COB AND TPL CAN PLAY A GREATER ROLE IN MEDICAID PAYMENT INTEGRITY

Medicaid payment integrity remains a priority as federal oversight identifies continued challenges in reducing improper payments. An August 2026 HHS OIG audit found that HHS did not fully satisfy federal payment integrity requirements for FY2025, while Medicaid's reported improper payment rate increased.

According to the HHS OIG report, Medicaid's improper payment rate rose from 5.09% in FY2024 to 6.12% in FY2025. OIG also concluded that HHS had not demonstrated sufficient improvement in Medicaid payment integrity.

While improper payments have numerous causes, the findings reinforce the importance of strengthening controls throughout the payment process.

COB/TPL Is One Piece of the Payment Integrity Strategy

For Medicaid, identifying other liable coverage is an important part of making accurate payment decisions.

CMS Medicaid COB/TPL guidance states that Medicaid is generally the payer of last resort and requires states to take reasonable measures to identify third parties legally responsible for beneficiaries' healthcare costs.

The effectiveness of that process depends heavily on data.

Third-party insurance information can become outdated as beneficiaries gain or lose employer-sponsored coverage or move between health plans. Without current information, another payer's responsibility may not be apparent when Medicaid adjudicates a claim.

Cost Avoidance Addresses Liability Before Payment

When coverage is known before payment, Medicaid has an opportunity to cost avoid the claim.

CMS guidance on third-party liability distinguishes this process from pay and chase. Cost avoidance addresses known third-party responsibility before Medicaid payment, while pay and chase seeks reimbursement after Medicaid has already paid.

Recovery remains an important safeguard, but it begins after Medicaid dollars have left the program.

The challenges surrounding improper payments and traditional pay-and-chase recovery support a broader approach in which Medicaid payers use both prospective and retrospective controls.

Improve Coverage Visibility Before Adjudication

Real-time insurance discovery provides an opportunity to strengthen the prospective side of TPL.

Syrtis Solutions' real-time prospective cost avoidance technology helps Medicaid payers identify active third-party coverage before claims are paid. Better coverage visibility can improve COB/TPL accuracy, support payer-of-last-resort requirements, and reduce avoidable Medicaid expenditures.

Medicaid payment integrity requires controls that operate throughout the claims lifecycle. Strengthening COB/TPL information before payment, while maintaining effective recovery capabilities after payment, gives Medicaid programs a more comprehensive approach to identifying liability and protecting program funds.

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H.R. 1 UNDERSCORES THE SHIFT TO PAYMENT PREVENTION ACROSS MEDICAID

 

Payment Prevention is emerging as the cornerstone of modern Medicaid program integrity. While fraud enforcement remains an essential responsibility, federal policymakers are increasingly emphasizing payment accuracy before claims are paid. That direction is reflected in both the March 2026 announcement of the federal Task Force to Eliminate Fraud and the enactment of the One Big Beautiful Bill Act (H.R. 1), which heightens financial accountability for erroneous Medicaid payments. Although H.R. 1 never uses the phrase "payment prevention," its provisions create stronger incentives for states to reduce payment errors before they occur instead of relying primarily on post-payment recovery.

Improper Payments Are Primarily a Data and Administrative Challenge

Fraud continues to receive significant attention, but it accounts for only a portion of Medicaid's improper payment problem.

The Centers for Medicare & Medicaid Services (CMS) has consistently reported through its Payment Error Rate Measurement (PERM) Program that most Medicaid improper payments result from insufficient documentation, eligibility issues, or administrative deficiencies rather than confirmed fraud or abuse. CMS has repeatedly explained that the improper payment rate should not be interpreted as a fraud rate.

That distinction has important policy implications.

For more than twenty years, the Government Accountability Office has identified Medicaid as a High-Risk program because of persistent improper payment concerns. During that period, oversight activities have expanded considerably, yet payment errors continue because many originate during eligibility verification, coverage validation, and claims processing—not during fraudulent schemes.

Why H.R. 1 Matters

H.R. 1 increases the financial importance of making accurate payment decisions the first time.

Beginning in federal fiscal year 2030, the legislation limits the Department of Health and Human Services' authority to waive repayments for certain excessive erroneous Medicaid payments while broadening the circumstances under which some payments may be classified as erroneous. Those changes increase the financial consequences for states with elevated payment error rates and reinforce the value of preventing mistakes before claims are adjudicated.

The Bipartisan Policy Center provides a useful overview of how these provisions affect PERM accountability.

Because Medicaid is the payer of last resort, agencies and managed care organizations must determine whether another insurer is legally responsible before Medicaid pays a claim. Commercial insurance, Medicare, employer-sponsored coverage, TRICARE, and other liable third-party coverage all must be considered when adjudicating claims.

When that information is incomplete or outdated, Medicaid may incorrectly pay claims that should have been submitted to another payer. Even if those payments are later recovered, PERM evaluates whether the original payment decision was accurate at the time of adjudication. Recovery generally does not eliminate the improper payment finding.

For that reason, accurate third-party liability (TPL) information, effective coordination of benefits (COB), and high-quality eligibility data have become increasingly important components of Medicaid payment integrity.

Prevention Complements Recovery

Recovery efforts remain indispensable to protecting Medicaid resources.

Medicaid Fraud Control Units continue to investigate fraud, prosecute wrongdoing, and recover billions of taxpayer dollars each year. Those efforts remain an essential part of maintaining public trust in the Medicaid program.

At the same time, recovery is fundamentally retrospective. By the time an investigation begins, an improper payment has already occurred.

Preventing payment errors before claims are paid offers a more efficient approach. Every avoided improper payment reduces administrative costs, limits recovery efforts, improves audit performance, and allows agencies to devote more resources to program administration instead of correcting preventable mistakes.

Technology Is Advancing Payment Accuracy

Modern Medicaid programs increasingly recognize that better payment decisions require better information.

Many traditional third-party liability programs rely on monthly or quarterly eligibility files to identify other insurance coverage. While those processes continue to provide value, they may not capture coverage changes that occur between reporting cycles. As a result, Medicaid may unknowingly pay claims that should have been billed to another insurer.

