Medicare FFS amassed $23.2B in improper payments in 2017

Medicare fee-for-service (FFS) programs racked up an estimated $23.2 billion in improper payments in 2017, according to CMS data—almost $19 billion more than Medicaid FFS’ $4.3 billion and a red flag that the program’s documentation requirements might not be up to par.

CMS has projected substantially more improper payments in Medicare than in Medicaid in recent years, primary because of insufficient documentation, the U.S. Government Accountability Office reported in a congressional address March 27. GAO analyzed Medicare and Medicaid data from 2005 to 2017 in an attempt to assess the efficacy of CMS’ current policies.

Medicare typically has more documentation requirements than Medicaid, according to the report, and requires additional documentation for services involving physician referrals while Medicaid requirements vary by state and are dictated by other mechanisms.

“The substantial variation in the programs’ improper payments raises questions about how well the programs’ documentation requirements help identify causes of program risks,” the report read. “As a result, CMS may not have the information it needs to effectively address program risks and direct program integrity efforts.”

In the fiscal year 2017, CMS medical reviews identified fewer than 10 improper payments in more than half of U.S. states, GAO officials said. The agency directs states to develop corrective actions specific to their improper payments, but more often than not those corrections fail to represent the broader implications of improper payments across the state.

“Augmenting medical reviews with other sources of information, such as state auditor findings, is one option to better ensure that corrective actions address program risks,” the report read.

In their investigation, GAO undertook an examination of Medicare and Medicaid documentation requirements and factors that contributed to improper payments, as well as the extent to which Medicaid reviews—also known as payment error measurement, or PERM, reviews—provide states with actual actionable information. Officials used CMS data and interviews with CMS officials, contractors and six state Medicaid programs in their review.

As expected, GAO found that Medicare, relative to Medicaid, had a higher estimated FFS improper payment rate in 2017 due primarily to insufficient documentation. Using CMS data, a team calculated the rate of insufficient documentation was 6.1 percent for Medicare and 1.3 percent for Medicaid that year—much higher than the difference in rates for all other types of errors, which were 3.4 percent and 1 percent, respectively.

GAO concluded that, at the state level, PERM medical reviews don’t provide robust enough information to individual states, and CMS’ requirement to address singular improper payments derails a state’s ability to take more extensive corrective actions.

“CMS and states are missing an opportunity to improve their ability to address program risks,” officials wrote. “In addition, the lack of a requirement for state Medicaid agencies to determine whether providers whose claims are selected for PERM medical reviews are also under fraud investigation risks compromising ongoing investigations.”

GAO made the follow four recommendations to CMS, aimed at Administrator Seema Verma:

  • CMS should institute a process to routinely assess and ensure that Medicare and Medicaid documentation requirements are necessary and effective at demonstrating compliance with coverage policies while still addressing program risks.
  • The agency should take steps to ensure their medical reviews provide robust enough information that effectively addresses the underlying causes of improper payments.
  • CMS should attempt to minimize the potential for PERM medical reviews to compromise fraud investigations.
  • The agency should address disincentives for state Medicaid agencies to notify PERM contractors of providers under fraud investigation.

CMS concurred with three of the four recommendations, according to the report, but didn’t agree with the suggestion about Medicaid medical reviews.