Fiscal Year 2024 Improper Payments Fact Sheet

The Centers for Medicare & Medicaid Services (CMS) is committed to being a responsible steward of public funds and to promoting the sustainability of its programs for future generations. While CMS’ improper payments reporting programs are designed to protect the integrity of CMS programs, it is important to keep in mind that not all improper payments represent fraud or abuse. Improper payments are payments that do not meet CMS program requirements. They can be overpayments, underpayments, or payments where insufficient information was provided to determine whether a payment was proper. Most improper payments involve a state, contractor, or provider missing an administrative step. CMS is committed to ensuring the programmatic and fiscal integrity of its programs.

Here are the improper payment rates for CMS’ programs in fiscal year 2024:

• The Medicare Fee-for-Service (FFS) estimated improper payment rate was 7.66%, or $31.70 billion, marking the eighth consecutive year this figure has been below the 10% threshold for compliance established by improper payment statutory requirements.¹ The 2024 estimated rate is not statistically different from the 2023 Medicare FFS estimated improper payment rate of 7.38%.
• The Medicare Part C estimated improper payment rate was 5.61%, or $19.07 billion.  In FY 2024, CMS implemented changes to more accurately represent the Medicare Advantage population within the sample. The FY 2024 estimated rate is not statistically different from the FY 2023 estimated improper payment rate of 6.01%. 
• The Medicare Part D estimated improper payment rate was 3.70%, or $3.58 billion. In FY 2023, CMS implemented several methodology changes, and FY 2024 establishes a baseline. 
• The Medicaid improper payment rate (comprised of reviews in 2022, 2023, and 2024) was 5.09%, or $31.10 billion, a decrease from the 2023 reported rate of 8.58%. Of the 2024 Medicaid improper payments, 79.11% were the result of insufficient documentation. These payments typically involve situations where a state or provider missed an administrative step and do not necessarily indicate fraud or abuse.
• The Children’s Health Insurance Program (CHIP) improper payment rate (comprised of reviews in 2022, 2023, and 2024) was 6.11%, or $1.07 billion, a substantial decrease from the 2023 rate of 12.81%. Of the 2024 CHIP improper payments, 61.56% resulted from insufficient documentation, which is generally not indicative of fraud or abuse.
• The improved performance in the national Medicaid and CHIP improper payment estimates reflect 1) reviews that accounted for certain flexibilities afforded to states related to the COVID-19 public health emergency, such as suspended eligibility determinations and reduced requirements around provider enrollment and revalidations; and 2) improved state compliance with other program requirements. 
• The fiscal year (FY) 2024 improper payment rate for the Advance Payments of the Premium Tax Credit (APTC) program for the Federally-facilitated Exchange (FFE) for Benefit Year 2022 (January 1 to December 31, 2022) was 1.01% or $562.93 million. CMS found that the FFE properly paid an estimated 98.99 % of total outlays, or $55.14 billion, in Benefit Year 2022. 

What You Need to Know:

• The Payment Integrity Information Act of 2019 defines significant improper payments as either:
  1. improper payments greater than $10 million and over 1.5% of all payments made under that program, or
  2. improper payments greater than $100 million.
• The 2024 HHS Agency Financial Report provides the improper payment rates for the Medicare Fee-for-Service (FFS), Medicare Part C, Medicare Part D, Medicaid, CHIP, and Affordable Care Act Health Insurance Exchange Advance Payments of the Premium Tax Credit (APTC) programs.
• The vast majority of improper payments occurred in situations where a reviewer could not determine if a payment was proper because of insufficient documentation from a state, provider, or the Medicare Advantage Organization (MAO). While fraud and abuse are one cause of improper payments, not all improper payments represent fraud or abuse. Improper payment estimates are not fraud rate estimates.
• Improper payments can result from a variety of circumstances, including:
  • Items or services with no documentation.
  • Items or services with insufficient documentation.
  • Or, with respect to Medicaid, CHIP, and the FFE, no record of a required verification of an element of the individual’s eligibility, such as income.

• Proper payments occur when there is sufficient documentation to support payment in accordance with the program payment requirements. Two examples of proper payments include:
  • Payments where CMS or the state appropriately maintained documentation of an eligibility verification requirement and appropriately determined eligibility based on program eligibility and payment requirements.
  • Payments where sufficient documentation was provided to support medical necessity in accordance with program payment requirements.