To improve payment accuracy, agencies and managed care organizations are adopting technologies that continuously verify eligibility and identify liable third-party coverage before claims are processed.

Automated Algorithmic Analysis and Insurance Discovery Engines (AAAIDE), including solutions developed by Syrtis Solutions, continuously analyze eligibility and coverage data to identify active commercial insurance, Medicare, TRICARE, and other liable third-party coverage that may not appear in traditional eligibility files. Providing more complete and timely coverage information before adjudication helps strengthen payer-of-last-resort compliance while reducing avoidable improper payments.

Additional modernization initiatives include:

• Automated verification using trusted federal, state, and commercial data sources.
• Continuous TPL and COB validation throughout the claims lifecycle.
• Real-time identification of newly discovered, updated, or previously unknown insurance coverage before payment.
• Expanded interoperability among Medicaid, Medicare, commercial insurers, and other authoritative data sources.

Together, these capabilities enable organizations to improve payment accuracy while shifting from traditional pay-and-chase recovery toward proactive cost avoidance.

The Future of Medicaid Program Integrity

Medicaid program integrity is evolving beyond a recovery-focused model. Audits, investigations, and enforcement will continue to play an important role, but they are increasingly being complemented by technologies and processes that improve payment accuracy before claims are paid. 

Payment Prevention is no longer simply an emerging concept—it is becoming the foundation of modern Medicaid payment integrity. As H.R. 1 increases accountability for erroneous payments, organizations that emphasize accurate data, proactive verification, and continuous identification of liable third-party coverage will be better positioned to reduce improper payments, strengthen compliance with Medicaid's payer-of-last-resort requirements, improve audit performance, protect taxpayer resources, and support the long-term sustainability of the Medicaid program.

Find out more here. 

REDUCING IMPROPER MEDICAID PAYMENTS BEFORE THEY OCCUR

 

Stephen Konsin Jr. from Syrtis Solutions, a solution provider at the Marcus Evans Value-Based Care Summit 2026, discusses the growing need for proactive Medicaid payment accuracy and cost avoidance strategies.

Interview with: Stephen Konsin Jr., Vice President of Sales, Syrtis Solutions

“The window for demonstrating proactive prevention of improper payments before the 2030 mandatory Federal Medical Assistance Percentage (FMAP) reductions is narrowing with each fiscal quarter. Organizations that act now will be positioning themselves to meet federal compliance expectations while realizing multi-year operational benefits. Those that delay it will have limited time to demonstrate sustained improvement trends, reducing options for mitigating FMAP consequences,” says Stephen Konsin Jr., Vice President of Sales, Syrtis Solutions.

Syrtis Solutions is a solution provider at the Marcus Evans Value-Based Care Summit 2026.

What is changing with the One Big Beautiful Bill Act? What do healthcare leaders need to plan for?

The One Big Beautiful Bill Act (H.R. 1) converts improper payment performance from a compliance benchmark into a direct funding trigger. Beginning in FY2030, states will face mandatory FMAP reductions when Medicaid improper payment rates exceed three percent. This represents a paradigm shift from discretionary oversight to automatic financial penalties, with only limited waiver authority available to states demonstrating good-faith corrective action. FMAP reductions are triggered by error rates at adjudication, not by net financial impact after recovery efforts.

For healthcare organizations, unknown primary commercial insurance coverage represents a significant preventable category of improper Medicaid payments. When beneficiaries have unreported or recently activated commercial insurance, Medicaid systems lack real-time visibility at claim adjudication. Traditional third-party (TPL) liability infrastructure cannot close this gap. TPL programs mostly rely on member self-disclosure, delayed batch feeds, and periodic data matching that structurally miss coverage changes between verification cycles. What was improper at adjudication remains improper in Payment Error Rate Measurement (PERM) calculations regardless of later corrective action.

Why is the compliance clock ticking? What strategies could they implement to reduce improper payments before they occur?

We address this structural constraint through real-time access to nationwide commercial payer eligibility data. The platform verifies primary coverage by identifying previously unknown commercial insurance, enabling prevention before Medicaid payment occurs. This directly addresses the compliance metric triggering FMAP reductions. For Medicaid agencies and managed care organizations facing mandatory FMAP consequences, the compliance timeline is compressed. Organizations implementing real-time prevention capabilities now can demonstrate multi-year improvement trends before 2030 consequences take effect, thus creating the operational track record that limited waiver authority requires.

The FY2030 FMAP reduction mandate transforms prevention from operational “best practice” to fiscal imperative. States can no longer rely on recovery performance to manage TPL compliance. The PERM methodology measures error rates at adjudication, creating permanent advantages for prevention approaches that stop improper payments before they occur. Recovery programs remain necessary components of comprehensive TPL operations, addressing improper payments that evade prevention systems and managing historical claims. However, recovery alone cannot achieve FMAP compliance when error rates exceed three percent. Only prevention capabilities that reduce gross improper payment rates can protect federal medical assistance funds under the One Big Beautiful Bill Act requirements.

Why can’t traditional approaches solve this?

The fundamental constraint is data availability at the time of claims payment. The traditional pay-and-chase model is a rational response to ensure beneficiary access through prompt payment. However, this model cannot prevent FMAP reductions as it addresses errors after they occur.

Prospective prevention eliminates improper claims payments before occurrence by verifying coverage at payment decision and routing all future claims appropriately. A claim correctly routed to commercial insurance never appears as an improper Medicaid payment in PERM audits. It requires no identification, investigation, recovery or reconciliation. It creates no provider friction, member confusion or administrative burden. Cost avoidance is permanent and the improper payment never exists. This is not incremental improvement to recovery but a structural shift from retrospective correction to prospective prevention.

Does it work with their existing infrastructure?

