Are CMS Improper Payment Rates Too High?


No one likes making improper payments, and that’s especially true for management at the Centers for Medicare & Medicaid Services, which spent $595 billion on Medicare alone in fiscal year 2016. And yet improper payments remain high at the CMS, according to a recent report from the Health and Human Services Office of Inspector General. The Medicare fee-for-service improper payment rate was above 10 percent in FY 2016, and the Medicare Advantage program failed to meet an improper payment rate target.

The report is likely to support additional program integrity and enforcement efforts, Danielle Sloane, an attorney with Bass, Berry & Sims, told me. “With respect to Medicare, providers can expect continued audits, particularly in home and inpatient rehabilitation,” Sloane said. The Improper Payments Elimination and Recovery Act (IPERA) of 2010 tasked the OIG with evaluating and reporting the HHS's annual improper payment rate data.

The audit report, which was conducted by Ernst & Young on behalf of the OIG, identified insufficient documentation and a lack of medical necessity as leading causes contributing to improper payment rates of 42.01 percent and 62.39 percent for home health and inpatient rehabilitation, respectively, Sloane said.

The OIG also found fault with the CMS over the lack of contract for a Medicare Advantage recovery audit contractor. Judy Waltz, an attorney with Foley & Lardner LLP, told me she thought it was interesting that the original contract bid didn’t attract any takers. That could be a reflection of how difficult it is to audit a managed care plan's performance when the metrics are so different from the fee-for service side, Waltz said.

Medicaid improper payments were also singled out, as the report found the Medicaid improper payment rate also failed to drop below 10 percent in FY 2016. The Medicaid improper payment rate, which was 10.48 percent in FY 2016, was likely the result of states continuing to have issues with the Affordable Care Act's expansion of the program, Waltz said.

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