$23.2B in Improper Payments Tied to Medicare Fee-For-Service Programs

April 10, 2019 - Documentation issues and other errors led to Medicare fee-for-service programs improperly paying $23.2 billion in 2017, a GAO report revealed.

In comparison, Medicaid fee-for-service programs improperly paid $4.3 billion in the same year, suggesting that there are differences between Medicare and Medicaid documentation requirements for the same services, which contribute to variations in error rates.

CMS estimates Medicare and Medicaid fee-for-service (FFS) improper payments partly by conducting medical reviews, GAO states.

“Medical reviews are reviews of provider-submitted medical record documentation to determine whether the services were medically necessary and complied with coverage policies. Payments for services not sufficiently documented are considered improper payments,” the report said.

“In recent years, CMS estimated substantially more improper payments in Medicare, relative to Medicaid, primarily due to insufficient documentation.”

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GAO noted that for some services, Medicare has more extensive documentation requirements than Medicaid. While both programs pay for similar services, the same documentation can be sufficient in one program but not the other.

“The substantial variation in the programs’ improper payments raises questions about how well the programs’ documentation requirements help identify causes of program risks,” the report said. “As a result, CMS may not have the information it needs to effectively address program risks and direct program integrity efforts.”

GAO set out to examine Medicare and Medicaid documentation requirements, as well as the factors that contribute to improper payments due to insufficient documentation. Researchers evaluated CMS’s processes for estimating improper payments, including Medicare’s Comprehensive Error Rate Testing (CERT) and Medicaid’s Payment Error Rate Measurement (PERM).

The agency found that in fiscal year 2017, insufficient documentation comprised the majority of estimated FFS improper payments in Medicare and Medicaid, with 64 percent of Medicare and 57 percent of Medicaid improper payments due to insufficient documentation.

GAO also found that improper payments stemming from insufficient documentation for Medicare FFS increased substantially beginning in 2009, while insufficient documentation in Medicaid has remained relatively stable since 2011.

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CMS has attributed the increase in Medicare insufficient documentation to changes made in CERT review criteria, GAO said.

“Prior to 2009, CERT medical reviewers used ‘clinical inference’ to determine that claims were proper even when specific documentation was missing if, based on other documentation and beneficiary claim histories, the reviewers could reasonably infer that the services were provided and medically necessary,” the report said.

“Beginning with CMS’s fiscal year 2009 CERT report, in response to 2008 HHS-OIG recommendations, CMS revised the criteria for CERT medical reviews to no longer allow clinical inference and the use of claim histories as a source of review information.”

The team also reviewed Medicare and Medicaid documentation requirements based on statutes, regulations, and other national and state coverage policies.

GAO found that across all services in fiscal year 2017, the rate of insufficient documentation for Medicare was 6.1, while Medicaid had an insufficient documentation rate of just 1.3. For home health, durable medical equipment, and laboratory services, the insufficient documentation rate was at least 27 percentage points higher for Medicare than for Medicaid. For hospice services, the rate was nine percentage points higher.

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GAO noted four differences in coverage policy and documentation requirements that likely affected how Medicare and Medicaid conducted medical reviews, including face-to-face examinations, prior authorizations, signature requirements, and documentation from referring physicians for referred services.

Both Medicare and Medicaid require referring physicians to conduct a face-to-face examination of beneficiaries for some services, GAO noted. However, states were still in the process of implementing this requirement for Medicaid in fiscal year 2017. This requirement was likely part of the increase in documentation errors, the report said.

Additionally, Medicare does not have the same broad authority as state Medicaid agencies to implement prior authorization, which also could have contributed to insufficient documentation in Medicare.

Medicare also has more detailed standards for what constitutes a valid physician signature than Medicaid. Moreover, Medicare requires documentation from referring physicians to support the medical necessity of referred services, while Medicaid generally does not.

To address these issues, GAO recommends that CMS implement a process that regularly reviews Medicare and Medicaid documentation requirements. CMS should ensure that these recommendations are effective and appropriate at demonstrating compliance with coverage policies, and address program risks.

GAO also suggested that CMS ensure Medicaid medical reviews effectively address the underlying causes of improper payments. To do this, CMS could work with state Medicaid agencies to leverage other sources of information, such as state auditor data.

Going forward, CMS and state agencies will need further information about the reasons for improper payments in order to address these issues, GAO said.

“The substantial variation in Medicare and Medicaid estimated improper payment rates for the services we examined raise questions about how well the programs’ documentation requirements ensure that services were rendered in accordance with program coverage policies,” the report concluded.

“CMS and states need information about the underlying causes of improper payments to develop corrective actions that will effectively prevent or reduce future improper payments in Medicare and Medicaid FFS.”