Fiscal Year 2025 Improper Payments Fact Sheet
The Centers for Medicare & Medicaid Services (CMS) is committed to being a responsible steward of public funds and to promoting the sustainability of its programs for future generations. While CMS’ improper payment reporting programs are designed to protect the integrity of CMS programs, improper payment measurement is not a measure of fraud, and not all improper payments are attributable to fraud or abuse. Rather, it is important to understand that improper payments are payments that do not meet CMS program payment requirements. They can be overpayments, underpayments, or payments where insufficient information was provided to determine whether a payment was proper. In some programs, improper payments involve a situation where a state or contractor misses an administrative step that had it been properly completed would have resulted in a proper payment.
The estimated improper payment rates for CMS’ programs in Fiscal Year (FY) 2025 are:
- The Medicare Fee-for-Service (FFS) estimated improper payment rate was 6.55%, or $28.83 billion, compared to the FY 2024 reported rate of 7.66%, or $31.70 billion. The FY 2025 estimate marks the ninth consecutive year this figure has been below the 10% threshold for compliance established by improper payment statutory requirements. [1]
- The Medicare Part C estimated improper payment rate was 6.09%, or $23.67 billion, compared to the FY 2024 reported rate of 5.61%, or $19.07 billion.
- Most Part C improper payments were attributable to situations where the Medicare Advantage Organization’s supporting documentation failed to substantiate the beneficiary diagnosis data submitted for payment.
- The Medicare Part D estimated improper payment rate was 4.00%, or $4.23 billion, compared to the FY 2024 reported rate of 3.70%, or $3.58 billion.
- The Medicaid estimated improper payment rate (comprised of the past three cycles of approximately 17 state per cycle from reviews in 2023, 2024, and 2025) was 6.12%, or $37.39 billion, compared to the FY 2024 reported rate of 5.09%, or $31.10 billion. Of the FY 2025 Medicaid improper payments, 77.17% were the result of insufficient documentation, which is generally not indicative of fraud or abuse.
- The Children’s Health Insurance Program (CHIP) estimated improper payment rate (comprised of reviews in 2023, 2024, and 2025) was 7.05%, or $1.37 billion, compared to the FY 2024 reported rate of 6.11%, or $1.07 billion. Of the FY 2025 CHIP improper payments, 56.07% were the result of insufficient documentation, which is generally not indicative of fraud or abuse.
- The increase in the national Medicaid and CHIP improper payment estimates reflects the effects of unwinding the flexibilities given to states during the COVID-19 public health emergency (PHE), such as conducting eligibility redeterminations and provider revalidation requirements, which resumed in April 2023.
- The FY 2025 estimated improper payment rate for the Advance payment of the Premium Tax Credit (APTC) program for the Federally-facilitated Exchange (FFE) for Benefit Year 2023 (January 1 to December 31, 2023) was 0.89% or $657.46 million, compared to the FY 2024 reported rate of 1.01%, or $562.93 million.
- The primary root cause of improper payments was overpayments due to manual errors (47.08% of improper payments) where the FFE accepted consumer submitted documentation with unacceptable name and date of birth variances to resolve an eligibility verification issue or improperly inputting information in the income verification tool.
- Approximately 43% of the APTC improper payments represent situations where the payment was to the right recipient for the right amount, but the payment process did not comply with applicable statutory or regulatory requirements, which are known as technically improper payments.
What You Need to Know:
- The Payment Integrity Information Act of 2019 (Public Law 116- 117) defines significant improper payments as either:
- greater than $10 million and over 1.5% of all payments made under that program, or
- greater than $100 million.
- The FY 2025 HHS Agency Financial Report provides the improper payment data for the Medicare FFS, Medicare Part C, Medicare Part D, Medicaid, CHIP, and Affordable Care Act Health Insurance Exchange APTC programs.
- Most improper payments occurred in situations where a reviewer could not determine if a payment was proper because of insufficient documentation from a state, provider, or the Part D Sponsor.
- Improper payments can result from a variety of circumstances, including:
- Items or services with no documentation;
- Items or services with insufficient documentation;
- Items or services with documentation that does not substantiate the payment;
- Items or services where the payment was to the right recipient for the right amount, but the payment process did not comply with applicable statutory or regulatory payment requirements; or
- With respect to Medicaid and CHIP, there is no record of the required verification of an individual’s eligibility factors, such as income.
- Proper payments occur when there is sufficient documentation to support payment in accordance with the program payment requirements. Two examples of proper payments include:
- Payments where CMS or the state appropriately maintained documentation of an eligibility verification requirement and appropriately determined eligibility based on program eligibility and payment requirements.
- Payments where sufficient documentation was provided to support program payment requirements.
More information on CMS’ Improper Payments Measurement Programs can be found at https://www.cms.gov/data-research/monitoring-programs/improper-payment-measurement-programs.
To view the HHS Agency Financial Report, visit: www.hhs.gov/afr.