Centers for Medicare & Medicaid Services (CMS) - Medicare Fee-for-Service (FFS)

High-priority program

Home > Agencies & Programs > Centers for Medicare & Medicaid Services (CMS) - Medicare Fee-for-Service (FFS)

Program level Payment Integrity results

Sponsoring agency: Department of Health and Human Services

Medicare Fee-for-Service (FFS) is a federal health insurance program that provides hospital insurance (Part A) and supplementary medical insurance (Part B) to eligible citizens. The primary causes of overpayments continue to be insufficient documentation and medical necessity errors for skilled nursing facilities, hospital outpatient, hospice, and home health claims. A known barrier to preventing improper payments is that providers' and suppliers' compliance with requirements is outside of the agency's control.

View on Federal Program Inventory

PROGRAM METRICS

$399,777 M

in FY 2021 outlays, with a

93.7%

payment accuracy rate

PROGRAM METRICS

$421,914 M

in FY 2022 outlays, with a

92.5%

payment accuracy rate

PROGRAM METRICS

$423,009 M

in FY 2023 outlays, with a

92.6%

payment accuracy rate

PROGRAM METRICS

$413,719 M

in FY 2024 outlays, with a

92.3%

payment accuracy rate

PROGRAM METRICS

$439,879 M

in FY 2025 outlays, with a

93.4%

payment accuracy rate

  • Improper payment estimates over time
    View as:

    Chart toggle amounts:
    Proper payments
    Overpayment
    Underpayment
    Technically improper
    Unknown

Payment Integrity results

  • FY 2021 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    07/2019 - 06/2020


    Confidence interval:

    >95%


    Margin of error:

    +/-1917.5

Overpayments

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $0.0 M

Overpayment root cause Overpayment amount
Amount of overpayments outside the agency's control $24,584.87 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $24,584.87 M

Underpayments

Underpayment root cause Underpayment amount
Amount of underpayments $449.31 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $449.31 M

Technically improper payments

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

Additional information

$449.31 M

Unknown Payment Details

Evaluation of corrective actions

Annually, the agency identifies the root causes of IPs and UPs and develops specific corrective actions to address them. This work is reported on through the AFR process. This has led to a consistent reduction in the Medicare FFS improper payment rate for the last several years.

Future payment integrity outlook

Centers for Medicare & Medicaid Services (CMS) - Medicare Fee-for-Service (FFS) has established a baseline.

Out-Year improper payment and unknown payment projections and target
Current year +1 estimated future outlays $382,175.81 M
Current year +1 estimated future improper payments $23,542.03 M
Current year +1 estimated future unknown payments $0 M
Current year +1 estimated future improper payment and unknown payment rate 6.16 %

The program's current year improper payment and unknown payment rate of 6.26 % has not been achieved with a balance of payment integrity risk and controls and does not represent the lowest rate that can be achieved without disproportionally increasing another risk, therefore it is not the tolerable rate.

A tolerable rate has not been established for this program.

A tolerable rate has not been established for this program.

Additional programmatic information

  • FY 2022 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    07/2020 - 06/2021


    Confidence interval:

    95% to <100%


    Margin of error:

    +/-0.01

Overpayments

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $0 M

Overpayment root cause Overpayment amount
Amount of overpayments outside the agency's control $30,677.99 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $30,677.99 M

Underpayments

Underpayment root cause Underpayment amount
Amount of underpayments $778.72 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $778.72 M

Technically improper payments

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

Additional information

$778.72 M

Unknown Payment Details

Evaluation of corrective actions

Annually, the agency identifies the root causes of IPs and UPs and develops specific corrective actions to address them. The work is reported on through the AFR process. This has led to a general reduction in the Medicare FFS improper payment rate for the last several years.

Future payment integrity outlook

Centers for Medicare & Medicaid Services (CMS) - Medicare Fee-for-Service (FFS) has established a baseline.

Selection of this improper payment rate target considers payment policy changes that impact medical review and are likely to result in improper payment effects based on recent years trends. CMS does not believe there are any specific factors that will have a significant impact on the Medicare FFS improper payment rate over the next year.

