Program Background

The Payment Integrity Information Act of 2019 (PIIA) (Public Law No. 116-117) requires government agencies to identify, report, and reduce improper payments in government programs. In compliance with the Implementation Guidance in Appendix C of the Office of Management and Budget (OMB) Circular No. A-123, Federal agencies must review their programs annually to identify those at risk for significant improper payments. When a program is identified as being susceptible to significant improper payments, agencies are required to estimate the annual amount of improper payments and report the estimate and their reduction plans to Congress.

To comply with PIIA, the Department of Health and Human Services (HHS), Centers for Medicare & Medicaid Services (CMS) created a systematic plan to identify, measure, and report improper payments in the Medicare Part D program, known as the Part D Improper Payment Measure (Part D IPM).

Invalid or inaccurate Prescription Drug Event (PDE) records cause payment errors that affect beneficiaries’ benefit phases and reinsurance subsidy payments. CMS reviews selected PDE records using supporting documentation from Part D sponsors and their downstream entities, including prescription record hardcopies and Claim Detail Files (CDF). The validation findings are applied to a randomly selected 5% sample of the Part D beneficiary population. CMS calculates the estimated payment error for this sample of beneficiaries and extrapolates the result onto the payments of the remaining Part D beneficiaries to determine the Part D IPM gross payment error amount, and the national Part D IPM. The reported Part D improper payment rate estimation reflects both overpayments and underpayments.