

“Protecting our programs’ sustainability is one of CMS’ core strategic pillars. We are focused on program integrity so that people today  ̶  and in the future  ̶  continue to benefit from access to quality care,” CMS Administrator Chiquita Brooks-LaSure said in the press release.

“This low rate of improper payments in the federally facilitated Exchange is a testament to the effectiveness of our efforts to ensure program integrity, furthering the Biden-Harris Administration’s goal of maintaining the long-term sustainability of CMS’ programs. We are committed to strengthening and maintaining these efforts to bring down improper payment rates across the board.”

The improper payment estimate for the FFE program does not reflect payments made by state-based exchanges (SBEs), the press release noted. CMS said it continues to develop the improper payment measurement program for SBEs.

The report also found that improper payment rates for Medicaid and the Children’s Health Insurance Program (CHIP) declined in 2022. The Medicaid improper payment rate fell from 21.69 percent in 2021 to 15.62 percent in 2022 ($80.57 billion). Most of the improper payments (86.82 percent) resulted from insufficient documentation.

The CHIP improper payment rate declined from 31.84 percent in 2021 to 26.75 percent in 2022 ($4.30 billion). Around three-quarters of the improper payments were due to insufficient documentation.

The Medicare fee-for-service (FFS) and Medicare Part C and Part D improper payment rates all fell below the 10 percent statutory threshold in 2022.

The estimated Medicare FFS improper payment rate was 7.46 percent, marking the sixth consecutive year of it falling below the 10 percent threshold established in the Payment Integrity Information Act of 2019.

In addition, durable medical equipment claims saw a $193 million decrease in estimated improper payments from 2021, the report noted.

The estimated Medicare Part C improper payment rate in 2022 was 5.42 percent. CMS implemented policy and methodology changes to improve the accuracy of the payment error estimate, contributing to a decrease in the projected improper payment rate. The Medicare Part D improper payment rate is estimated to be 1.54 percent, indicating a slight increase from 2021 due to year-over-year variability.

While improper payment rates remain low, CMS is still in the process of collecting millions of dollars in Medicare overpayments.

According to the Office of Inspector General (OIG), CMS reported collecting $272 million in Medicare overpayments—55 percent of the $498 million OIG initially identified. However, the agency only provided documentation showing that it collected $120 million.