FY 2021 MEDICAID IMPROPER PAYMENTS

 

Medicaid has been designated a high-risk program by the Government Accountability Office (GAO) since 2003 because of improper payments, low-quality data, and administrative challenges. Earlier in November, the Department of Health and Human Services (DHHS) posted its Agency Financial Report. In FY 2021 Medicaid's estimated improper payments amounted to a staggering $98.72 billion. According to DHHS, the vast majority of these improper payments were a result of inadequate documentation and eligibility errors.

Just recently, CMS published the following Improper Payments Fact Sheet.

What You Need to Know:

• Improper payments represent payments that do not meet program requirements.
• The vast majority of improper payments occur in regards to people who may be eligible for care, but for whom there was an unintentional payment error or a reviewer can not determine if a payment was proper due to insufficient payment documentation from a state or a provider.
• Improper payments do not necessarily represent expenditures that should not have occurred and can include both overpayments and underpayments situations where there is insufficient documentation to determine if a payment is proper in accordance with program payment requirements.
• While fraud and abuse are improper payments, they are not synonymous; it is important to note that most improper payments are not attributable to fraud, and improper payment estimates are not fraud rate estimates.

Improper Payment Measurements:

Medicare

• CMS developed the Comprehensive Error Rate Testing (CERT) program to estimate the Medicare Fee-For-Service (FFS) program's improper payment rate.

• The CERT program cites improper payments in accordance with payment policies on any claim: 1) that was paid when it should have been denied or paid at another amount (including both overpayments and underpayments); and/or 2) for which documentation was insufficient to be an improper payment.

• 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 either a total or partial improper payment.

• The majority of Medicare FFS improper payments fall into two categories:

• (1) insufficient documentation; and
• (2) the documentation provided for the items or services billed did not sufficiently demonstrate medical necessity.

Medicaid

• CMS estimates Medicaid and CHIP improper payments using the Payment Error Rate Measurement (PERM) program.

• The PERM program uses a 3-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 (2021, 2020, and 2019) 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 meets a national precision requirement where CMS is 95% confident that the Medicaid and CHIP improper payment rates are within +/- 3 percentage points.
• The Medicaid and CHIP improper payment national 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. A correction factor in the methodology ensures that each Medicaid improper payment is counted only once in the combined national rate.

• Medicaid and CHIP improper payment data released by CMS are based on reviews of whether states are implementing their Medicaid and CHIP programs in accordance with federal and state payment and eligibility policies.

Click here to read the white paper Improper Payments - Medicaid's Billion Dollar Problem

Improper Payments Do Not Necessarily Indicate Fraud:

• Improper payment rates are not measures of fraud in CMS programs. Most improper payments are caused by improper or inadequate documentation.
• Improper payments do not necessarily represent expenditures that should not have occurred.

• For example, a majority of improper payments are due to instances where information required for payment was missing, documentation that an eligibility determination was made correctly was missing from the state system, states did not follow the appropriate process for enrolling providers, and/or states did not follow the appropriate process for determining beneficiary eligibility. However, these improper payments do not necessarily represent payments to illegitimate providers or on behalf of ineligible beneficiaries. Had the missing information been on the claim and/or had the state complied with the enrollment or redetermination requirements, then the claims may have been payable. A smaller proportion of improper payments are instances where the State Agency had sufficient documentation to determine that payments should not have been made or should have been made in different amounts, which are considered monetary losses to the Federal Government (e.g., medical necessity, incorrect coding, and other errors).

• Improper payments can result from a variety of circumstances, including:

• 1) services with no documentation,
• 2) services with insufficient documentation, or
• 3) no record of the required verification of an individual's eligibility, such as income, specifically for Medicaid and CHIP.

• 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 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 Reporting Criteria

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

• (i) improper payments greater than $10 million and over 1.5 percent of all payments made under that program, or.
• (ii) improper payments greater than $100 million.

• The Office of Management and Budget (OMB) has identified Medicare Fee-For-Service (FFS), Medicare Part C, Medicare Part D, Medicaid, and the Children's Health Insurance Program as susceptible to significant improper payments. The Advanced Premium Tax Credit program has also been identified as susceptible to significant improper payments. In FY 2021, CMS completed the development of the Federally-facilitated Exchange improper payment measurement and commenced measurement activities for future reporting.

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.
• Enhanced State PERM Corrective Action Plan Process: CMS works with states to coordinate state development of corrective action plans to address each error and deficiency identified during the PERM cycle. After each state submits the corrective action plan, CMS monitors each state's progress in implementing effective corrective actions. Throughout the process, CMS also provides training opportunities to ensure compliance with federal policies.
• State Medicaid Provider Screening and Enrollment Data and Tools: CMS shares Medicare data to assist states with meeting Medicaid screening and enrollment requirements.
• 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.
• 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.

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MEDICAID NEWS FROM OCTOBER

 

Syrtis Solutions distributes a monthly Medicaid news roundup to help you stay informed. The monthly recap concentrates on developments, analysis, and legislation that pertains to Medicaid program integrity, cost avoidance, coordination of benefits, third party liability, improper payments, fraud, waste, and abuse. Below is a list of last month's important Medicaid news.


