Most Medicaid, SCHIP errors are due to inadequate documentation. Image Source: Piper Report

The Centers for Medicare & Medicaid Services (CMS) said it protected roughly $400 million of taxpayer dollars as improper payments for Medicare fee-for-service (FFS), a 3.9 percent decrease from 2007 to 3.6 percent, or $10.4 billion, in FY 2008. 

In addition, CMS reported its first Medicare Advantage improper payment rate of 10.6 percent, or $6.8 billion, in payments made in calendar year 2006. Also being reported for the first time are the FY 2007 national composite error rates for Medicaid and for SCHIP. The Medicaid composite error rate is 10.5 percent, or $32.7 billion of which the federal share is $18.6 billion, and, for SCHIP, the rate is 14.7 percent, or $1.2 billion, with a federal share of $800,000.

CMS said that the improper payment rates include payments that may have been paid incorrectly and do not necessarily reflect fraud. For Medicare FFS, most improper payments are due to claims for services that were medically unnecessary or incorrectly coded.  The vast majority of Medicaid and SCHIP errors are due to inadequate documentation; providers either did not submit information to support their FFS or managed care claims or did not submit additional data when requested, a similar trend seen with Medicare Parts A and B in previous years. Other errors are due to services provided under Medicaid or SCHIP to beneficiaries who were not eligible for either program or who were not eligible for the services received.

The agency is using information-gathering tools to help identify and eliminate improper payments to protect the integrity of CMS programs, according to Kerry Weems, CMS acting administrator.

Due to CMS’ efforts to reduce payment errors, the Medicare FFS rate has declined from about 14 percent in 1996 to the 2008 rate of 3.6 percent. CMS said it expects the error rates for Medicare Advantage, Medicaid and SCHIP to decline similarly through program maturation and the agency's use of tools that include statistical sampling, medical reviews and error rate reduction plans.

The composite Medicaid and SCHIP rates are based on a weighted average reflecting FFS and managed care payments. They include an eligibility component that measures improper payments for services furnished to beneficiaries who were not eligible for Medicaid or SCHIP - or who were eligible for Medicaid or SCHIP, but not for the services they received under those programs.

CMS also announced it is conducting an in-depth evaluation effort to review this year's Medicare FFS error rate. CMS also is developing methodologies to report the Medicare Part D error rate in the future.