Out-Year improper payment and unknown payment projections and target
Current year +1 estimated future outlays $455,755.81 M
Current year +1 estimated future improper payments $33,543.63 M
Current year +1 estimated future unknown payments $0 M
Current year +1 estimated future improper payment and unknown payment rate 7.36 %
Current year +1 estimated future improper payment and unknown payment reduction target 7.36 %

The program's current year improper payment and unknown payment rate of 7.46 % may or may not be the tolerable rate. The agency has not yet determined the tolerable rate for this program.

Methodology to determine the tolerate rate for this program has not been determined.

A tolerable rate has not been established for this program.

A tolerable rate has not been established for this program.

Additional programmatic information

For 2022, the Medicare Fee-For-Service (FFS) estimated improper payment rate is 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.
Although the FFS estimated improper payment rate increased slightly from 2021, CMS has seen continued success in its efforts to combat improper payments in durable medical equipment claims. Due to CMS’ corrective actions, durable medical equipment claims saw a $193 million reduction in estimated improper payments since 2021.

  • FY 2023 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    07/2021 - 06/2022


    Confidence interval:

    95% to <100%


    Margin of error:

    +/-0.6

  • Actions taken & planned to mitigate improper payments

    Mitigation strategy Description of the corrective action Completion date Status
    Automation
    Due to the high volume of Medicare claims processed by HHS daily and the significant cost associated with conducting medical reviews of an individual claim, HHS relies on automated edits to identify inappropriate claims. HHS designed its systems to detect anomalies and prevent payment for many erroneous claims through these efforts. HHS also uses the National Correct Coding Initiative (NCCI) to prevent inappropriate payments of Medicare Part B claims and Medicaid claims.
    The corrective action was not fully completed this reporting period
    Not Completed
    Training
    HHS educated providers and Durable Medical Equipment Prosthetics/Orthotics & Supplies (DMEPOS) providers through Medicare Learning Network (MLN) articles called Provider Compliance Tips. HHS posted 31 articles, each on a different DMEPOS-related service area, to the website in FY 2023. HHS contractors also give individualized provider education opportunities after targeted probe and educate audits, if necessary. HHS releases comparative billing reports and detailed review results letters to providers to give them additional information on billing correctly.
    The corrective action was not fully completed this reporting period
    Not Completed
    Change Process
    In FY 2023, HHS continued existing prior authorization processes for hospital outpatient, DMEPOS, and Repetitive, Scheduled Non-Emergent Ambulance Transport. CMS added facet joint interventions and a voluntary prior authorization program for 53 power mobility device (PMD) accessories. CMS also continued to screen new and existing Medicare providers and suppliers. CMS continued to use the Medical Review Accuracy Award Fee Metric to measure the accuracy of Medicare Administrative Contractor (MAC) decisions across MACs. CMS introduced a Review Choice Demonstration in Alabama for Inpatient Rehabilitation Facility (IRF) Services. The Review Choice Demonstration for Home Health Services continues with future expansion.
    The corrective action was not fully completed this reporting period
    Not Completed
    Audit
    HHS continued the Targeted Probe and Educate (TPE) process, which consists of up to three rounds of review of 20-40 claims per round, with one-on-one education provided at the end of each round. Supplemental Medical Review Contractor (SMRC) and Recovery Audit Contractor (RAC) were also ongoing in FY 2023.
    The corrective action was not fully completed this reporting period
    Not Completed
    Predictive Analytics
    The Fraud Prevention System analyzes Medicare FFS claims using sophisticated algorithms to target investigative resources; generate alerts for suspect claims or providers and suppliers; and facilitate and support investigations of the most egregious, suspect, or aberrant activity.
    The corrective action was not fully completed this reporting period
    Not Completed
    Automation
    Due to the high volume of Medicare claims processed by HHS daily and the significant cost associated with conducting medical reviews of an individual claim, HHS will continue to rely on automated edits to identify inappropriate claims. HHS designed its systems to detect anomalies and prevent payment for many erroneous claims through these efforts. HHS will also continue using the National Correct Coding Initiative (NCCI) to prevent inappropriate payments of Medicare Part B claims and Medicaid claims.
    FY2024
    Planned
    Training
    HHS will educate providers and Durable Medical Equipment Prosthetics/Orthotics & Supplies (DMEPOS) providers through Medicare Learning Network (MLN) articles called Provider Compliance Tips. HHS contractors will also continue to give individualized provider education opportunities after targeted probe and educate audits, if necessary. HHS will also continue releasing comparative billing reports and detailed review results letters to providers to give them additional information on billing correctly.
    FY2024
    Planned
    Change Process
    HHS will continue existing prior authorization processes. HHS will also continue to screen new and existing Medicare providers and suppliers. HHS will continue to use the Medical Review Accuracy Award Fee Metric to measure the accuracy of Medicare Administrative Contractor (MAC) decisions across MACs.
    FY2024
    Planned
    Audit
    HHS will continue the Targeted Probe and Educate (TPE) process , which consists of up to three rounds of review of 20-40 claims per round, with one-on-one education provided at the end of each round. .
    FY2024
    Planned
    Predictive Analytics
    The Fraud Prevention System analyzes Medicare FFS claims using sophisticated algorithms to target investigative resources; generates alerts for suspect claims or providers and suppliers; and facilitates and supports investigations of the most egregious, suspect, or aberrant activity. HHS will continue to use the Fraud Prevention System as a key corrective action in FY 2024.
    FY2024
    Planned

