2011 Medicare Part D Improper Payment Error Rate

For fiscal year (FY) 2011 reporting, HHS will report its baseline composite Part D improper payment error rate estimate of 3.2 percent. This rate is reported in the HHS FY 2011 Agency Financial Report (AFR), and is based on Calendar Year (CY) 2009 final Part D payments. This is the first time a payment error measure will be reported for the Part D program, which was effective starting in Calendar Year 2006.[1]


The Part D payment error rate represents the combined impact on payment of five sources of error, described below:


MARx Payment System Error (MPE): measures errors in payments that arise during the routine CMS system processing of monthly payments to Part D plans. The MPE error estimate is 0.08 percent.


Payment Error related to Low-income Subsidy (PELS): measures incorrect low income cost sharing subsidy payments resulting from incorrect low income beneficiary status. The PELS error estimate is 0.14 percent.


Payment Error related to incorrect Medicaid Status (PEMS): measures payment errors due to incorrect assignment of Medicaid status for beneficiaries who are dually eligible for Medicare and Medicaid. Assignment of incorrect Medicaid status could lead to CMS making overpayments for low income subsidies for dual-eligible beneficiaries. The PEMS error estimate is 0.66 percent.


Payment Error related to Prescription Drug Event (PDE) Data Validation (PEPV): measures error in drug costs and low income payments in PDE data, using both prescription and Part D sponsor claim information. A PDE provides information about a prescription transaction. Incorrect reporting of drug costs by Part D sponsors will result in adjustments to beneficiaries’ benefit phases and in turn impacts low income cost sharing and reinsurance portions of Part D payments. The PEPV error estimate is 2.18 percent.


Payment Error related to Direct and Indirect Remuneration (PEDIR): measures error in final Part D program payment using corrected Direct and Indirect Remuneration (DIR) amounts reported by Part D sponsors to CMS. DIR is defined as price concessions (offered to purchasers by drug manufacturers, pharmacies, or other sources) that serve to decrease the costs incurred by the Part D sponsor for prescription drugs. Sponsors reported DIR amounts which are incorrect will result in incorrect CMS payments. The PEDIR error estimate is 0.15 percent.


Four of the five measures were reported as individual component estimates in prior fiscal years. The fifth measure, payment error related to direct and indirect remuneration (DIR) is being reported for the first time this year.


[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.



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