Medicare Avoided $12 Billion in Improper Payments in CY 2011, OMB Announces

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By James Swann

The Office of Management and Budget Nov. 15 said the Medicare program avoided $12 billion in improper payments in 2011 because of lowered error rates, while administrationwide improper payments were cut by $18 billion.

“Through aggressive and innovative solutions being deployed by federal agencies, we are on track to meet the President's bold directive to prevent $50 billion in payment errors by the end of 2012,” Jack Lew, director of the Office of Management and Budget, said during a conference call.

The Obama administration launched the Campaign to Cut Waste in 2010 with the goal of identifying and eliminating improper payments across the federal government.

Reduction in Medicare Error Rate

The cuts in Medicare improper payments were driven by a reduction in the overall Medicare error rate, which fell from 10.2 percent in 2010 to 8.6 percent in 2011. The error rate represents the percentage of improper payments out of overall Medicare payments.

The Medicare fee-for-service error rate fell from 9.1 percent in 2010 to 8.6 percent in 2011, the Medicare Part C error rate fell from 14 percent in 2010 to 11 percent for 2011, while Medicare Part D reported a composite error rate of 3.2 percent for 2011, the first time it has reported this category.

Medicare fee-for-service avoided $7 billion in improper payments, while Medicare Part C avoided $5 billion in improper payments.

Officials also announced that the Medicaid error rate fell from 9.4 percent in 2010 to 8.1 percent in 2011.

A government website provides additional information on the error rates.

Four Pilot Programs Targeting Fraud

Health and Human Services Secretary Kathleen Sebelius said on the call that HHS will implement four pilot programs to lower the Medicare error rate and prevent fraud and abuse.

In one pilot program, HHS will let Recovery Audit Contractors (RACs) conduct pre-payment reviews for certain hospital payments in 11 high-risk states, potentially avoiding improper Medicare payments from happening.

Another pilot will address the issue of hospitals billing services under the inpatient program when Medicare requires they be billed as outpatients. Currently, Medicare does not allow those claims to be rebilled under the outpatient program, but the pilot will allow some hospital claims to be rebilled under the correct program.

Under the third pilot, HHS will try to reduce improper reimbursements for medical equipment by reviewing claims in seven states before they are paid.

The final pilot program involves testing an automated screening solution that can measure a Medicaid provider's fraud risks.


Information on the error rates is at http://www.paymentaccuracy.gov/ . A CMS fact sheet on the pre-payment review pilot program is at https://www.cms.gov/apps/media/press/factsheet.asp?Counter=4170 . A CMS fact sheet on the rebilling pilot program is at https://www.cms.gov/apps/media/press/factsheet.asp?Counter=4169 . A CMS fact sheet on the medical equipment claims review program is at https://www.cms.gov/apps/media/press/factsheet.asp?Counter=4168 . A CMS fact sheet on the Medicare fee-for-service error rate is at https://www.cms.gov/apps/media/press/factsheet.asp?Counter=4174 . A CMS fact sheet on the Medicare Part C error rate is at https://www.cms.gov/apps/media/press/factsheet.asp?Counter=4175 . A CMS fact sheet on the Medicare Part D error rate is at https://www.cms.gov/apps/media/press/factsheet.asp?Counter=4172 . A CMS fact sheet on the Medicaid error rate is at https://www.cms.gov/apps/media/press/factsheet.asp?Counter=4171 .