Overpayments

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $0 M

Provider/supplier non-compliance with requirements is outside agency control. The primary causes of Medicare Fee-for-Service improper payments are insufficient documentation and medical necessity errors for skilled nursing facilities, hospital outpatient, inpatient rehabilitation facilities, and hospice claims. Refer to the HHS AFR for information.
Overpayment root cause Overpayment amount
Amount of overpayments outside the agency's control $30,213.46 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $30,213.46 M

Overpayment type Eligibility element/information needed Eligibility amount
Overpayments Outside Agency Control Contractor or Provider Status $20,847.29 M
Overpayments Outside Agency Control Medical Status $9,366.17 M

Underpayments

Underpayment root cause Underpayment amount
Amount of underpayments $1,015.34 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $1,015.34 M

Eligibility element/information needed Eligibility amount
Contractor or Provider Status $20.31 M
Medical Status $995.03 M

Mitigation strategies taken Mitigation strategies planned
Audit, Change Process, Training Audit, Change Process, Training

Technically improper payments

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

Additional information

$1,015.34 M

Unknown Payment Details

Evaluation of corrective actions

HHS continues to prioritize and implement effective corrective actions and mitigation strategies that reduce improper payments and unknown payments agency-wide as evidenced by its two consecutive year of reductions in the improper payment rate. Specifically, from FY 2022 to FY 2023, the Medicare FFS improper payment rate decreased from 7.46% to 7.38%.

The actions taken and planned to address the root causes of the improper payment rate and are proportional to the associated amount and address the root causes of the improper payments. For example, in FY 2023, the primary drivers of the improper payment rate are Skilled Nursing Facility (SNF), Hospital Outpatient, and Inpatient Rehabilitation Facility (IRF) claims. To drive down the improper payment rate, HHS continues nationwide prior authorization for hospital outpatient claims. Medicare review contractors continue to identify and prevent improper payments due to documentation errors in error-prone claim types, including SNF, hospital outpatient and IRF. HHS also announced an expansion of its home health review choice demonstration to a sixth state and started a review choice demonstration for inpatient rehabilitation facility services. HHS will continue to develop and prioritize additional CAPs in FY 2024 based on the FY 2023 improper payment rate data.

Future payment integrity outlook

Centers for Medicare & Medicaid Services (CMS) - Medicare Fee-for-Service (FFS) has established a baseline.

Selection of this improper payment rate target considers payment policy changes that impact medical review and are likely to result in improper payment effects based on recent years trends. CMS does not believe there are any specific factors that will have a significant impact on the Medicare FFS improper payment rate over the next year.

Out-Year improper payment and unknown payment projections and target
Current year +1 estimated future outlays $425,548.81 M
Current year +1 estimated future improper payments $30,980.03 M
Current year +1 estimated future unknown payments $0 M
Current year +1 estimated future improper payment and unknown payment rate 7.28 %
Current year +1 estimated future improper payment and unknown payment reduction target 7.28 %

The program's current year improper payment and unknown payment rate of 7.38 % may or may not be the tolerable rate. The agency has not yet determined the tolerable rate for this program.

