Nov 16, 2018

2018 Medicare Fee-For-Service improper payment rate is lowest since 2010

Seema Verma
Administrator, Centers for Medicare & Medicaid Services

2018 Medicare Fee-For-Service improper payment rate is lowest since 2010
Significant progress in saving $4.59B in estimated improper payments
 for the Medicare Fee-For-Service program

One of my commitments as the Administrator of the Centers for Medicare & Medicaid Services (CMS) is to ensure we remain steadfast in our commitment to strengthen Medicare by making sure that tax dollars are spent appropriately. In our country, 1 of every 5 tax dollars is spent on healthcare, so we cannot afford to spend them inappropriately. We are proud to announce that the Medicare Fee-for-Service (FFS) improper payment rate is at its lowest since 2010 and the decreased improper payment rate from 2017 to 2018 represents a $4.59 billion decrease in estimated improper payments. Even more significant for CMS, is that for the first time in improper payment reporting history, we have achieved improper payment rate reductions across the board in Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP).

Improper payment rates are one of our metrics for measuring appropriate expenditures of tax dollars.  Improper payments are not necessarily measures of fraud, but instead are payments that did not meet statutory, regulatory, administrative, or other legally applicable requirements. These improper payments may be overpayments or underpayments and do not necessarily represent expenses that should not have occurred.

Our accomplishments over the past year were the result of a focused effort to target root causes of improper payments. CMS also implemented a targeted review strategy that focused on provider education, assistance and burden reduction. The agency’s actions emphasized prevention-oriented activities. These preventions included simplifying and clarifying policies as well as developing and implementing initiatives that ensure applicable coverage, payment and coding rules are met on the front end before services are rendered.  

The progress and cost-savings have been positive. Most notably:

  • The 2018 Medicare-FFS improper payment rate decreased from 9.51 percent in 2017 to 8.12 percent in 2018. This is the second consecutive year the rate has been below the 10 percent threshold for compliance established in the Improper Payments Elimination and Recovery Act of 2010. 
  • Home health corrective actions resulted in a significant $6.92 billion decrease in estimated improper payments from 2015 to 2018.  The home health improper payment rate decreased from 58.95 percent in 2015 to 17.61 percent in 2018.
  • Skilled nursing facility corrective actions resulted in a $1.04 billion decrease in estimated improper payments from 2017 to 2018.  The skilled nursing facility improper payment rate decreased from 9.33 percent in 2017 to 6.55 percent in 2018.
  • Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) improper payments decreased an estimated $1.14 billion from 2016 to 2018.  This represents a decrease in improper payment rates from 46.26 percent in 2016 to 35.54 percent in 2018. 

While we have made progress on reducing the improper payments rate, we are not satisfied and more work needs to be done to achieve increased and consistent reductions in the future by implementing already existing initiatives as well as innovative processes.  CMS’s program integrity initiative relies on a multifaceted approach that includes provider enrollment and screening standards, enforcement authorities, and advanced data analytics such as predictive modeling.  This initiative strikes an important balance by preventing improper payments while reducing the administrative burden on legitimate providers and suppliers.

We are also leveraging Provider Outreach and Education to provide greater transparency to our stakeholders, allowing them to better understand program integrity issues through education, data and process transparency, and strategic communications. We are phasing in a Targeted Probe and Educate initiative to reach individual providers with educational interventions and we’re also enhancing these efforts to allow for flexible and consistent user training. The goal of this outreach is to reduce provider burden, improper payments, and claim denials and appeals, while improving beneficiary quality of care and the consumer experience.

We are also looking at other innovations, some of which are being used in the private sector, to magnify our efforts toward reducing improper payments and provider burden. Included in the innovations we’re considering are:

  • Prior Authorization – Our Center for Program Integrity (CPI) is expanding its use of prior authorization in the DMEPOS area.
  • Documentation Requirement Lookup Service – To reduce improper payments CMS is looking to make our documentation and prior authorization requirements visible to clinicians through their electronic health record. To accomplish this, CPI began participating this year in the Da Vinci project, a private-sector initiative led by Health Level 7 (HL7), a standards development organization. For one of the use cases under this project – called “Coverage Requirements and Documentation Rules Discovery” – the Da Vinci project proposes to develop a Fast Healthcare Interoperability Resources (FHIR) standard.  To support the Da Vinci project, this past summer, the CMS Medicare FFS program began: 
    • developing a prototype Documentation Requirement Lookup Service for the Medicare FFS program;
    • populating it with the list of items/services for which prior authorization is required by the Medicare FFS program; and
    • populating it with the documentation rules for oxygen and Continuous Positive Airway Pressure (CPAP) devices.  

These already-established initiatives and implementation of private-sector innovations will help us keep positive momentum moving forward to make even greater inroads in reducing improper payment rates.  A key to our continued success will be collaborating across CMS and with stakeholders to address potential vulnerabilities, strengthening our program integrity efforts, and minimizing unnecessary burden for our partners.   

To view CMS’s fact sheet with more information about Improper Payment Reductions, please visit:


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