CMS: Medicare claims error rate drops 1.9%

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The error rate for Medicare fee-for-service claims in 2010 dropped to 10.5 percent, or $34.3 billion in estimated improper claims payments, from the 12.4 percent 2009 error rate, or $35.4 billion, and is on track for a 50 percent reduction by 2012, according to the Centers for Medicare & Medicaid Services (CMS).

The Medicare and Medicaid improper payment rates are issued annually as part of the U.S. Department of Health and Human Services (HHS) Agency Financial Report.

According to CMS, the Medicaid error rate is 9.4 percent, or $22.5 billion in estimated improper payments. This rate reflects a three-year average of the 2008, 2009 and 2010 rates which were 10.5 percent, 8.7 percent and 9 percent, respectively. Only one-third of the states are reviewed each year.

In addition, the agency made progress in developing a Medicare Part D composite-error estimate based on a series of payment error sources. This year, an additional measure was developed and a total of four component error estimates are being reported. CMS stated it plans to report a composite-error estimate for Part D beginning in FY 2011.

The four components are a Part D payment system error of 0.1 percent, a low-income subsidy payment error of 0.1 percent, payment error related to Medicaid status for dual eligible Part D enrollees of 1.8 percent and payment error related to prescription drug event data validation of 12.7 percent.

The majority of this final component error estimate was due to missing prescription documentation, CMS reported.

While improper payment rates are not necessarily an indicator of fraud in Medicare, Medicaid or the Children's Health Insurance Program, they do provide HHS, CMS and states with a more complete assessment of how many errors need to be fixed, the agency noted.