Methodology to determine the tolerable rate for this program has not been determined.

A tolerable rate has not been established for this program. The tolerable rate will be identified when the methodology is developed. Once the tolerable rate is developed, the agency can determine if we have what is needed with respect to internal controls, human capital and information system and other infrastructure to reduce Improper Payments and Unknown Payments to the tolerable rate.

A tolerable rate has not been established for this program. Once the tolerable rate is developed, the agency can determine if we have what is needed with respect to internal controls, human capital and information system and other infrastructure to reduce Improper Payments and Unknown Payments to the tolerable rate and we can describe the resources requested in the most recent budget submission to establish and maintain internal controls.

Additional programmatic information

CMS is committed to strengthening and maintaining program integrity efforts to reduce improper payments rates. CMS has developed preventive measures for specific service areas with high improper payment estimates, such as Skilled Nursing Facility (SNF), hospital outpatient, hospice, and home health. CMS believes targeted corrective actions will prevent and reduce improper payments in these areas. CMS takes a comprehensive approach in developing corrective actions such as improved policy, provider enrollment, integrated medical review approaches, systems edits, and expanded provider education.

The Reporting Year (RY) 2023 Medicare Fee-for-Service (FFS) improper payment rate is statistically similar to the RY 2022 Medicare FFS improper payment rate.

  • FY 2024 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    07/2022 - 06/2023


    Confidence interval:

    95% to <100%


    Margin of error:

