Medicare Improper Payment Rate Continues Multi-Year Decline 

CMS said this week that its efforts have led to a $15 billion reduction in problematic claims.

The incidence of improper payments by healthcare providers has declined for a fourth consecutive year, federal officials announced this week. 

The Centers for Medicare & Medicaid Services (CMS) estimated in a press release that its “aggressive corrective actions” have led to an approximately $15 billion reduction of Medicare fee-for-service (FFS) improper payments during that time – with the announcement appearing to constitute a clear-cut and ringing endorsement of the various audit and enforcement strategies the agency employs.

Citing “a clear commitment to protect Medicare for our seniors,” to accomplish that, “we must ensure that fraud and abuse doesn’t rob the program of precious resources,” CMS Administrator Seema Verma said in a statement. “From the beginning, this administration has doubled down on our commitment to protect taxpayer dollars, and this year’s continued reduction in Medicare improper payments is a direct result of those actions.”

Specifically, the Medicare FFS estimated improper payment rate decreased to 6.27 percent for the 2020 fiscal year (FY), down from 7.25 percent in 2019. CMS noted that 2020 also marked the fourth consecutive year the rate has been below the 10-percent threshold for compliance established in the Payment Integrity Information Act of 2019.

CMS attributed the success to “progress” made in the areas of home health and skilled nursing claims. The agency estimated that its Targeted Probe-and-Educate program produced a $5.9 billion decrease in estimated improper payments over the last four years, while an additional $1 billion reduction resulted from a policy change related to supporting information for physician certification and recertification for skilled nursing facility services.

“Healthcare costs are skyrocketing; by 2026, one out of every five tax dollars will be spent on healthcare. To constrain unsustainable cost growth, CMS must continue to ensure payments are made according to the rules,” the agency’s press release read. “Improper payments represent payments that don’t meet program requirements – intentional or otherwise – and contribute to inaccurate spending of Americans’ tax dollars, but are not all representative of fraud. Rather, improper payments might be overpayments or underpayments, or payments where sufficient information was not provided to determine whether a payment is proper or not.”

In its press release CMS outlined its five-pillar program integrity strategy to “modernize the agency’s approach to reducing the improper payment rate while protecting its programs for future generations” (all text following bullet points listed as it appeared):

  • Stop Bad Actors. CMS works with law enforcement agencies to crack down on “bad actors” who have defrauded federal health programs.
  • Prevent Fraud. Rather than the expensive and inefficient “pay-and-chase” model, CMS prevents and eliminates fraud, waste, and abuse on the front end by proactively strengthening vulnerabilities before they are exploited.
  • Mitigate Emerging Programmatic Risks. CMS is exploring ways to identify and reduce program integrity risks related to value-based payment programs by looking to experts in the healthcare community for lessons learned and best practices.
  • Reduce Provider Burden. To assist rather than punish providers who make good-faith claim errors, CMS is reducing burden on providers by making coverage and payment rules more easily accessible to them, educating them on CMS programs, and reducing documentation requirements that are duplicative or unnecessary.
  • Leverage New Technology. CMS is working to modernize its program integrity efforts by exploring innovative technologies like artificial intelligence and machine learning, which could allow the Medicare program to review compliance on more claims with less burden on providers and less cost to taxpayers.

The agency’s announcement also cited its Payment Error Rate Measurements (PERM) program, which identifies improper payments in Medicaid and Children’s Health Insurance Program (CHIP) and serves as source of data for CMS and states to implement various corrective actions to prevent and reduce improper payments. As states were implementing new rules under the Patient Protection and Affordable Care Act (PPACA) for determining eligibility for many beneficiaries, PERM eligibility reviews were paused from 2015 to 2018, CMS noted, but in 2019, improper payment rates were recorded for the first cycle of 17 states measured under the updated eligibility component of the program.

“Medicaid and CHIP rates continue to increase as the second cycle of states has been measured under the updated eligibility component,” officials said. “The 2020 Medicaid and CHIP improper payments rates are 21 percent, or $86 billion, for Medicaid, and 27 percent, or $4.8 billion, for CHIP. CMS anticipates the rate to increase again in 2021 as the last cycle of states is measured under the new eligibility component.”

Based on the measurement of the first two cycles of states, eligibility errors were found mostly to be due to insufficient documentation to affirmatively verify eligibility according to requirements. The majority of the insufficient documentation errors represent two situations, CMS said: no record of the required verification of eligibility data, such as income; and scenarios in which the eligibility verification was initiated, but the state did not document that verification process was completed.

To review the U.S. Department of Health and Human Services (HHS) Agency Financial Report in its entirety, go online to reports/index.html.


Mark Spivey

Mark Spivey is a national correspondent for,, and Auditor Monitor who has been writing and editing material about the federal oversight of American healthcare for more than a decade.

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