Syrtis does not replace disclosed coverage already captured in eligibility systems, traditional carrier feeds or batch matching processes. It supplements existing infrastructure by addressing the specific gap those systems structurally cannot close. It identifies commercial coverage never disclosed to the state, coverage that changed since the last data match and coverage resulting from recent life events not yet in batch systems. Typical deployments reach full operational status within three months of project initiation, well within the window needed to begin building a measurable compliance track record before 2030 consequences take effect. The platform is designed to minimize implementation risk while maximizing operational resilience.

Any final thoughts?

In an environment where FMAP protection depends on preventing improper payments rather than recovering them afterward, the difference between prevention and recovery is the difference between maintaining federal matching funds and facing mandatory reductions compounding with every fiscal year.

Federal auditors will increasingly differentiate between programs that have embedded real-time prevention into operations versus those reliant on retrospective correction. The operational track record of implementing real-time verification in 2026, processing millions of claims over subsequent years, and identifying thousands of previously unknown commercial policies with measurable TPL-related improper rate declines presents a fundamentally different compliance profile than maintaining robust recovery while continuing payment without real-time verification.

Contact: Sarin Kouyoumdjian-Gurunlian, Press Manager, Marcus Evans, Summits Division, press@marcusevanscy.com

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About the Value-Based Care Summit 2026

The Value-Based Care Summit aims to foster innovative thinking, share inspiring ideas, and promote community connections. Our continuing mission is to curate an engaging program featuring visionary keynote presentations, real-life case studies and interactive forums delivered by compelling speakers and expert moderators. To achieve this vision we choose our collaborators with great precision – we seek out professionals who have deep expertise and hands-on experience, and can present cutting-edge insights that spark conversation.

About Syrtis Solutions

Syrtis Solutions was founded in 2011 after seeing payers of last resort – Medicaid, Medicare and Marketplace plans – struggle to properly identify third-party liability (TPL) information quickly and accurately. Still today, health plans rely on stale data mined from millions of other health insurance (OHI) coverage records that are incomplete, often expired, and frequently for the wrong member. This poor-quality data leads to member disruption and provider abrasion at the pharmacy counter, OHI overrides, and claims paid in error which fuels ineffective “pay and chase” recovery solutions – returning less than 17% of dollars attempted for recovery.

Today, we are helping solve this problem for health plans – looking for OHI on 42% of the Medicaid managed care lives covered by 83 different health plans. If you are looking for a better OHI discovery solution that reduces your reliance on “pay and chase” efforts – we invite you to meet with us. With as few as 5,000 member records, we can show you the opportunities you are missing and the quality of your current OHI data. Within just a few weeks, you will see your OHI cost avoidance efforts increase due to better quality OHI data, and we bet you will see less OHI override calls to your member services and pharmacy help desk as well!

www.syrtis.com

About Marcus Evans Summits

Marcus Evans Summits are high level business forums for the world’s leading decision-makers to meet, learn and discuss strategies and solutions. Held at exclusive locations around the world, these events provide attendees with a unique opportunity to individually tailor their schedules of keynote presentations, case studies, roundtables and one-on-one business meetings. For more information, please visit www.marcusevans.com

All rights reserved. The above content may be republished or reproduced. Kindly inform us by sending an email to press@marcusevanscy.com

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ADDRESSING MEDICAID BUDGET PRESSURE WITHOUT REDUCING BENEFITS

As states prepare their fiscal year (FY) 2027 Medicaid budgets, financial flexibility is becoming increasingly limited. State revenue growth has slowed, healthcare costs continue to climb, and federal policy changes enacted through the 2025 budget reconciliation law have altered how future funding risk is managed. Even as enrollment stabilizes, Medicaid spending remains on an upward trajectory, driven by higher clinical complexity, increased utilization of long-term services and supports, rising pharmacy expenditures, and expanded behavioral health needs.

In this environment, states are revisiting familiar cost-containment strategies. Proposals to reduce provider reimbursement, narrow optional benefits, or tighten utilization controls are once again entering budget conversations. While these measures can reduce spending in the short term, they often introduce downstream challenges—including access limitations, provider participation concerns, and outcomes that conflict with CMS’s emphasis on coverage stability and care quality. As financial pressure grows, Medicaid agencies and managed care organizations (MCOs) are increasingly seeking alternatives that protect budgets without undermining benefits.

Improper Payments Now Carry Direct Budget Risk

One of the most significant shifts affecting Medicaid finances is the heightened consequence of payment errors. Improper payments above the federal 3 percent threshold now result in concrete funding penalties, regardless of whether states later recover the dollars. Federal matching funds may be reduced for any excess over the benchmark, with fewer opportunities for exceptions or mitigation.

This framework fundamentally changes the role of recovery. Post-payment collections no longer shield states from financial exposure or help preserve future funding. A payment made incorrectly remains improper under federal standards—even if it is later recouped—making prevention the only reliable way to manage risk.

Moving Beyond “Pay and Chase”

A large portion of Medicaid improper payments occur when claims should have been paid by another insurer. Traditional recovery-based approaches identify these issues only after funds have been disbursed, offering little benefit in reducing improper payment rates.

Prospective cost avoidance addresses this challenge by stopping errors before they occur. Real-time identification of other health insurance and third-party liability ensures Medicaid consistently acts as the payer of last resort. Each avoided improper payment directly supports compliance with the 3 percent standard and preserves funding for covered services.

Operational Accuracy Drives Financial Stability

Administrative inefficiencies often compound budget challenges. Manual claims review, fragmented eligibility systems, and delayed coverage verification increase error rates while adding operational cost.

By automating eligibility checks, coverage validation, and claims workflows, Medicaid programs and MCOs can improve accuracy while reducing administrative burden. Operational modernization enables compliance with federal standards without shifting costs onto providers or beneficiaries.

Program Integrity as a Budget Strategy

Program integrity has become a central component of fiscal management rather than a retrospective compliance exercise. Continuous monitoring, data-driven oversight, and early risk detection allow states to prevent recurring payment issues before they escalate.

When paired with prospective cost avoidance, these efforts reduce financial leakage, improve audit preparedness, and support long-term budget sustainability—even during periods of economic uncertainty.

