Lawmakers Angered by Rising Medicaid Improper Payments Rate

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By James Swann

June 2 — Lawmakers told government officials at a congressional hearing June 2 that the current Medicaid improper payment rate of 6.7 percent is unacceptable and needs to be dramatically reduced.

Rep. Tim Murphy (R-Pa.), chairman of the Energy and Commerce Subcommittee on Oversight and Investigations, said the 6.7 percent Medicaid improper payment rate for fiscal year 2014 equated to $17.5 billion in improper payments, an increase of roughly 1 percent and more than $3 billion from the preceding year.

“This is a troubling trend, especially as the program continues to expand,” Murphy said.

Murphy was joined in his unease over the error rate by Rep. Chris Collins (R-N.Y.), who said an improper payment rate of 6.7 percent was “atrocious,” and Rep. Marsha Blackburn (R-Tenn.), who noted of the Centers for Medicare & Medicaid Services, “You're not getting better, you're getting worse.”

Collins said that when he was in the private sector, he practiced six sigma management techniques, which are designed to improve quality management.

“Our goal in six sigma was 3.4 errors per million, and yet here in Medicaid, you're getting 67,000 errors per million,” Collins said.

The hearing featured testimony from Shantanu Agrawal, the CMS deputy administrator and director of CMS's Center for Program Integrity, and Seto J. Bagdoyan, director, audit services, at the Government Accountability Office.

Bagdoyan presented the findings of a May 29 GAO report that examined Medicaid improper payments made in FY 2011 in four states, and Agrawal provided an update on program integrity efforts within the CMS.

The Medicaid improper payment error rate was discussed recently in a report from the Department of Health and Human Services Office of Inspector General concerning the HHS compliance with the Improper Payments Information Act (IPIA) of 2002.

Although the rate was below 10 percent for FY 2014, it was higher than its target rate (5.6 percent), the OIG said, representing an area of noncompliance with the IPIA.

Improper Payments

In response to congressional questioning, Agrawal said that although the CMS has made progress in reducing the improper error rate through the use of data analytics, more work remains.

Agrawal said the biggest driver of the higher improper payments rate has been a lack of state adoption of provider enrollment and screening standards.

“States are in various places when it comes to implementing the standards,” Agrawal said.

However, he said, the Medicaid beneficiary error rate has been cut in half since 2011.

The Medicaid improper payment rate is based on several components, Agrawal said, including provider enrollment and beneficiary eligibility.

He said that as program requirements become more stringent, as they have with Medicaid's provider enrollment and screening standards, improper payment rates often rise.

GAO Report

The GAO report, which had been requested by Murphy and Energy and Commerce Committee Chairman Fred Upton (R-Mich.), discovered that 8,600 Medicaid patients had $18 million in payments made on their behalf from more than two state programs, in violation of Medicaid regulations.

In addition, $10 million in payments were made on behalf of 200 dead Medicaid beneficiaries, while $4 million was paid on behalf of 3,000 Medicaid beneficiaries in prison.

Bagdoyan said that in February 2015 the GAO “reported that Medicaid remains at high risk because of concerns about the adequacy of fiscal oversight of the program, including improper payments to Medicaid providers”.

When asked by the subcommittee's ranking member, Diana DeGette (D-Colo.), about whether the CMS is taking adequate steps to reduce the improper payments rate, Bagdoyan said some progress has been made. However, he said, “the key is whether the efforts are sustainable.”

Bagdoyan said the CMS debuted the Data Services Hub in FY 2014, which can help to verify beneficiary data, and, if used properly, can help reduce improper payments.

To contact the reporter on this story: James Swann in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at