Medicare Made $12.1B in Improper Payments Last Year; Figure Continues To Improve

HHS on Feb. 21 reported that Medicare paid out a projected $12.1 billion in improper payments last year, about half the estimated amount of such payments in 1996, the AP/Philadelphia Inquirer reports. Auditors from the HHS Office of Inspector General reviewed 6,594 randomly selected claims out of the roughly 931 million claims filed last year through Medicare fee-for-service programs, which totaled $191.8 billion (AP/Philadelphia Inquirer, 2/22). Last year's improper payment rate was 6.3%, a slight improvement from the 6.8% rate in 2000, when Medicare paid out an estimated $11.9 billion in improper payments out of $173.6 billion in total payments. In 1996, the first year that the HHS inspector general estimated overpayments, Medicare paid out $23.2 billion in improper payments, a rate of 13.8%.

Possible Causes
Among the possible causes of improper payments, 43% of such payments last year were attributed to "medically unnecessary services," usually when a beneficiary received unneeded inpatient hospital care. Another 43% were due to "documentation deficiencies," or cases where medical records to support a claim were insufficient or nonexistent. Seventeen percent of cases were attributed to miscoding that resulted in a payment for a higher level of care than was actually administered. The review did not measure fraud or attempt to discern the exact cause of an improper payment. HHS Secretary Tommy Thompson said in a statement, "We are continuing to make significant improvements to assure that payments for Medicare services are accurate and correctly documented. We are also working to make our procedures and rules more understandable through our regulatory reform efforts, which will help physicians and other providers avoid unintended errors." CMS Administrator Tom Scully added, "There is still important work to be done. ... [W]e are developing a financial system that will enable us to better manage our programs. Providers are getting more accurate, and as a result taxpayer dollars are more focused on good patient care" (HHS release, 2/21). The full OIG report is available online.