Protecting Coverage Through Prevention

As Medicaid budgets face increasing pressure, benefit reductions should remain a last-resort option. The most effective way to prepare for funding constraints is to ensure claims are paid correctly the first time.

Preventing improper payments, maintaining compliance with the federal 3 percent standard, and modernizing operational processes allow states and MCOs to preserve access to care while safeguarding limited resources. In today’s Medicaid environment, cost avoidance is not optional—it is essential to sustaining program integrity and financial stability.

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MEDICAID REFORM AND TECHNOLOGIES HELP STATES CUT COSTS

As Medicaid enrollment swells and costs continue to rise, while budget cuts are being considered, state governments are reaching a critical decision point. What was already one of the most expensive state programs has become even more costly, now accounting for close to 33% of many state budgets. Pandemic-era protections and Medicaid expansion policies helped millions gain coverage, but they also exposed systemic inefficiencies that states can no longer afford to overlook.

Now, with post-pandemic budget tightening underway, states are taking a hard look at how to rein in Medicaid spending without compromising access to care.

A DECADE OF BILLIONS LOST TO IMPROPER PAYMENTS

Improper payments remain one of Medicaid’s most persistent and expensive problems. In fiscal year 2023, more than $50 billion in payments were made in error, according to CMS. The primary culprits? Poor documentation and weak eligibility verification.

Improper Medicaid payments have topped half a billion dollars over the last ten years—money that could have been redirected to essential services or stretched existing healthcare budgets further. For states already facing economic headwinds, these avoidable losses are unsustainable.

STATES ENACT REFORMS TO STRENGTHEN PROGRAM OVERSIGHT

In response, many states are advancing legislation and policy changes to bring accountability and accuracy back to Medicaid operations:

• Indiana eliminated self-attestation in favor of regular eligibility checks using government databases and implemented quarterly reporting on fraud prevention efforts.

• Texas has expanded the use of third-party and federal tax data to verify Medicaid eligibility and has invested in modernized systems to increase automation and accuracy.

• Florida and Missouri are doubling down on frequent eligibility redeterminations and greater scrutiny of Managed Care Organizations (MCOs).

• Arkansas and Georgia have rolled out stricter redetermination schedules and automated eligibility verification to reduce enrollment errors.

These actions reflect a coordinated shift toward data-driven oversight and stricter controls to prevent ineligible individuals from remaining on the rolls.

TECHNOLOGY: THE ENABLER OF REAL-TIME INTEGRITY

To make these policies effective and scalable, states are increasingly adopting purpose-built technologies that can automate and enhance the integrity of the Medicaid program. One such solution is ProTPL from Syrtis Solutions—a real-time third-party liability detection platform.

ProTPL helps Medicaid programs meet federal coordination of benefits (COB) requirements and improve cost avoidance by:

• Flagging claims with existing commercial coverage before payment is issued,

• Automating verification tasks that would otherwise require manual follow-up,

• Minimizing administrative overhead while improving audit readiness,

• Ensuring that Medicaid remains the payer of last resort, as intended by law.

By shifting from “pay-and-chase” recovery tactics to preemptive cost avoidance, ProTPL supports faster, cleaner operations while saving states millions.

A MODERN MEDICAID SYSTEM REQUIRES BOTH POLICY AND TECH

For Medicaid to remain sustainable, states need to rethink not just what is being done, but also how it is being done. The best policy in the world can’t succeed if the systems enforcing it are outdated or underpowered. That’s why the combination of reform-driven governance and real-time technology is emerging as the most effective strategy.

States that align legislative reform with innovations like ProTPL will be better equipped to:

• Protect public funds,

• Deliver accurate, timely care,

• And restore confidence in the long-term viability of Medicaid.

This is not just about fixing what’s broken—it’s about building a smarter, stronger Medicaid program that can adapt to modern demands.

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URGENT ACTION NEEDED: PROTECT MEDICAID FUNDING BY ELIMINATING IMPROPER PAYMENTS

With billions of dollars in Medicaid funding on the chopping block due to the latest House budget proposal, state programs and Managed Care Organizations (MCOs) are facing an urgent challenge. To safeguard critical healthcare services, Medicaid agencies must take proactive steps to maximize every dollar. One of the biggest opportunities for savings lies in addressing improper payments—an issue that costs Medicaid more than $80 billion each year.

The Costly Problem: Inefficient Medicaid Payments

For nearly two decades, Medicaid’s improper payments have placed it on the Government Accountability Office’s (GAO) high-risk list. While fraud is often blamed, the real issue lies in outdated data systems and inefficient coordination of benefits (COB).

Medicaid is legally required to be the payer of last resort, meaning any other available health coverage should be billed first. However, structural inefficiencies make this difficult:

• Unidentified Third-Party Liability (TPL): Over 13% of Medicaid enrollees have unreported private insurance, leading to Medicaid covering costs that should have been paid by other insurers.
• Outdated and Fragmented Eligibility Data: Medicaid’s eligibility information is scattered across multiple databases, making it difficult to verify primary coverage before paying claims.
• The Ineffective “Pay and Chase” Model: Medicaid agencies attempt to recover improper payments after they occur, but only a small fraction of lost funds are ever recouped.

With Medicaid budgets under intense pressure, continuing this cycle of waste is no longer an option. Addressing these inefficiencies is critical to protecting the program’s financial stability.

The Solution: Proactive Cost Avoidance

Instead of paying claims incorrectly and then trying to recover funds later, Medicaid agencies and MCOs must adopt a cost avoidance approach—ensuring that primary payers are identified and billed before Medicaid covers any claims. This requires real-time access to accurate eligibility data that allows for proper coordination of benefits from the start.

Syrtis Solutions provides a proven, effective solution through ProTPL, a cutting-edge technology that utilizes ePrescribing data—one of the most accurate and timely sources of commercial insurance information—to:

✔ Identify up to 40% more TPL cases than current methods.
✔ Provide real-time OHI data at the point of claim submission, ensuring improper payments never happen.
✔ Eliminate the costly and inefficient “pay and chase” process, reducing administrative waste and financial losses.

