Under the Improper Payments Information Act of 2002, as amended, the Department of Health and Human Services (HHS) is required to annually report on improper payments and meet certain improvement metrics. In a report released last fall, HHS identified approximately $96.9 billion in gross improper payments in fiscal year (FY) 2016. Improper payments are payments that should not have been made or were made in an improper amount (either overpayments or underpayments). Of the $96.9 billion, just over $7 billion were underpayments, with the other nearly $90 billion in overpayments. On May 16, 2017, the HHS Office of Inspector General (OIG) released a report examining these improper payments to determine HHS’s compliance with the statute. In violation of the statute, the improper payment rates for both Medicare fee-for-service and Medicaid exceeded 10 percent in FY 2016. The OIG also found that HHS did not meet its improper payment reduction goals for the Medicare Advantage program and the Children’s Health Insurance Program (CHIP).
HHS identified an improper payment rate of 11 percent for Medicare fee-for-service, mainly related to insufficient documentation and medical necessity errors. This amounted to over $41 billion in improper payments. Documentation errors for home health were particularly high (over 42 percent), as were inpatient rehabilitation facility claims (over 62 percent). Medicaid payment errors were just slightly over the target at 10.48 percent, with over $35 billion in improper payments. HHS identified states’ noncompliance with program integrity provisions as the primary causes (e.g., requiring ordering/referring providers to be enrolled in Medicaid, requiring risk-based screening of providers prior to enrollment and requiring National Provider Identifiers to be submitted with all electronic institutional claims). For both Medicare fee-for-service and Medicaid, the OIG recommended that “HHS focus on the root causes of the improper payment percentage and evaluate critical and feasible action steps” to decrease the rates.
In addition, Congress required HHS to meet certain improper payment reduction targets with each program, which it failed to do for Medicare Advantage and CHIP. The error rate for Medicare Advantage was 9.99 percent (target was 9.14 percent), which HHS attributed mainly to documentation issues by third parties, resulted in nearly $11.5 billion in improper payments. The OIG recommended that HHS communicate with providers and plans on documentation requirements and monitor adherence throughout the year. The CHIP error rate was 7.99 percent (target was 6.81 percent), totaling almost $740 million in improper payments, which HHS attributed to administrative errors made by state and local agencies. The OIG recommended that HHS work with states to bring their respective systems into compliance.
The OIG also noted that HHS failed to calculate the FY 2016 improper payment rate for Temporary Assistance for Needy Families (TANF) altogether and failed to enumerate a TANF corrective action plan as required. HHS also failed to meet the improper payment reduction goals for the Foster Care program. Lastly, contrary to statutory requirements, HHS failed to secure a Medicare Advantage Recovery Audit Contractor.
HHS responded that it concurred with the OIG’s findings.
The OIG’s report – U.S. Department of Health and Human Services Met Many Requirements of the Improper Payments Information Act of 2002 but Did Not Fully Comply for Fiscal Year 2016 – is available here. HHS’s most recent Agency Financial Report is available here.
