Medicare FFS Improper Payment Rate Hits Low of 6.26%

November 16, 2021 - CMS continues to control improper payments in Medicare fee-for-service (FFS). The federal agency recently announced that the 2021 Medicare FFS improper payment rate hit a historic low of 6.26 percent between July 1, 2020, and June 30, 2021.

The period marks the fifth consecutive year the Medicare FFS improper payment rate has been below the 10 percent threshold set by Congress in the Payment Integrity Information Act of 2019.

The improper payment rate for Medicare Part C was 10.28 percent and the Part D improper payment rate is 1.58 percent. However, CMS noted that the Part C improper payment rate is not comparable to previous years because of a change in the error rate calculation methodology and the Part D improper payment rate is slightly higher due to “year-over-year variability.”

“CMS is undertaking a concerted effort to address the root causes of improper payments in our programs,” CMS Administrator Chiquita Brooks-LaSure said in the announcement yesterday. “The continued reduction in Medicare fee-for-service improper payments represents considerable progress toward the Biden-Harris Administration’s goal of protecting CMS programs’ sustainability for future generations.”

“We intend to build on this success and take the lessons we’ve learned to ensure a high-level of integrity across all of our programs,” Brooks-LaSure continued.

The Medicare FFS improper payment rate was close to 14.0 percent in 2014, data from CMS shows. The rate has steadily fallen since, hovering near 6.0 percent for the past two years as CMS sees results from targeted initiatives like the Targeted Probe and Educate program.

To date, those initiatives have reduced improper payments in traditional Medicare by over $20 billion.

CMS has particularly seen success in reducing improper Medicare FFS payment among inpatient rehabilitation providers. The agency stated in the announcement and an accompanying HHS Agency Financial Report that improper payments for inpatient rehabilitation facility claims decreased by $1.81 billion from 2018 to 2021 alone.

Improper payments for durable medical equipment claims also experienced a significant decline, falling by $388 million since 2020.

CMS attributed the decline in both inpatient rehabilitation facility and durable medical equipment claims to a nationwide expansion of prior authorization for certain durable medical equipment items, as well as the Targeted Probe and Educate program.

The Targeted Probe and Educate program is CMS’ large-scale effort to improve accuracy of Medicare billing. Under the program, Medicare Administrative Contractors (MACs) review a sample of claims and supporting documentation from creatin providers to review billing accuracy. If the claims are compliant, the provider’s claims will not be reviewed for at least one year on the selected topic.

However, if claims are found to be non-compliant, they are denied and providers are required to attend educational sessions with the MAC to improve accuracy. Providers can go through three rounds of education sessions in order to improve accuracy. Otherwise, they will be referred to CMS for next steps.

The program was paused during the height of the COVID-19 pandemic but has resumed as of September 1, 2021. CMS said in the HHS Agency Financial Report that in the 2021 fiscal year, “MACs primary conducted service-specific post-payment medical reviews, limited the number of requests for providers, and allowed extensions to providers who had difficult submitting documentation due to COVID-19.” HHS also continued to provide extensions to providers, as needed.

CMS also highlighted that it completed the Payment Error Rate Measurements (PERM) program’s new eligibility reviews for Medicaid and CHIP. The PERM program identifies and measures improper payments in the federal program in 17 states per year.

Results from the PERM program this year showed that 2021 Medicaid improper payment rate was 21.69 precent and the CHIP improper payment rate was 31.84 percent. The majority (88 percent) of improper payments in Medicaid were from insufficient documentation, CMS reported.

The date reflects the first year CMS has PERM data for all 50 states and Washington DC under the new PERM eligibility review component, which aims to more accurately measure eligibility determination changes under the Affordable Care Act.

“CMS is taking an agency-wide approach to addressing improperly documented payments,” Dan Tsai, Deputy Administrator and Director of the Center for Medicaid and CHIP Services, said in the release. “CMS is committed to lowering the improper payments rate by focusing on documentation and information-sharing efforts. In Medicaid, that means working closely with states to implement best practices and ensure they maintain the proper documentation.”