Why Immediate Action is Critical

With Medicaid funding at risk, states and MCOs cannot afford to delay. Every improper payment represents lost funding that could have been directed toward patient care. Without intervention, Medicaid agencies will face deeper financial challenges, limiting their ability to provide essential services.

Cost avoidance is no longer just an operational improvement—it is a necessary step to ensure Medicaid’s survival in the face of budget cuts. Syrtis Solutions offers an immediate, effective, and scalable solution to reduce waste and stretch Medicaid dollars further.

Take Control of Medicaid’s Future—Act Now

The time for action is now. Protect Medicaid funding before budget cuts force difficult decisions.

Contact us today at info@syrtissolutions.com to learn how ProTPL can help your organization save millions and secure the future of Medicaid funding.

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ADDRESSING IMPROPER PAYMENTS WITH A DATA-DRIVEN SOLUTION

 

The reported government-wide improper payment rate of 3.97% in 2024 represents the lowest level in over ten years. But below the surface lies a complicated reality that exposes systemic flaws in how improper payments are measured and controlled. These numbers, far from representing legitimate progress, highlight the important need for significant reform and solutions.

What Exactly Is The Improper Payment Rate?

Improper payment rates are often used as a headline metric to signal success or failure. Yet these rates, calculated as a percentage of total spending, tell only a part of the story. A declining rate does not always mean less improper payments; it could simply reflect a surge in spending that outpaces the growth of improper payments. For example, out of the 46 federal programs with consistent data for 2023 and 2024, only about half announced a reduction in improper payment rates. That being said, the picture changes when looking at the actual dollar amounts: two-thirds of these programs revealed increased improper payment totals. Some programs spent more but managed to mask these increases with lower rates, while others spent less and still saw improper payments rise. This disconnect highlights the limitations of relying on percentages alone.

Medicaid's Billion Dollar Problem

Medicaid's improper payment rate illustrates these difficulties well. In 2023, the program reported a rate of 8.6%, a figure already considered underestimated because of relaxed eligibility requirements during the COVID-19 pandemic. These policies temporarily reduced review, skewing the numbers.

By 2024, Medicaid's improper payment rate dropped drastically to 5.09%. However, this reduction had less to do with actual improvements and more with the methodology used by the Department of Health and Human Services. Medicaid calculates its improper payment rate using a rolling three-year average, meaning the impacts of temporary COVID-19 policies will continue to distort the numbers until at least 2025.

Addressing Medicaid's Improper Payments

To protect Medicaid from improper payments, several legislative initiatives have been made. While these steps have helped identify and report improper payments, they have done little to reduce them. Consequently, agencies expend substantial resources on reporting requirements that do little to address the root causes of improper payments. This process-driven mindset diverts attention from proactive, data-driven solutions that could make a real difference. Moreover, the repercussions of improper payments extend beyond mere monetary loss. They hinder access to quality care for beneficiaries, diverting resources from legitimate medical services and interventions. Patients may encounter barriers to receiving necessary treatments, while providers face increased scrutiny and regulatory burdens. Moreover, the broader healthcare system bears the brunt of these inefficiencies, grappling with rising costs and diminished effectiveness.

One of the most effective data-driven solutions for combating Medicaid's improper payments has emerged from the private sector. Syrtis Solutions ( Syrtis) has introduced a technology-based solution to aid the program in detecting third party liability (TPL) before medical and pharmacy claims are paid improperly. Syrtis discovered that Medicaid's conventional TPL discovery processes' are primarily retrospective and fail to capture 13.4% of individuals who have unreported primary commercial coverage. Because of this, Medicaid loses billions in improper claims payments; consequently, inefficient post-payment recovery processes are used to recoup the improper payments. To make matters worse, these post-payment recovery efforts only recoup less than $0.20 on the dollar. With the help of Syrtis Solutions and their proprietary ePrescribing data, Medicaid plans are now able to cost avoid pharmacy and medical claims on the front end and significantly reduce improper payments.

A Smarter Way Forward

Improper payments are costing Medicaid and other programs billions of dollars annually. By adopting data-driven solutions, federal government programs can move from compliance-focused reporting to proactive strategies that improve efficiency and integrity. This approach will help streamline operations, ensure accountability, and strengthen public trust in the government's ability to safeguard taxpayer funds.

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MEDICAID PAYMENT INTEGRITY: ADDRESSING IMPROPER PAYMENTS

 

Improper payments and fraud continue to be chronic and costly difficulties for Medicaid and other government-funded programs. The GAO defines improper payments as payments that should not have been made or that were made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements. According to the GAO, the federal government loses between $233 billion and $521 billion annually to fraud alone.

Since FY 2003, executive branch agencies have reported increasing improper payment estimates totaling approximately $2.7 trillion. In fiscal year 2023 alone, federal agencies reported $236 billion in improper payments across 71 programs. While the FY 2023 estimate represents an $11 billion downturn from the previous year, this reduction is credited to temporary flexibilities granted during the COVID-19 PHE. These measures, such as relaxed eligibility requirements for Medicaid beneficiaries and providers, minimized instances of improper payments under the altered criteria.

Medicaid's High-Risk Status

Medicaid has been on the GAO's High-Risk List since 2003 due to vulnerabilities in payment integrity. In FY 2023 alone, HHS estimated that Medicaid improper payments totaled $50 billion. According to HHS, the leading contributors to these payments are missing or insufficient documentation, particularly in validating beneficiary eligibility and payments to ineligible beneficiaries or ineligible services.

Actions and Legislative Efforts to Reduce Improper Payments:

CMS has made some progress in identifying these susceptibilities. For instance, CMS collaborated with states and audit contractors to improve oversight of healthcare companies contracted to manage healthcare services for Medicaid beneficiaries. Investigations rose from 16 between 2016 and 2018 to 893 between 2019 and 2021, uncovering significant overpayments.

Over time, several legislative efforts have been aimed at curbing fraud, waste, and abuse. Despite these pieces of legislation, Medicaid continues to lose billions of dollars because of payments made in error. The measures directed by the legislation are costly and primarily revolve around compliance and reporting rather than reducing improper payments.

