- A recent Office of the Inspector General (OIG) report revealed that the rates of Medicaid and Medicare improper payments in 2016 exceeded the legislative threshold of less than 10 percent.
The improper payment rate for Medicare fee-for-service reimbursement reached 11 percent in 2016 and the Medicaid improper payment rate was 10.48 percent.
The OIG-contracted auditors also found that HHS did not reach improper payment reduction goals for Medicare Advantage and the Children’s Health Insurance Program (CHIP). The federal department also neglected to award a recovery audit contract for Medicare Advantage in 2016.
The OIG report indicated that HHS continues to face program integrity challenges with its major federal healthcare programs.
The Medicare improper payment rate decreased from 12.09 percent in 2015, but the rate continued to exceed the benchmark set by the Improper Payment Information Act of 2002. HHS attributed the high Medicare improper payment rate to “insufficient documentation and medical necessity errors.”
The federal department also pointed to post-acute care reimbursement as the primary driver of higher-than-expected Medicare improper payment rates in 2016. Specifically, Medicare home health claims saw an improper payment rate of 42.01 percent due to insufficient documentation to support the medical necessity of services.
Inpatient rehabilitation facility claims also contributed to the Medicare improper payment rate with a rate increase from 45.5 percent in 2015 to 62.39 percent in 2016.
The Medicaid improper payment rate also increased since 2015. HHS reported a 9.78 percent Medicaid improper payment rate in 2015.
State challenges with updating systems to comply with program integrity requirements caused the Medicaid improper payment rate to increase above the legislative threshold in 2016, HHS told the auditors. States faced obstacles with the following program integrity provisions:
• Mandating all ordering and referring providers to be enrolled in Medicaid and claims to be submitted with the provider’s National Provider Identifier (NPI)
• Requiring risk-based screening of providers before enrollment
• Necessitating the attending provider NPI to be submitted on all electronically filed institutional claims
While Medicare Advantage and CHIP improper payment rates fell under 10 percent in 2016, the auditors uncovered that HHS failed to meet reduction goals for the two healthcare programs.
Medicare Advantage fell short of its 9.14 percent rate goal with an improper payment rate of 9.99 percent in 2016 and CHIP did not reach its goal of 6.81 percent with an actual rate of 7.99 percent.
HHS did not meet its Medicare Advantage target rate due to insufficient documentation by third parties, whereas administrative and process errors at the state and local levels prevented CHIP from reaching its target rate, the report stated.
In addition to improper payment rate noncompliance, the auditors also revealed that HHS did not perform appropriate Recovery Audit Contractor activities in 2016 to recover improper payments for Medicare Advantage.
The Improper Payments Elimination and Recovery Act of 2010 requires HHS to perform recovery audits for each program that expends at least $1 million annually. HHS also expanded the Recovery Audit Contract program to Medicare Advantage under the Affordable Care Act.
However, the federal department has yet to award a Medicare Advantage contract. Therefore, it did not perform recovery audits for the program even though its expenditures exceeded $1 million.
HHS told the auditors that it plans to award a contract in 2017.
To ensure HHS complies with Medicaid and Medicare improper payment rate requirements, OIG recommended the following actions:
• Focus on the root causes of Medicare improper payments and develop feasible steps to decrease the rate below 10 percent
• Target Medicaid improper payment root causes and create a plan to help states with their compliance efforts, including following up with states during the interim period to ensure corrective actions are being implemented
• Partner with Medicare Advantage plans and providers to communicate documentation requirements and verify adherence
• Work with states to update respective systems to prevent CHIP improper payments
• Actively seek a Recovery Audit Contractor for Medicare Advantage and finalize the award in a timely manner to ensure recovery audits are performed 2017
HHS agreed with the federal watchdog’s recommendations to ensure program integrity.
“Although HHS has implemented a number of important steps in the past several years – many of which are outlined in the draft report – to reduce improper payments and improve reporting, we recognize the need for continuous and focused efforts to further prevent, detect, and reduce improper payments in our programs,” the federal department responded.