Program Background

The Payment Integrity Information Act of 2019 (PIIA) (Public Law No. 116-117) requires government agencies to identify, report, and reduce erroneous payments in the government’s programs and activities. In compliance with the Implementation Guidance in Appendix C of the Office of Management and Budget (OMB) Circular No. A-123, executive branch agencies must conduct an annual review of their programs and activities to identify those susceptible to significant improper payments. When a program is identified as being susceptible to significant improper payments, agencies are required to estimate the annual amount of improper payments and report both the estimates and their plans to reduce these improper payments to Congress.

In compliance with the PIIA, the Department of Health and Human Services (HHS), Centers for Medicare & Medicaid Services (CMS) has implemented a systematic plan to identify, measure, and report erroneous payments within the Medicare Part D program, known as the Part D Improper Payment Measure (Part D IPM).

The Part D IPM measures errors in payments due to invalid and/or inaccurate Prescription Drug Event (PDE) records, which results in adjustments to beneficiaries’ benefit phases and reinsurance subsidy payments. The PDE records selected for review are evaluated using supporting documentation, including the prescription record hardcopy or medication order (RxRec) and Claim Detail File (CDF) collected from the Part D sponsors and their downstream entities. The findings from the validation process are imputed onto the corresponding PDE records for a randomly selected five percent sample of Part D beneficiary population. CMS calculates the estimated payment error for this sample of beneficiaries and extrapolates the result onto the payments of the remaining Part D beneficiaries to determine the Part D IPM gross payment error amount, and the national Part D IPM. The national Part D IPM reflects both overpayments and underpayments.