2011 Medicaid Improper Payment Error Rate

The 2011 Medicaid improper payment error rate is 8.1 percent. This represents a drop in the improper payment rate from 2010 (9.4 percent).[1] CMS measures Medicaid improper payments through the Payment Error Rate Measurement (PERM) program and produces state and national-level error rates for each program. The error rates are based on reviews of the fee-for-service (FFS), managed care, and eligibility components of Medicaid in the fiscal year (FY) under review. PERM uses a 17-state rotational approach to measure the 50 states and the District of Columbia over a three-year period. As a result, CMS measures each state once every three years.


2011 Medicaid Error Rate Key Information:

  • The 2011 Medicaid improper payment rate is 8.1 percent. The weighted national error components rates are as follows: Medicaid FFS: 2.7 percent; Medicaid managed care: 0.3 percent; and Medicaid eligibility: 6.1 percent.
  • The 2011 Medicaid improper payment rate reflects a three-year weighted average of the 2009, 2010, and 2011 rates that were 8.7 percent, 9.0 percent and 6.7 percent respectively.
  • The 17 states reviewed in 2011 were the same states reviewed in 2008. The improper payment rate for these states dropped from 10.5% in 2008 to 6.7% in 2011 causing the three-year Medicaid improper payment rate to decrease. The most significant improvement was in the fee-for-service component and reflects the impact of effective corrective actions such as provider education.
  • Most FFS errors result from providers failing to submit the necessary documentation to support the claims. Beyond documentation errors, FFS errors are primarily due to providers billing the incorrect number of units of services, etc, provided.
  • The eligibility component is the main contributor to the Medicaid error rate. CMS published a PERM final regulation in August 2010 allowing reviewers to use a self-declaration statement that is present in the case record to verify eligibility for the PERM reviews, if the statement meets certain requirements. The 2011 eligibility reviews were the first conducted under this new regulation.
  • Improper payments include both overpayments and underpayments and are not necessarily fraudulent in nature. The majority of improper payments identified are overpayments. Underpayments account for approximately only 2% of improper payments.
  • State error rates in 2011 ranged from 1.5% to 32.7%. CMS shares this information with individual States, but does not publish it.

Reducing improper payments is a high priority for CMS. In collaboration with the States, CMS is working on multiple fronts to address reducing improper payments. Through the error rate measurement, CMS identifies and classifies types of errors and shares this information with each State. States then conduct an analysis to determine the root causes for improper payments to specifically identify why the errors occur, which is a necessary precursor to developing and implementing effective corrective actions. CMS works closely with states following each measurement cycle to develop state-specific Corrective Action Plans (CAPs). States, in close coordination with CMS, are responsible for implementing, monitoring, and evaluating the effectiveness of their CAPs. In addition, CMS is continuously reviewing the causes of errors and implementing national and state-focused activities to decrease Medicaid and CHIP improper payments. Examples include expanded education and outreach to the provider community, State education through the Medicaid Integrity Institute, and review of paid claims by Medicaid Integrity Contractors. Together, these efforts will result in more accurate claim payments and a reduction of waste and abuse in the Medicaid and CHIP programs.

Under Section 601 of CHIPRA, CMS is prohibited from publishing a CHIP error rate until six months after the final PERM rule is in effect. In addition, Section 205(c) of the Medicare and Medicaid Extenders Act of 2010 exempts CMS from completing a 2011 CHIP error rate. Therefore, CMS is not publishing a CHIP error rate at this time. The next CHIP error rate will be published in 2012.

[1] In 2010, the President set an ambitious goal to avoid $50 billion in improper payments between FY 2010 and FY 2012. To calculate this amount, we consider FY 2009 to be the baseline year. We compare the improper payment rate in FY 2009 to the current improper payment rate in FY 2011, and calculate what the improper payments would have been if the FY 2011 improper payment rate had been the same as it was in FY 2009. Thus, this calculation may be different from figures that calculate the specific program error rates changes from one year to the next

View the CMS Fact Sheet here.


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