HHS Made Nearly $90B in Improper Payments to Medicaid, Medicare

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By Thomas Beaton

– HHS made approximately $90 billion in improper payments to Medicaid and Medicare programs during 2017 and may require updated payment evaluation procedures to address improper payments, a new Government Accountability Office (GAO) report found.

HHS is just one of six federal agencies that rely on internal payment evaluation methods that are sometimes unable to detect complete risk factors of improper or under-documented payment claims. The payment review processes for CMS programs lead to significant overspending.

HHS programs report improper payments in Medicare fee-for-service by reviewing medical
necessity, compliance with documentation requirements, and coding of services provided to audit claims.

Within Medicaid, auditors review FFS claims, managed care payments, and the medical necessity of services to determine if providers or beneficiaries are eligible for payments. Both Medicare FFS and Medicaid flag non-responses from beneficiaries and providers as improper payments.

Even though HHS uses improper documentation to flag incorrectly made payments, the agency still experienced tens of billions in overpayments within CMS programs.

In 2017, HHS made improper payments to the Medicare fee-for-service (FFS) program participants totaling $36.2 billion, as well as $36.7 billion in improper payments to Medicaid. Additionally, Medicare Part C was improperly compensated for $14.2 billion and Medicare Part D received $1.2 billion in improper payments.

Many federal agencies do not use a baseline statistical annual analysis to review improper payments and rely on Office of Management and Budget (OBM)-approved adjusted methods in certain situations. For example, Medicaid relies on a three-year cycle to review payments made to state-sponsored Medicaid programs. GAO said additional oversight form OBM could address issues with improper payments.

GAO recommended that OMB should develop guidance and a risk-based methodology to help all federal agencies, including HHS, to assess improper payments.

“Further, although OMB guidance addresses requirements for sampling, it does not address how agencies test to identify improper payments,” GAO said.

“Without such assessments and guidance, there is increased risk that agencies’ processes may not address key risks of improper payments in their programs, calling into question the improper payment estimates for such programs and their usefulness for developing effective corrective actions.”

However, OBM did not fully concur with GAO and suggested each federal agency’s inspector general should head concerns related to improper payments. A senior policy advisor from OBM said that OBM would provide minimal guidance at an annual meeting to assist inspector generals.

“[The advisor] stated that OMB should not have to develop more specific guidance as each program and activity has its own risks,” GAO stated. “Instead, inspectors general are better equipped and positioned to review the sampling and estimation plans as part of their annual IPERA compliance audits and that agencies, their statisticians, and inspectors general should work out the best testing procedures for their agencies”

It remains to be seen if federal agencies will take increased action to address improper payments, which drastically affect federal spending rates. GAO estimated that in 2017 the federal government spent nearly $147 billion on improper payments.