    +/-0.4

  • Actions taken & planned to mitigate improper payments

    Mitigation strategy Description of the corrective action Completion date Status
    Automation
    Due to the high volume of Medicare claims processed by HHS daily and the significant cost associated with conducting medical reviews of an individual claim, HHS relies on automated edits to identify inappropriate claims. HHS designed its systems to detect anomalies and prevent payment for many erroneous claims through these efforts. HHS also uses the National Correct Coding Initiative (NCCI) to prevent inappropriate payments of Medicare Part B claims and Medicaid claims.
    FY2024 Q4
    Completed
    Training
    HHS educated providers and Durable Medical Equipment Prosthetics/Orthotics & Supplies (DMEPOS) providers through Medicare Learning Network (MLN) articles called Provider Compliance Tips. The tips cover Part A, B, and DME services with high Medicare improper payment rates. HHS posted 61 articles to the website in FY 2024. HHS contractors also give individualized provider education opportunities after targeted probe and educate audits, if necessary.
    FY2024 Q4
    Completed
    Change Process
    In FY 2024, HHS continued existing prior authorization processes for hospital outpatient, DMEPOS, and Repetitive, Scheduled Non-Emergent Ambulance Transport. HHS announced the addition of six orthoses codes and three osteogenesis stimulator codes to the Required Prior Authorization List. Additionally, HHS continued to screen new and existing Medicare providers and suppliers. HHS also continued to use the Medical Review Accuracy Award Fee Metric to measure the accuracy of Medicare Administrative Contractor (MAC) decisions across MACs. HHS introduced a Review Choice Demonstration for Inpatient Rehabilitation Facility (IRF) Services in Pennsylvania and continued the demonstration in Alabama. The Review Choice Demonstration for Home Health Services continues with future expansion. HHS worked to revamp its hospice program integrity strategy to counter fraud. Also in FY 2024, HHS continued the SNF 5-Claim Probe and Educate program is to assist SNFs in understanding how to bill appropriately under the new Patient Driven Payment Model (PDPM).
    FY2024 Q4
    Completed
    Audit
    HHS continued the Targeted Probe and Educate (TPE) process, which consists of up to three rounds of review of 20-40 claims per round, with one-on-one education provided at the end of each round. Supplemental Medical Review Contractor (SMRC) and Recovery Audit Contractor (RAC) were also ongoing in FY 2024.
    FY2024 Q4
    Completed
    Predictive Analytics
    The Fraud Prevention System analyzes Medicare FFS claims using sophisticated algorithms to target investigative resources; generates alerts for suspect claims or providers and suppliers; and facilitates and supports investigations of the most egregious, suspect, or aberrant activity.
    FY2024 Q4
    Completed
    Automation
    Due to the high volume of Medicare claims processed by HHS daily and the significant cost associated with conducting medical reviews of an individual claim, HHS relies on automated edits to identify inappropriate claims. HHS designed its systems to detect anomalies and prevent payment for many erroneous claims through these efforts. HHS also uses the National Correct Coding Initiative (NCCI) to prevent inappropriate payments of Medicare Part B claims and Medicaid claims. HHS will continue to use these strategies to reduce iimproper payments in FY 2025.
    FY2025
    Planned
    Training
    HHS will educate providers and Durable Medical Equipment Prosthetics/Orthotics & Supplies (DMEPOS) providers through Medicare Learning Network (MLN) articles called Provider Compliance Tips. HHS contractors will also continue to give individualized provider education opportunities after targeted probe and educate audits, if necessary. HHS will resume releasing comparative billing reports and detailed review results letters to providers to give them additional information on billing correctly.
    FY2025
    Planned
    Change Process
    In FY 2025, HHS will continue the existing prior authorization processes for hospital outpatient, DMEPOS, and Repetitive, Scheduled Non-Emergent Ambulance Transport. CMS will also continue to screen new and existing Medicare providers and suppliers. CMS will continue to use the Medical Review Accuracy Award Fee Metric to measure the accuracy of Medicare Administrative Contractor (MAC) decisions across MACs. CMS will continue the Review Choice Demonstration for Inpatient Rehabilitation Facility (IRF) Services. The Review Choice Demonstration for Home Health Services will also continue with future expansion. HHS will continue working on its hospice program integrity strategy to counter fraud. HHS will also continue the SNF 5 Claim Probe and Educate program to assist SNFs in understanding how to bill appropriately under the new Patient Driven Payment Model (PDPM).
    FY2025
    Planned
    Audit
    HHS will continue the Targeted Probe and Educate (TPE) process , which consists of up to three rounds of review of 20-40 claims per round, with one-on-one education provided at the end of each round. Supplemental Medical Review Contractor (SMRC) and Recovery Audit Contractor (RAC) activities will also continue in FY 2025.
    FY2025
    Planned
    Predictive Analytics
    The Fraud Prevention System analyzes Medicare FFS claims using sophisticated algorithms to target investigative resources; generates alerts for suspect claims or providers and suppliers; and facilitates and supports investigations of the most egregious, suspect, or aberrant activity. HHS will continue to use the Fraud Prevention System as a key corrective action in FY 2025.
    FY2025
    Planned

Overpayments

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $0.0 M

Provider/supplier non-compliance with requirements is outside agency control. The primary causes of Medicare Fee-for-Service improper payments are insufficient documentation and medical necessity errors for skilled nursing facilities, hospital outpatient, inpatient rehabilitation facilities, and hospice claims. Refer to the HHS AFR for information.
Overpayment root cause Overpayment amount
Amount of overpayments outside the agency's control $31,000.65 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $31,000.65 M

Overpayment type Eligibility element/information needed Eligibility amount
Overpayments Outside Agency Control Contractor or Provider Status $21,390.45 M
Overpayments Outside Agency Control Medical Status $9,610.2 M

Underpayments

Underpayment root cause Underpayment amount
Amount of underpayments $701.98 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $701.98 M

Eligibility element/information needed Eligibility amount
Contractor or Provider Status $70.2 M
Medical Status $631.78 M

Mitigation strategies taken Mitigation strategies planned
Audit, Automation, Change Process, Predictive Analytics, Training Audit, Automation, Change Process, Predictive Analytics, Training

Technically improper payments

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

Additional information

$701.98 M

Unknown Payment Details

Evaluation of corrective actions

HHS continues to prioritize and implement effective corrective actions and mitigation strategies that reduce improper payments and unknown payments agency-wide as evidenced by its error rate of 7.66%. The actions taken and planned to address the root causes of the improper payment rate and are proportional to the associated amount and address the root causes of the improper payments. For example, in FY 2024, the primary drivers of the improper payment rate are Skilled Nursing Facility (SNF), Hospital Outpatient, Inpatient Rehabilitation Facility (IRF), and Hospice claims. To drive down the improper payment rate, HHS continues nationwide prior authorization for hospital outpatient claims. Medicare review contractors continue to identify and prevent improper payments due to documentation errors in error-prone claim types, including SNF, hospital outpatient and IRF. HHS also revamped its hospice strategy to reduce the hospice error rate. HHS will continue to develop and prioritize additional CAPs in FY 2025 based on the FY 2024 improper payment rate data.

