Medicare FFS Improper Payments Down by $15B Since 2016

Aggressive corrective actions aimed at reducing Medicare fee-for-service (FFS) improper payments have resulted in less healthcare fraud, waste, and abuse, as well as $15 billion in savings, according to the latest data from CMS.

The data released earlier today also revealed that the Medicare FFS improper payment rate declined to 6.27 percent in fiscal year (FY) 2020 from 7.25 percent in FY 2019. It was the fourth consecutive year that the Medicare FFS improper payment rate was below 10 percent, CMS reported.

“President Trump made a clear commitment to protect Medicare for our seniors, and to do that we must ensure that fraud and abuse doesn’t rob the program of precious resources,” CMS Administrator Seema Verma said in an announcement. “From the beginning this administration has doubled down on our commitment to protect taxpayer dollars and this year’s continued reduction in Medicare improper payments is a direct result of those actions.”

Medicare FFS improper payments decreased the most in home healthcare. CMS reported $5.9 billion in savings attributed to fewer improper payments to home health agencies between FY 2016 and 2019.

The agency also saw a $1 billion reduction in estimated improper payments made to skilled nursing facilities in the last year.

Reductions in both the home health and skilled nursing facility improper payment rates can be attributed to CMS efforts to educate providers through the Targeted Probe and Educate program, as well as changes to the policy related to supporting information for physician certification and recertification for skilled nursing facility services, CMS stated.

Improper payments occur when reimbursements do not meet statutory, regulatory, administrative, or other legally application requirements, CMS explained. A common example is insufficient or missing documentation for a claim.

Without proper documentation or errors in the documentation, CMS cannot verify if its programs correctly reimbursed for the services rendered. As a result, CMS may over or underpay the provider for the claim.

Additionally, a smaller portion of improper payments should never have been made largely because of issues with medical necessity, coding, beneficiary eligibility, and other errors on the claim. These end up as losses to the government.

Addressing all types of improper payments across government-run programs is a top priority for CMS, which is seeking to lower costs for taxpayers. To achieve that goal, the agency has developed a five-pillar program integrity strategy for reducing improper payments.

The five components of CMS’ strategy are stopping bad actors who have defrauded federal healthcare programs; preventing fraud; mitigating emerging programmatic risks related to value-based payment programs; reducing provider burden; and leveraging new technology (e.g., artificial intelligence and machine learning).

CMS implemented the strategy in 2019. Since then, there has been a $3.17 billion reduction in Medicare FFS improper payments, according to the new data.

The improper payment rate also declined in Medicare Part C, or Medicare Advantage. However, the rates increased in Medicare Part D, Medicaid, and CHIP, with increases in the latter two programs being attributed to the reintegration of a program integrity program.

Specifically, CMS restarted the State Payment Error Rate Measurements (PERM) program, which identifies improper payments in Medicaid and CHIP primarily based on eligibility for services.

The previous administration had paused the program from FY 2015 to FY 2018 as states navigated new eligibility rules under the Affordable Care Act. The Trump administration resumed the reviews and found that Medicaid and CHIP improper payment rates in the first cycle were under the updated eligibility component of the PERM program.

Today, the agency announced that the rates continued to be under the updated eligibility component of the program despite data showing an increase in rates across the programs. The 2020 Medicaid and CHIP improper payment rates are 21 percent, or $86 billion, and 27 percent, of $4.8 billion, respectively.

These rates are expected to increase in 2021 as CMS completes the last cycle of states to be measured under the new eligibility component.