Estimating Payment Error for Medicare Acute Care Inpatient Services

CMS recently assumed responsibility forestimating the Medicare fee-for-service (FFS)error rate from the Office of the InspectorGeneral (OIG). Here, the method used to cal-culate national, by State, and by error type,estimates for the inpatient acute care portionof this rate is presented. For fiscal years (FYs)1998 and 2000 discharges, national esti-mates for the net error rate were 2.6 and 2.8percent, respectively, about $2 billion annual-ly. Wide variation in State rates illustratesthat estimates to the State level are essentialfor targeting and monitoring interventions toreduce improper Medicare inpatient acutecare reimbursements.