Medicare continues to reduce improper payments

Sunday, October 15, 2006

BALTIMORE - CMS reduced the number of improper Medicare claim payments from 5.2% in 2005 to 4.4% in 2006--a decrease of $1.3 billion.

"We have been increasing our efforts to reduce improper Medicare claims payments, and for the second year in a row, it's paying off," CMS Administrator Mark McClellan said last week. "Because we are able to measure the accuracy of payments more closely now, we are able to target our efforts more effectively with Medicare contractors and providers."

The Medicare fee-for-service (FFS) error rate has declined from 14.2% in 1996, when the Medicare improper payment rate was first reported, to 4.4% in 2006. The recent error rate reductions have led to approximately $11 billion less in improper payments over the past two years. CMS pays more than 1 billion fee-for-service claims each year.

CMS conducted detailed reviews of randomly sampled Medicare FFS claims submitted between April 1, 2005, and March 31, 2006. Approximately 160,000 claims spanning all types of Medicare FFS payments were included in the Medicare error rate-testing program. By providing accurate statistical information to its personnel and contractors, CMS can identify where problems exist and target improvement efforts to address those problems.

This effort reflects the agency's use of data and analysis to identify and eliminate improper payments. CMS has worked with the contractors to apply the data collected to improve system edits, update coverage policies and direct provider education efforts. In addition, CMS has developed national and state-specific models for predicting inpatient-hospital payment errors to study the areas prone to payment error.