CMS Reports Improper Payment Rate Continues Decline

WASHINGTON, D.C. (November 18, 2020)—The Centers for Medicare & Medicaid Services (CMS) announced that the Medicare Fee- For-Service (FFS) improper payment rate has continued to decline, the fourth year Medicare FFS improper payment rate has been below 10%, the threshold for compliance established in the Payment Integrity Information Act of 2019.

• The Medicare FFS estimated improper payment rate decreased to 6.27% in FY 2020, from 7.25% in FY 2019. This year’s decrease was driven largely by progress in the following important areas:
• Home health improvements, including clarifying documentation requirements and educating providers through the Targeted Probe and Educate program, resulted in a $5.9 billion decrease in estimated improper payments from FY 2016 to FY 2020.
• Skilled nursing facility claims saw a $1 billion reduction in estimated improper payments in the last year due to a policy change related to the supporting information for physician certification and recertification for skilled nursing facility services, as well as CMS’ Targeted Probe and Educate efforts. “We see the reduction in Medicare home health ‘improper payments’ as the result of both improved provider and Medicare contractor performance,” said NAHC President William A. Dombi, in reaction to the news. “For many years, the vast majority of errors have been documentation related. Through the clarification of documentation requirements, home health agencies are able to consistently meet Medicare’s standards and its contractors are more able to issue accurate determinations.”
• Improper payments represent payments that don’t meet program requirements – intentional or otherwise – and are not all representative of fraud. Rather, improper payments might be overpayments or underpayments, or payments where sufficient information was not provided to determine whether a payment is proper or not.

CMS has developed a five-pillar program integrity strategy to modernize the agency’s approach to reducing the improper payment rate while protecting its programs for future generations:

• Stop Bad Actors. CMS works with law enforcement agencies to crack down on “bad actors” who have defrauded federal health programs.
• Prevent Fraud. Rather than the expensive and inefficient “pay & chase” model, CMS prevents and eliminates fraud, waste and abuse on the front end by proactively strengthening vulnerabilities before they are
• Mitigate Emerging Programmatic Risks. CMS is exploring ways to identify and reduce program integrity risks related to value-based payment programs by looking to experts in the healthcare community for lessons learned and best
• Reduce Provider Burden. To assist rather than punish providers who make good faith claim errors, CMS is reducing burden on providers by making coverage and payment rules more easily accessible to them, educating them on CMS programs, and reducing documentation requirements that are duplicative or unnecessary.
• Leverage New Technology. CMS is working to modernize its program integrity efforts by exploring innovative technologies like artificial intelligence and machine learning, which could allow the Medicare program to review compliance on more claims with less burden on providers and less cost to taxpayers.

CMS also announced results of the State Payment Error Rate Measurements (PERM) program, which identifies improper payments in Medicaid and CHIP and serves as source of data for CMS and states to implement various corrective actions to prevent and reduce improper payments. As states were implementing new rules under the Affordable Care Act for determining eligibility for many beneficiaries, the previous administration paused PERM eligibility reviews from FY 2015 to FY 2018. The reviews were re-started and in FY 2019 reported the Medicaid and Children’s Health Insurance Program (CHIP) improper payment rates for the first cycle of 17 measured under the updated eligibility component of PERM program.

The Medicaid and CHIP rates continue to increase as the second cycle of states have been measured under the updated eligibility component. The 2020 Medicaid and CHIP improper payments rates are 21 percent, or $86 billion for Medicaid and 27 percen t, or $4.8 billion for CHIP.  CMS anticipates the rate to increase again in 2021 as the last cycle of states is measured under the new eligibility component.
Based on the measurement of the first two cycles of states, eligibility errors are mostly due to insufficient documentation to affirmatively verify eligibility according to requirements. The majority of the insufficient documentation errors represent two situations: no record of the required verification of eligibility data, such as income; and the eligibility verification was initiated but the state did not document that verification process was completed.

CMS has already released guidance on expectations for state eligibility practices, particularly for populations covered at enhanced federal match rates. States have suspended normal eligibility renewal processes due to the maintenance of effort (MOE) of the Families First Coronavirus Response Act (FFCRA) and that CMS is preparing guidance for states to ensure the swift and orderly return to normal eligibility renewal and verification practices upon the end of the public health emergency. In the long term, CMS plans to closely review state eligibility policies and practices to ensure compliance with federal requirements.

More information on the agency’s improper payments for Medicare, Medicaid and the Children’s Health Insurance Program (CHIP) can be found here.