The actions that will be taken are adequate, as they are focused on specific service area that are driving the error rate . HHS instituted a number of corrective actions designed to prevent improper payments and will continue to utilize these corrective action plans in FY 2025. Additionally, HHS corrective actions will continue to focus on audits, education, and process change, which are likely to lead to a reduction in the error rate.

HHS has developed preventive measures for specific service areas with high improper payment estimates, such as hospital outpatient, SNF, home health, and hospice and will continue to use these measures in FY 2025. HHS believes targeted actions will prevent and reduce improper payments in these areas. HHS will continue to implement corrective actions for payment errors resulting from missing or insufficient medical record documentation and medical necessity issues.

HHS will prioritize corrective actions based upon specific service areas that were driving the error rate. Based on the error rate data, HHS will develop corrective action plans to drive down the error rate. These action plans led to a seventh consecutive year of HHS exceeding (reporting below) the 10% threshold for compliance.

Future payment integrity outlook

Centers for Medicare & Medicaid Services (CMS) - Medicare Fee-for-Service (FFS) has established a baseline.

Selection of this improper payment rate target considers payment policy changes that impact medical review and are likely to result in improper payment effects based on recent years trends. CMS does not believe there are any specific factors that will have a significant impact on the Medicare FFS improper payment rate over the next year.

Out-Year improper payment and unknown payment projections and target
Current year +1 estimated future outlays $457,976.2 M
Current year +1 estimated future improper payments $34,165.02 M
Current year +1 estimated future unknown payments $0 M
Current year +1 estimated future improper payment and unknown payment rate 7.46 %
Current year +1 estimated future improper payment and unknown payment reduction target 7.46 %

The program's current year improper payment and unknown payment rate of 7.66 % may or may not be the tolerable rate. The agency has not yet determined the tolerable rate for this program.

Methodology to determine the tolerable rate for this program has not been determined.

A tolerable rate has not been established for this program. The tolerable rate will be identified when the methodology is developed. Once the tolerable rate is developed, the agency can determine if we have what is needed with respect to internal controls, human capital and information system and other infrastructure to reduce Improper Payments and Unknown Payments to the tolerable rate.

To establish and maintain payment integrity internal controls in HHS included the following program integrity proposals in its FY 2026 Budget request:

• Share Information on Providers Subject to a Medicare Payment Suspension with Supplemental Payers and Hold Beneficiaries Harmless
• Establish an Access-to-Care Exceptions Process for Future Enrollment Moratoria Provide the Secretary with the authority to establish an exceptions process for any future enrollment moratoria based on access-to-care concerns.
• Expand Prior Authorization to Medicare Fee-for-Service Home Health Services
• Allow More Flexibility for Early Termination/Cancellation of Medicare Practitioner Opt-Out
• Increase Ownership Transparency and Require Skilled Nursing Facility Private Equity or Real Estate Investment Trust Ownership to Provide Additional Disclosures
• Ensure Providers that Violate Medicare Safety Requirements and Have Harmed Patients Cannot Quickly Reenter the Program
• Prohibit Unsolicited Medicare Beneficiary Contacts
• Bolster Medicare & Medicaid Affiliations Provision by Targeting Problematic Nursing Home Owners and Decreasing Provider Affiliations Reporting Burden

Additional programmatic information

The Reporting Year (RY) 2024 Medicare Fee-for-Service (FFS) improper payment rate is statistically similar to the RY 2023 Medicare FFS improper payment rate.

