The government doled out nearly $100 billion in "improper" Medicaid payments in 2021-- accounting for about one-fifth of all Medicaid payments, according to estimates.
The figure represents Washington's current accounting of payments that did not meet the numerous requirements for the Medicaid program, which the federal government manages in conjunction with the states and allows millions of low-income people access to healthcare.The numbers were also high in 2020, with about $86.5 billion in Medicaid payments deemed improper, or just over 21%.
Medicaid provides healthcare coverage to nearly 80 million people, more than 30 million of which are children. The number of adults enrolled in the program has greatly risen recently, partly because of the pandemic, as well as Medicaid expansion under the Affordable Care Act (ACA).
Improper payments are not synonymous with fraud and abuse, according to analysts and the federal agency that oversees Medicaid and generates the data. "Instead, improper payments are payments that did not meet statutory, regulatory, administrative, or other legally applicable requirements and may be overpayments or underpayments," the Centers for Medicare and Medicaid Services (CMS) says. Improper payments also include payments that may have been valid but where there was not enough data on file at the time of the review to verify they were made properly, according to CMS.
The stunning stats are evidence of a swelling Medicaid regime with obsolete and largely varied state systems for tracking data. Furthermore, federal officials have been using updated criteria to review Medicaid eligibility over the last few years, making it challenging to compare current rates with those of years past.
The figures have nevertheless attracted scrutiny from government watchdogs looking to ensure that billions in tax dollars are being paid and tracked correctly. In February, the inspector general for the U.S. Department of Health and Human Services published a report outlining its past audits to help CMS "in achieving greater efficiencies in its operation of the Medicaid program."
The inspector general's review sampled four states (New York, California, Colorado, and Kentucky) and "found that these States did not always determine Medicaid eligibility" for both newly eligible individuals and those who qualify under old rules "in accordance with Federal and State requirements."
CMS reported actual monetary losses-- cases where officials identified a payment was, actually, erroneously made, were about $11 billion last year. Though it represents a small fraction of total Medicaid spending, it remains a cause for concern, experts say.
"Instead of twisting the [audit] results to fit an erroneous narrative of rampant beneficiary fraud, we should acknowledge that mistakes will be made and act to reduce identified errors collaboratively," Kelly Whitener, a professor at Georgetown University, wrote in 2019.
Missing documentation is another primary factor driving up improper payment rates, according to CMS's data. In 2021, 89% of improper payments were caused by insufficient documentation, representing more than $87 billion in payments. Of those, over half were linked to eligibility determination.
According to CMS reports, the Medicaid overpayment rate swelled from 9% in 2018 to 21% in 2020. In the 2020 report, CMS said that year's figures couldn't be compared to those before 2019, though, because that's when it implemented a key change in the eligibility rules it uses to audit payments.
The Payment Error Rate Measurement audit program (PERM) is what produces improper payment rates each year and operates on a three-year cycle. "CMS paused PERM eligibility reviews from 2015 to 2018, as states were implementing new rules under the Affordable Care Act for determining eligibility for many beneficiaries," the agency said.
Jessica Schubel, a senior policy analyst at the Center on Budget and Policy Priorities, said "most eligibility errors reflect paperwork problems or other procedural mistakes that can easily occur when eligible people enroll." For example, an incorrect code (where a state inadvertently assigns the parent eligibility code to an eligible child) is considered an improper payment. In another example, a caseworker could fail to determine if the enrollee has primary commercial coverage.
In general, the data and documentation problems within the Medicaid system mean that determining the actual fraud rate is challenging. "I don't know anyone who knows the answer. I certainly don't," Andy Schneider, a professor at Georgetown University said when asked what he believed the actual fraud levels were. All he knows, he said, is that "the rate of fraud varies from state to state" and "most of the state and federal government's losses from Medicaid fraud are attributable to providers or managed care plans, who receive Medicaid payments, and not to applicants or beneficiaries, who don't." "Of the 77 million Medicaid beneficiaries as of November 2021, 33 million, or over 40%, were children," he said. "Few of whom would even know what fraud was, much less commit it."
Medicaid improper payments have risen throughout the years and while PERM brings the problem into scope, it does nothing to reduce them. These payments often stem from fraud and abuse but the vast majority are actually a result of eligibility errors from antiquated systems and low-quality data. To reduce improper payments states and Medicaid plans must turn to data solutions to improve the coordination of benefits and identification of third party liability.