Remaining Challenges:

The GAO identified several areas for improvement, including:

Provider Screening and Enrollment Requirements

The GAO suggested CMS review state compliance with screening and enrollment requirements and monitor noncompliance yearly. While CMS has provided technical assistance, further action is needed to assess and address all states' compliance.

Medical Reviews for Improper Payments

The GAO advised CMS to strengthen Medicaid's medical review processes to identify the root causes of improper payments and implement corrective actions. As of March 2024, HHS disagreed with this recommendation and does not plan to implement it.

Compliance with the Payment Integrity Information Act of 2019 

Medicaid was deemed compliant with PIIA criteria in FY 2023. However, it was not fully compliant in fiscal years 2021 and 2022.


Considerable gaps remain in addressing improper payments and fraud. By fully implementing GAO recommendations and enhancing oversight, federal agencies and programs like Medicaid can better safeguard taxpayer dollars, reduce waste, and improve operational efficiency. Nevertheless, to prevent improper payment rates from rising even more, agencies should look to innovate data solutions to identify and prevent fraud, waste, and abuse.

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IMPROPER PAYMENTS THREATEN MEDICAID AND MEDICARE

America's most vulnerable populations turn to Medicaid and Medicare for essential healthcare services. Regrettably, these programs lose billions of dollars annually as a result of improper payments. Just recently, the Subcommittee on Oversight and Investigations delved into this pressing issue in a pivotal hearing titled "Examining How Improper Payments Cost Taxpayers Billions and Weaken Medicare and Medicaid." The discoveries shed light on the far-reaching effects of these errors and highlighted the urgent need for reform.

At the heart of the hearing was an exploration of the extent and impact of improper payments within Medicare and Medicaid. These erroneous disbursements, whether stemming from fraud, waste, or abuse, represent a substantial strain on public resources, amounting to billions of dollars annually. This sort of waste not only erodes the fiscal integrity of these critical healthcare programs but also undermines their ability to fulfill their mission of providing crucial medical services to vulnerable populations.

The subcommittee's inquiry revealed a complex landscape of improper payments, with fraudulent activities and administrative errors adding to the problem. Fraudulent schemes, such as billing for services not rendered or inflating claims through deceptive practices, exploit vulnerabilities within the system, leading to substantial financial losses. Furthermore, administrative inefficiencies, outdated technology, and bad-quality data intensify the issue, hindering accurate eligibility determinations and claims processing.

The effects of improper payments extend beyond mere monetary loss. They disrupt access to quality care for beneficiaries, diverting resources away from legitimate medical services and interventions. Beneficiaries may encounter barriers to receiving needed treatments, while providers face increased scrutiny and regulatory burdens. Moreover, the broader healthcare system bears the brunt of these inefficiencies, grappling with rising costs and diminished effectiveness.

The hearing also highlighted the significance of proactive measures to combat improper payments and strengthen the integrity of Medicare and Medicaid. Enhanced oversight, quality data and analytics, and targeted reforms were among the proposed strategies to reduce fraud and waste. By leveraging technology solutions and promoting collaboration among government agencies and healthcare providers, policymakers aim to identify and prevent improper payments more successfully.

In conclusion, the Subcommittee on Oversight and Investigations hearing shed light on the prevalent problem of improper payments within Medicaid and Medicare. By confronting this issue head-on and implementing meaningful reforms, policymakers can help safeguard the fiscal integrity of these vital healthcare programs and ensure that program dollars are appropriately used to fulfill the mission of providing healthcare to the nation's most vulnerable populations.

Learn more here. 

MEDICAID IMPROPER PAYMENTS TOTALED $50.3 BILLION IN 2023

 

A new audit by the GAO reveals that the government suffered a significant loss of $236 billion in 2023 because of improper payments. Medicaid and Medicare alone made up 43% of these payments, with Medicaid's improper payments totaling $50.3 billion. These findings underscore the urgent need to address improper payments, which often come from eligibility errors and out-of-date data systems, not widespread fraud and abuse.

By law, Medicaid functions as the payer of last resort, meaning it covers healthcare expenses only after other third-party payers satisfy their obligations. However, discovering these third-party payers has become increasingly difficult as the program expands because of insufficient access to usable eligibility data. The lack of accurate eligibility data has resulted in billions in improper payments for Medicaid plans.

When Medicaid plans discover improperly paid payments, they utilize a "pay and chase" process to recover funds. This approach has built a multibillion-dollar post-payment recovery industry, but unfortunately, for payers of last resort, only 20 cents on the dollar is recouped.

The challenge to identify liable third-party payers has persisted for years, exacerbated by the absence of tech capable of correctly pinpointing active and accurate "other health insurance". Despite legislative efforts and federal initiatives to curb improper payments, the problem has continued, resulting in Medicaid's inclusion on the Government Accountability Office's high-risk list for twenty consecutive years.

How can payers of last resort minimize improper payments?

To mitigate the need for post-payment recovery, Medicaid payers must gain access to timely and accurate eligibility data. Leveraging ePrescribing infrastructures presents a promising solution, as they house some of the most complete and current data on patients' health insurance coverage.

Recognizing this potential, Syrtis Solutions has created ProTPL, a technology-based solution that utilizes ePrescribing eligibility data to help Medicaid plans proactively identify primary payers. ProTPL makes it possible for Medicaid plans to avoid erroneous claims costs upfront by using proprietary logic and advanced matching algorithms, improving the claims process for all stakeholders involved.

Syrtis Solutions' ProTPL addresses the root cause of improper payments by using better data and applying it to avoid erroneous claims payments. ProTPL ultimately decreases costs and improves efficiency in Medicaid claims management.

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$50.3 BILLION IN MEDICAID IMPROPER PAYMENTS

 

Medicaid improper payments have caused the healthcare program to be on the Government Accountability Office's High-Risk List since 2003. The GAO's list identifies government-funded programs that involve significant resources and offer important services to the public that are susceptible to fraud, waste, abuse, and mismanagement. For two decades, Medicaid and other CMS programs have struggled with these improper payments, and it's costing billions. A common misunderstanding is that Medicaid improper payments stem primarily from fraud when, actually, the vast majority arise from insufficient documentation and eligibility errors. CMS issued the following improper payments fact sheet for fiscal year 2023 this month.

