Payment Error Rate Measurement (PERM)

Payment Error Rate Measurement (PERM)


Process for Reviewing Income Verifications Against Federal Tax Information (FTI)

For income verification, states have the option to use Internal Revenue Service (IRS) income data that is accessed through the Federal Data Services Hub or other data sources for income verification. However, IRS statute 6103 of the Internal Revenue Code prohibits states from disclosing FTI to any outside source, including CMS improper payment measurement programs. Please see the PERM Manual (page 53) for more information and refer any questions to your CMS PERM State Liaison regarding this matter.


The Centers for Medicare & Medicaid Services (CMS) remains committed to strengthening its program integrity efforts and safeguarding taxpayer dollars through its activities associated with the review of improper payment data. 

Effective August 11, 2020, CMS resumed all Payment Error Rate Measurement (PERM) engagement with providers and states that was temporarily suspended in response to the Public Health Emergency (PHE) for the Coronavirus Disease 2019 (COVID-19). Although PERM is now operating at normal capacity, CMS recognizes that the PHE remains in effect and has made review adjustments to account for applicable waivers and flexibilities.  

CMS will continue to evaluate PERM program activities to gauge whether any future suspension might again become necessary. Please reach out to your CMS PERM liaison if you have any questions or to identify any hardships or additional time needed to respond to a PERM documentation request.  

We believe that this guidance is a statement of agency policy not subject to the notice and comment requirements of the Administrative Procedure Act (APA). 5 U.S.C. § 553(b)(A). For the same reasons explained above, the CMS additionally finds that, even if this guidance were subject to the public participation provisions of the APA, prior notice and comment for this guidance is impracticable, and there is good cause to issue this guidance without prior public comment and without a delayed effective date. 5 U.S.C. § 553(b)(B) & (d)(3). 


The Payment Integrity Information Act (PIIA) of 2019 requires the heads of Federal agencies to annually review programs they administer and identify those that may be susceptible to significant improper payments, to estimate the amount of improper payments, to submit those estimates to Congress, and to submit a report on actions the agency is taking to reduce the improper payments. The Office of Management and Budget (OMB) has identified Medicaid and the Children's Health Insurance Program (CHIP) as programs at risk for significant improper payments. As a result, CMS developed the PERM program to comply with the PIIA and related guidance issued by OMB. 

The PERM program measures improper payments in Medicaid and CHIP and produces improper payment rates for each program. The improper payment rates are based on reviews of the Fee-For-Service (FFS), managed care, and eligibility components of Medicaid and CHIP in the year under review. It is important to note that the improper payment rate is not a “fraud rate” but simply a measurement of payments made that did not meet statutory, regulatory, or administrative requirements. 2008 was the first year in which CMS reported improper payment rates for each component of the PERM program.

Page Last Modified:
09/06/2023 04:57 PM