Improper Payment Measurements:

Medicare Fee-for-Service

• CMS developed the Comprehensive Error Rate Testing (CERT) program to estimate the Medicare Fee-for-Service (FFS) program improper payment rate.
  • The CERT program reviews a statistically valid stratified random sample of Medicare FFS claims to determine if they were paid properly under Medicare coverage, coding, and billing rules. If these criteria are not met, the claim is counted as an improper payment.
• The majority of Medicare FFS improper payments fall into two categories:

1. Insufficient documentation
2. The documentation provided for the items or services billed did not sufficiently demonstrate medical necessity. 

Medicare Part C

• CMS estimates the Part C Medicare Advantage (MA) improper payments using the Part C Improper Payment Measure (IPM) methodology.
  • CMS calculates an annual capitated payment for each person with Medicare  enrolled in an MA Organization (MAO) based on diagnosis data submitted by MAOs to CMS. The diagnosis data are used to determine risk scores and calculate risk-adjusted payments to MAOs for their enrollees. Inaccurate or incomplete diagnosis data may result in improper payments made to MAOs.
  • CMS conducts the annual Part C IPM activity to estimate the improper payments for the Medicare Part C program due to unsubstantiated risk adjustment data.
  • Part C IPM reviews the medical record documentation for a statistically valid sample of Medicare Part C enrollees to ensure the diagnosis data used to determine payment to the MAO are present and in accordance with CMS rules and regulations.
• The majority of Part C improper payments fall into three categories:

1. The MAO’s supporting medical record documentation fails to substantiate the individual diagnosis data submitted for payment.
2. Missing medical record documentation.
3. Invalid medical record documentation, such as illegible documentation.

Medicare Part D

• CMS estimates the Part D Prescription Drug Benefit improper payments using the Part D IPM methodology.
  • The Medicare Part D IPM primarily focuses on analyzing Prescription Drug Events (PDEs) which includes details about prescription transaction, such as the drug prescribed, the quantity, and the associated costs. The PDE data are not the same as individual drug claim transactions but are summary extracts using CMS-defined standard fields.
  • CMS conducts the annual Part D IPM activity to identify improper payments resulting from invalid and/or inaccurate drug claims. These errors could lead to adjustments in individuals’ benefit phases, reinsurance subsidy payments, and CMS payments. CMS evaluates sampled drug claims using prescription record data and supporting documentation provided by the Part D Plan Sponsors.
  • The Part D IPM reviews a statistically valid stratified random sample of PDEs to ensure the supporting documentation validates payment attributes and processing was in accordance with CMS rules and regulations.
• Part D improper payments fall into these categories:

1. Missing or invalid documentation, such as missing authorization.
2. Drug pricing discrepancies.
3. Drug discrepancies, such as the drug dispensed contains a different active ingredient than the drug prescribed.

Medicaid & Children’s Health Insurance Program (CHIP)

• CMS estimates Medicaid and CHIP improper payments using the Payment Error Rate Measurement (PERM) program.
  • The PERM program uses a three-year, 17-state rotation, meaning each state is reviewed once every three years, and each cycle measurement includes one-third of all states. The most recent three cycles (for 2024, that is, 2024, 2023, and 2022) are combined to form each year’s overall national rate.
  • PERM ensures a statistically valid random sample representative of all Medicaid and CHIP payments matched with federal funds.
  • Medicaid and CHIP improper payment data released by CMS are based on reviews of whether states are implementing their Medicaid program and CHIP in accordance with federal and state payment and eligibility policies.
  • The national Medicaid and CHIP improper payment rates are based on reviews of the FFS, managed care, and eligibility components of a state’s Medicaid and CHIP program in the year under review.
  • In addition, the PERM program combines individual state component estimates to calculate the national component estimates. National component rates and the Medicaid and CHIP rates are weighted by state size, such that a state with a $10 billion program is weighted more in the national rate than a state with a $1 billion program.
• The majority of Medicaid and CHIP improper payment findings are the result of insufficient or missing documentation and do not necessarily indicate fraud or abuse.

ACA Exchange Advance Payments of the Premium Tax Credit

• CMS estimates Advance Payments of the Premium Tax Credit (APTC) improper payments using the Exchange Improper Payment Measurement (EIPM) program.
  • The EIPM program currently measures improper payments for the Federally-facilitated Exchange (FFE). The improper payment measurement methodology for State-based Exchanges (SBEs) is under development. CMS will continue to update the HHS AFR with the SBE improper payment measurement program development status.
  • The EIPM program measures improper payments based on a statistically valid random sample representative of all health insurance applications with APTC payments processed by the FFE.
  • APTC improper payment estimates are based on reviews of the FFE compliance with requirements surrounding payment and eligibility determinations.