Here are the improper payment rates for CMS’ programs in Fiscal Year 2023:

• The Medicare Fee-for-Service (FFS) estimated improper payment rate was 7.38%, or $31.2 billion, marking the seventh consecutive year this figure has been below the 10% threshold for compliance established by improper payment statutory requirements.[1] The 2023 rate is not statistically different from the 2022 Medicare FFS estimated improper payment rate of 7.46%.
• The Medicare Part C estimated improper payment rate was 6.01%, or $16.6 billion. CMS made significant methodology changes during the past two years’ reporting cycles (FY 2021 and FY 2022), and FY 2023 establishes a baseline; however, it is not statistically different from the 2022 estimated improper payment rate.
• The Medicare Part D estimated improper payment rate was 3.72%, or $3.4 billion. This estimated improper payment rate incorporates various methodology refinements. These comprehensive changes contributed to an increase in the FY 2023 estimated improper payment rate, and the rates for FY 2023 are not comparable to previous years.
• The Medicaid improper payment rate (comprised of reviews in 2021, 2022, and 2023) was 8.58%, or $50.3 billion, a significant decrease from the 2022 reported rate of 15.62%. Of the 2023 Medicaid improper payments, 82% were the result of insufficient documentation. These payments typically involve situations where a state or provider missed an administrative step and do not necessarily indicate fraud or abuse.
• The Children’s Health Insurance Program (CHIP) improper payment rate (comprised of reviews in 2021, 2022, and 2023) was 12.81%, or $2.1 billion, a substantial decrease from the 2022 rate of 26.75%. Of the 2023 CHIP improper payments, 68% were the result of insufficient documentation, which is generally not indicative of fraud or abuse.
• The improved performance in the national Medicaid and CHIP improper payment estimates reflect 1) reviews that accounted for certain flexibilities afforded to states during COVID-19, such as suspended eligibility determinations and reduced requirements around provider enrollment and revalidations, which were typically included in the PERM reviews prior to the COVID-19 PHE; and 2) improved state compliance with other program requirements. While it is unclear how much the decrease is attributable to the PHE flexibilities versus improved state compliance, it appears that the PHE flexibilities had an impact on lowering the rate. Please note that the data does not capture any effects of the PHE unwinding, as these will be included in future report periods.
• The 2023 improper payment rate for the Advance payment of the Premium Tax Credit (APTC) program for the Federally Facilitated Exchange (FFE) for Benefit Year 2021 (January 1 to December 31, 2021) was 0.58% or $272 million. CMS found that the FFE properly paid an estimated 99.42% of total outlays, or $46 billion, in Benefit Year 2021.

 

Learn more from the whitepaper "Improper Payments - Medicaid's Billion Dollar Problem"

 

What You Need to Know:

The Payment Integrity Information Act of 2019 defines significant improper payments as either:

(i) improper payments greater than $10 million and over 1.5% of all payments made under that program, or

(ii) improper payments greater than $100 million.

• The 2023 HHS Agency Financial Report provides the improper payment rates for the Medicare Fee-for-Service (FFS), Medicare Part C, Medicare Part D, Medicaid, Children’s Health Insurance Program (CHIP), and Affordable Care Act Health Insurance Exchange Advance payment of the Premium Tax Credit (APTC) programs.
  1. Insufficient documentation
  2. The documentation provided for the items or services billed did not sufficiently demonstrate medical necessity.
• The vast majority of improper payments occurred in situations where there was an unintentional payment error or a reviewer could not determine if a payment was proper because of insufficient payment documentation from a state, provider, or the FFE.
• While fraud and abuse are one cause of improper payments, not all improper payments represent fraud or abuse. Improper payment estimates are not fraud rate estimates.
• Improper payments can result from a variety of circumstances, including:
  • Items or services with no documentation.
  • Items or services with insufficient documentation.
  • Or, with respect to Medicaid, CHIP, and the FFE, no record of the required verification of an individual’s eligibility, such as income.
• Proper payments occur when there is sufficient documentation to support payment in accordance with the program payment requirements. Two examples of proper payments include:
  • Payments where CMS or the state appropriately maintained documentation of an eligibility verification requirement and appropriately determined eligibility based on program eligibility and payment requirements.
  • Payments where sufficient documentation was provided to support medical necessity in accordance with program payment requirements.

 

Improper Payment Measurements:

 

Medicare Fee-for-Service

• CMS developed the Comprehensive Error Rate Testing (CERT) program to estimate the Medicare Fee-for-Service (FFS) program improper payment rate.
  • The CERT program reviews a statistically valid stratified random sample of Medicare FFS claims to determine if they were paid properly under Medicare coverage, coding, and billing rules. If these criteria are not met, the claim is counted as an improper payment.
  • The majority of Medicare FFS improper payments fall into two categories:
    1. Insufficient documentation
    2. The documentation provided for the items or services billed did not sufficiently demonstrate medical necessity.

1. 1.  

Medicare Part C

• CMS estimates the Part C Medicare Advantage (MA) improper payments using the Part C Improper Payment Measure (IPM) methodology.
  • CMS calculates an annual capitated payment for each Medicare beneficiary enrolled in an MA Organization (MAO) based on diagnosis data previously submitted to CMS by the MAO. The diagnosis data are used to determine risk scores and calculate risk-adjusted payments to MAOs for their enrollees. Inaccurate or incomplete diagnosis data may result in improper payments made to MAOs.
  • CMS conducts the annual Part C IPM activity to estimate the improper payments for the Medicare Part C program due to unsubstantiated risk adjustment data.
  • Part C IPM reviews the medical record documentation for a statistically valid stratified random sample of Medicare Part C enrollees to ensure the diagnosis data used to determine payment to the MAO are present and in accordance with CMS rules and regulations.
• The majority of Part C improper payments fall into three categories:
  1. The MAO’s supporting documentation fails to substantiate the beneficiary diagnosis data submitted for payment
  2. Invalid documentation, such as illegible documentation.
  3. Missing documentation.

