CMS Reduces Improper Payments by Half

BALTIMORE–Aggressive oversight and new improvement efforts have
cut the number of improper fee-for-service Medicare claims payments
by half in one year, from 10.1 percent in 2004 to 5.2 percent in
2005, a $9.5 billion reduction in improper payments, CMS
Administrator Mark McClellan announced Thursday.

Citing a drastic reduction in errors related to insufficient and
missing documentation for claims as the chief reason for
improvement, McClellan said “the unprecedented, $9.5 billion
reduction in improper Medicare payments reflects our commitment to
careful measurement and targeted oversight, and we intend to keep
building on these efforts. We are measuring the accuracy of
payments more closely, and that enables us to target our efforts
more effectively with Medicare contractors and providers.”

According to a CMS report, error rates for the fiscal
intermediaries category dropped from 16.4 percent to 3.4 percent,
and carriers’ error rates dropped from 11.4 percent to 6.4 percent.
The error rate for the DME and regional carriers category dropped
from 11.1 percent to 8.6 percent, making it the category with the
highest percentage of errors.

The error rate reduction has occurred despite a growing volume
of claims and complexity of payment processing, CMS said. The
agency pays more than 1 billion fee-for-service claims each year,
and provides oversight to state payments for services provided
under Medicaid and the State Children’s Health Insurance
Program.

In 2005, Medicare also made monthly payments to more than 450
Medicare health plans across the U.S.

CMS reviewed approximately 160,000 fee-for-service Medicare
claims in 2005 as part of its Medicare error rate testing program.
By providing accurate statistical information at the level of
particular contractors and types of medical services, the agency
said it can now identify where problems exist and target
improvement efforts to address the problems.

In 2006, CMS will review Medicaid fee-for-service medical
claims, and in 2007, will measure improper payments in the
fee-for-service, managed care and eligibility aspects of Medicaid.
CMS will then calculate state-specific error rates upon which a
national Medicaid error rate can be estimated.

Also in 2007, CMS will begin to measure improper payments in
SCHIP programs and will begin to select states for measurement once
every three years, similar to the selection in the Medicaid
improper payment effort.

“Program and fiscal integrity oversight is an integral part of
CMS’ financial management strategy, and we place a high priority on
detecting and preventing improper or fraudulent payments,” said
McClellan, who noted he has asked Congress to include $720 million
for Medicare program integrity in its budget and $80 million for
oversight in other programs, including Medicaid.