Accountability for detecting, preventing, and recovering improper payments

The agency's internal controls to detect, prevent, and recover improper payments are reported annually in the AFR. In addition, the agency sets annual performance goals related to the improper payment rates and reports quarterly on specific corrective actions to address improper payment rates through the quarterly scorecard process for high-priority programs.

  • FY 2025 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    07/2023 - 06/2024


    Confidence interval:

    95% to <100%


    Margin of error:

    +/-0.6

Causes

The primary causes of Medicare Fee-for-Service improper payments are insufficient documentation and medical necessity errors for skilled nursing facilities, hospital outpatient, hospice, and inpatient rehabilitation facilities claims.

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $0.0 M
Amount of overpayments outside the agency's control $27,869.7 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
Amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
Amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $27,869.7 M

Underpayment root cause Underpayment amount
Amount of underpayments $956.88 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $956.88 M

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

The amount that could either be proper or improper but the agency is unable to determine whether it was proper or improper as a result of insufficient or lack of documentation $0.0 M

Prevention

To correct the causes of improper payments and to prevent future improper payments,  HHS is implementing corrective actions including, provider education, automated system edits, enhanced prior authorization, medical reviews, and predictive data analytics to reduce and prevent improper payments.  

In FY 2025, HHS launched the five-year Ambulatory Surgical Center Prior Authorization demonstration in 10 states to verify compliance with coverage, coding, and payment rules before services are rendered and claims are paid to prevent improper payments.
HHS continues to prioritize and implement effective corrective actions and mitigation strategies that reduce improper payments and unknown payments agency-wide as evidenced by its error rate of 6.55%, a decrease from 7.66% in FY 2024. The actions taken and planned to address the root causes of the improper payment rate and are proportional to the associated amount and address the root causes of the improper payments. For example, in FY 2025, the primary drivers of the improper payment rate are Skilled Nursing Facility (SNF), Hospital Outpatient, Inpatient Rehabilitation Facility (IRF), and Hospice claims. To drive down the improper payment rate, HHS continues nationwide prior authorization for hospital outpatient claims. Medicare review contractors continue to identify and prevent improper payments due to documentation errors in error-prone claim types, including SNF, hospital outpatient and IRF.  HHS will continue to develop and prioritize additional CAPs in FY 2026 based on the FY 2025 improper payment rate data.

HHS will prioritize corrective actions based upon specific service areas that were driving the error rate. Based on the error rate data, HHS will develop corrective action plans to drive down the error  rate. These action plans led to an ninth consecutive year of HHS exceeding (reporting below) the 10% threshold for compliance.

Payment type Mitigation strategies taken Mitigation strategies planned
Overpayments Automation Audit, Automation, Change Process, Training
Underpayments Audit, Change Process, Training Audit, Change Process, Training

Eligibility element/information needed Description of the eligbility element/information
Contractor or Provider Status Status or standing of contractor or provider, including recipient eligibility to provide medical services
Medical Status Identifies whether a person is sick/healthy

Additional information

The Reporting Year (RY) 2025 Medicare Fee-for-Service (FFS) improper payment rate is statistically lower than the RY 2024 Medicare FFS improper payment rate.

Reduction target

6.45 %

A tolerable rate has not been established for this program. The tolerable rate will be identified when the methodology is developed. Once the tolerable rate is developed, the agency can determine if we have what is needed with respect to internal controls, human capital and information system and other infrastructure to reduce Improper Payments and Unknown Payments to the tolerable rate.

To establish and maintain payment integrity internal controls in HHS included the following program integrity proposals in its FY 2027 Budget request:
• Share Information on Providers Subject to a Medicare Payment Suspension with • Supplemental Payers and Hold Beneficiaries Harmless
• Expand PA for Excessively Ordered Services
• Expand Prior Authorization to Medicare FFS Home Health Services
• Allow ordering providers to submit PA requests for FFS
• Established Authority to Reject a DME Supplier Surety Bond if the Surety Failed to Make a Prior Required Payment(s) to CMS

The agency's internal controls to detect, prevent, and recover improper payments are reported annually in the AFR. In addition, the agency sets annual performance goals related to the improper payment rates and reports quarterly on specific corrective actions to address improper payment rates through the quarterly scorecard process for high-priority programs.

$956.88 M