The Centers for Medicare & Medicaid Services (CMS) announced today that the first improper payment rate for the Federally-facilitated Exchange (FFE) program was less than 1% for Benefit Year 2020, thanks in large part to the agency’s implementation of effective automated processes for the program’s eligibility determinations and payments. This finding highlights CMS’ commitment to being responsible stewards of public funds, and to ensuring the sustainability of its programs for future generations.
Improper payments are payments that do not meet CMS program requirements. These can be overpayments or underpayments, or payments where insufficient information was provided to determine whether a payment was proper. Most improper payments involve situations where a state or provider missed an administrative step. The vast majority of improper payments are not fraud, and improper payment estimates are not fraud rate estimates.
“Protecting our programs’ sustainability is one of CMS’ core strategic pillars. We are focused on program integrity so that people today ̶ and in the future ̶ continue to benefit from access to quality care,” said CMS Administrator Chiquita Brooks-LaSure. “This low rate of improper payments in the Federally-facilitated Exchange is a testament to the effectiveness of our efforts to ensure program integrity, furthering the Biden-Harris Administration’s goal of maintaining the long-term sustainability of CMS’ programs. We are committed to strengthening and maintaining these efforts to bring down improper payment rates across the board.”
This year marks the first time CMS has included measurements of the improper payment rate for the Advance payment of the Premium Tax Credit (APTC) program for the FFE in CMS’ and HHS’ annual 2022 Agency Financial Report. In 2022, CMS is reporting the improper payment rate for Benefit Year 2020 (January 1 to December 31, 2020). CMS found that the FFE properly paid an estimated 99.38% of total outlays, or $41 billion in Benefit Year 2020. The improper payment rate for the program was 0.62% or $256 million. CMS estimated the improper payment rate based on a review of a stratified random sample of applications to determine if the FFE properly performed the required eligibility determinations and paid the appropriate benefits for each sampled application. The primary causes of improper payments were manual errors associated with determining consumer eligibility for payments when verification by automated processes was insufficient or not possible. An improper payment could arise, for example, if a consumer is determined eligible for payments based on submitted documentation that did not meet requirements.
The FFE improper payment estimate does not reflect payments made by State-based Exchanges (SBEs). CMS continues to develop the improper payment measurement program for SBEs and will continue to provide updates on the development status of the SBE improper payment measurement through its annual Agency Financial Report.
Improper Payment Rates for Medicaid and CHIP Show Significant Decrease
Due to a combination of corrective actions implemented and COVID-19 review flexibilities, improper payment rates in Medicaid and the Children’s Health Insurance Program (CHIP) showed significant declines from last year in the latest Agency Financial Report.
The 2022 Medicaid improper payment rate was 15.62%, or $80.57 billion, a decrease from the 2021 reported rate of 21.69%. Of the 2022 Medicaid improper payments, 86.82% were the result of insufficient documentation. These payments involve situations where a state or provider missed an administrative step and does not indicate fraud or abuse. For CHIP, the 2022 improper payment rate was 26.75%, or $4.30 billion, a decrease from the 2021 rate of 31.84%. Of the 2022 CHIP improper payments, 76.05% were the result of insufficient documentation, not a finding of fraud or abuse.
These figures are calculated through CMS’ Payment Error Rate Measurement (PERM) program, which uses a 17-states-per-year, 3-year rotation to identify and measure improper payments in Medicaid and CHIP.
This year’s PERM measurement includes the first set of 17 states being measured a second time under an updated PERM eligibility review component, which CMS first began using in 2019. CMS established a baseline measurement of all 50 states and the District of Columbia in 2021, which allows CMS to measure the progress made by states since they were last reviewed, and target areas for additional oversight.
Medicare Fee-For-Service Improper Payment Rate Below the 10% Statutory Threshold for Sixth Consecutive Year
For 2022, the Medicare Fee-For-Service (FFS) estimated improper payment rate was 7.46%, marking the sixth consecutive year this figure has been below the 10% threshold for compliance established in the Payment Integrity Information Act of 2019.
CMS has seen continued success in its efforts to combat improper payments in durable medical equipment claims. Because of CMS’ corrective actions, durable medical equipment claims saw a $193 million reduction in estimated improper payments since 2021.
Medicare Part C and Part D Improper Payment Rates are Below the 10% Statutory Threshold
The 2022 Medicare Part C estimated improper payment rate is 5.42%. CMS implemented policy and methodology refinements to improve the accuracy of the payment error estimate. These refinements contributed to a decrease in the projected Medicare Part C improper payment rate, representing a new baseline rate. As a result, the 2022 Medicare Part C improper payment rate is not directly comparable with prior reporting years. The 2022 Medicare Part D estimated improper payment rate is 1.54%, a slight increase from 2021 that is likely the result of year-over-year variability.
More information on CMS’ Improper Payments Measurement Programs can be found at https://www.cms.gov/ImproperPayments.
To view the HHS Agency Financial Report, visit: www.hhs.gov/afr.
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