 

Medicare Part D

• CMS estimates the Part D Prescription Drug Benefit improper payments using the Part D IPM methodology.
  • The Medicare Part D IPM primarily focuses on analyzing Prescription Drug Events (PDEs). Each PDE record includes details about a specific prescription transaction, such as the drug prescribed, the quantity, and the associated costs. The PDE data are not the same as individual drug claim transactions but are summary extracts using CMS-defined standard fields.
• CMS conducts the annual Part D IPM activity to identify improper payments caused by invalid and/or inaccurate drug claims. These errors could lead to adjustments in beneficiaries’ benefit phases, reinsurance subsidy payments, and CMS payments. Drug claims selected for audit are evaluated using prescription record data and supporting documentation provided by the Part D Plan Sponsors.
• The Part D IPM reviews a statistically valid stratified random sample of PDEs to ensure the supporting documentation validates payment attributes and processing was in accordance with CMS rules and regulations.
• Part D improper payments fall into three major categories:
  1. Missing or invalid documentation, such as missing authorization.
  2. Drug discrepancies, such as the drug dispensed contains a different active ingredient than the drug prescribed.
  3. Drug pricing discrepancies.

 

Medicaid & Children’s Health Insurance Program (CHIP)

• CMS estimates Medicaid and CHIP improper payments using the Payment Error Rate Measurement (PERM) program.
  • The PERM program uses a three-year, 17-state rotation, meaning each state is reviewed once every three years, and each cycle measurement includes one-third of all states. The most recent three cycles (for 2023, that is, 2023, 2022, and 2021) are combined to form each year’s overall national rate.
  • PERM ensures a statistically valid random sample representative of all Medicaid and CHIP payments matched with federal funds.
  • Medicaid and CHIP improper payment data released by CMS are based on reviews of whether states are implementing their Medicaid program and CHIP in accordance with federal and state payment and eligibility policies.
  • The national Medicaid and CHIP improper payment rates are based on reviews of the FFS, managed care, and eligibility components of a state’s Medicaid and CHIP program in the year under review.
• In addition, the PERM program combines individual state component estimates to calculate the national component estimates. National component rates and the Medicaid and CHIP rates are weighted by state size, such that a state with a $10 billion program is weighted more in the national rate than a state with a $1 billion program.
• The majority of Medicaid and CHIP improper payment findings are the result of insufficient or missing documentation.

 

ACA Exchange Advance Payment of the Premium Tax Credit

• CMS estimates Advance payment of the Premium Tax Credit (APTC) improper payments using the Exchange Improper Payment Measurement (EIPM) program.
  • The EIPM program currently measures improper payments for the Federally Facilitated Exchange (FFE). The improper payment measurement methodology for State-based Exchanges is under development.
  • The EIPM program measures improper payments based on a statistically valid random sample representative of all health insurance applications with APTC payments processed by the FFE.
  • APTC improper payment estimates are based on reviews of the FFE compliance with requirements surrounding payment and eligibility determinations.
• The majority of APTC improper payments are tied to manual eligibility verifications.
• This year is the second year the EIPM program is reporting APTC improper payment information. CMS is reporting improper payment information for calendar year 2021 in the fiscal year 2023 HHS Agency Financial Report.
• The APTC program represents the first of two potential[2] payment streams for the overall Premium Tax Credit program. The second payment stream relates to additional Premium Tax Credit amounts claimed by taxpayers at the time of their tax filings, referred to as “Net Premium Tax Credits” (hereafter, “Net PTC”). That is, total Premium Tax Credit outlays (or credits) are equal to APTC payments plus Net PTC claims. The Internal Revenue Service (IRS) measures improper payments associated with Net PTC claims, and for Calendar Year 2021 reported[3] Net PTC claims of $1.97 billion, improper payments of $512.71 million, and an improper payment rate of 26.04%. The combined APTC and Net PTC improper payment estimate is $784.46 million out of $48.47 billion total Premium Tax Credit outlays/claims, or 1.62%. Treasury and HHS are reporting this combined error rate for the Premium Tax Credit program as a whole in both departments’ Agency Financial Reports.
  • State Medicaid Provider Screening and Enrollment Data and Tools: CMS shares Medicare data to assist states with meeting Medicaid screening and enrollment requirements. For instance, CMS shares the Medicare provider enrollment record via the Medicare Provider Enrollment, Chain, and Ownership System (PECOS) and offers a data compare service allowing states and territories to rely on Medicare’s provider screening in lieu of conducting a separate state screening, which is particularly helpful to states when conducting revalidation.
  • Enhanced Assistance on State Medicaid Provider Screening and Enrollment: CMS provides ongoing guidance, education, and outreach to states on federal requirements for Medicaid provider screening and enrollment. CMS also assesses provider screening and enrollment compliance, provides technical assistance, and offers states the opportunity to leverage Medicare screening and enrollment activities.

 

CMS/State Collaboration on Improper Payments:

• CMS collaborates with states in many ways to share information and help to ensure they maintain the proper documentation to demonstrate that payments are being made correctly. Examples include:
  • Medicaid Eligibility Quality Control (MEQC) Program: Under MEQC, states design and conduct pilots to evaluate the processes that determine an individual’s eligibility for Medicaid and CHIP benefits. States have flexibility in designing pilots to focus on vulnerable or error-prone areas as identified by the PERM program and state. The MEQC program also reviews eligibility determinations that are not reviewed under the PERM program, such as denials and terminations.
• Medicaid Integrity Institute (MII): CMS offers training, technical assistance, and support to state Medicaid program integrity officials through the MII. More information is located at the Medicaid Integrity Institute website.

More information on CMS’ Improper Payments Measurement Programs can be found at https://cms.gov/ImproperPayments.

To view the HHS Agency Financial Report, visit: http://hhs.gov/afr.

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