Read October's news here.

MEDICAID IMPROPER PAYMENTS CAUSE CONCERN AMONG SENATORS

Under the Payment Integrity Information Act of 2019, the Centers for Medicare & Medicaid Services (CMS) was instructed to assess federal programs in danger of improper payments. The bill tasked CMS to evaluate what programs are at risk, estimate the number of improper payments, and report on steps taken to lower improper payments.

In November, CMS issued its Medicaid Payment Error Rate Measurement (PERM) review discoveries. CMS determined that the national Medicaid improper payment rate estimate reached 21.36 percent in FY 2020, representing $86.49 billion in improper payments. Medicaid improper payments represented more than twenty percent of federal Medicaid expenditures, and one out of every four Medicaid dollars was spent improperly. Furthermore, the majority of improper payments stemmed from eligibility errors.

As November approaches and legislators consider additional Medicaid expansion, some representatives are concerned about the climbing improper payment rate and what the FY 2021 audit will uncover. The upcoming report will be the first full audit of all fifty states after program expansion.

On Monday, thirteen Senate Finance Committee Republicans sent a letter to Administrator Brooks-LaSure at CMS to voice their concerns and to request data to inform policy discussions.

Read the letter below.

Dear Administrator Brooks-LaSure:

As some in Congress consider proposals to expand the Medicaid program by potentially half a trillion dollars over the next decade, it is vital that both Senators and Members of the House of Representatives have accurate information about how the program is using taxpayer resources. Every November, the Centers for Medicare and Medicaid Services (CMS) releases estimates of improper payment rates for programs within its jurisdiction. The November 2020 report showed that the Medicaid improper payment rate reached 21.4 percent, with total federal improper payments in the program amounting to $86.5 billion annually. Medicaid’s improper payment rate has significantly increased since the passage of the Affordable Care Act, which dramatically expanded Medicaid. In 2013, the year before the ACA’s Medicaid expansion took effect, the improper payment rate was just 5.8 percent.

According to last year’s report, eligibility errors are the major drivers of the increased Medicaid improper payment rate. According to CMS, “Eligibility errors are mostly due to insufficient documentation to affirmatively verify eligibility determinations or non-compliance with eligibility redetermination requirements.” One of the most common eligibility errors often occurs when failing to verify information provided by the applicant, including income. Failure to properly verify that applicants are eligible for the program, especially to this extent, harms the nation’s taxpayers and takes resources away from those who are eligible and who truly need the program.

There is concern that the November 2020 improper payment rate estimate of 21.4 percent was unrealistically low because the eligibility reviews excluded one-third of states. Since the Obama Administration canceled eligibility audits from 2014-2017, this year’s forthcoming report will be the first complete assessment of all states since the expansion took effect. Given its more complete nature, the upcoming assessment has the potential to show that the improper payment rate in the program exceeds 25 percent, totaling above $100 billion annually. Such a high improper payment rate demonstrates that the program requires a stalwart defense to ensure those that are eligible receive the care they need. This rate also raises questions of whether Congressional and regulatory actions have made Medicaid too complicated for the Federal government to properly oversee it, especially given the differing improper payment rates among states. Congress needs complete and updated information about the improper payment rate in Medicaid as well as the corresponding drivers of this problem. We understand that the essential work on the 2021 CMS improper payment report has concluded, and drafts of the report have been completed. While state and Federal responses to COVID-19 halted some payment and eligibility reviews in 2020, this work is too vital to remain paused when the consequences are so dire. Given the importance of accurate data to inform ongoing policy discussions, by Monday, November 8, we ask that you provide:

• The updated improper payment rate in Medicaid;
• A breakdown of improper payment rates by state; and
• The corresponding estimated total of improper payments from insufficient verification or non-compliance with eligibility requirements.

When asked about this at a June hearing in front of the Senate Finance Committee, Secretary Becerra committed to making available such data. We also request a briefing with Committee Members’ staff, so that Congress can ask informed questions on this important matter. Thank you for your prompt attention to this shared concern.

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ASCERTAINING MEDICAID TPL

The majority of Medicaid improper payments occur as a result of antiquated data systems that lead to eligibility errors. As the Medicaid program has expanded, finding primary commercial coverage, also referred to as Third Party Liability (TPL), has become significantly more complicated and challenging. By law, Medicaid plans are payers of last resort. This means if a plan member has health care coverage through any other third party, that third party must pay its legal liability first. If any liability remains, Medicaid plans will then pay. According to the Centers for Medicare and Medicaid Services (CMS), "States are required to take all reasonable measures to ascertain the legal liability of third parties to pay for care and services that are available under the plan."

This rule has been in place since the Employee Retirement Income Security Act (ERISA) modified the Social Security Act in 1974. To this day, ascertaining TPL remains a difficult challenge. Coordination of benefits (COB) is no easy task. CMS explains that COB is achieved by, "determining Medicaid benefits when an enrollee has coverage through an individual, entity, insurance, or program that is liable to pay for health care services."

WHERE TPL IS IDENTIFIED

The discovery of liable third parties happens at three points in the lifecycle of a Medicaid beneficiary. This identification of unknown primary insurance coverage may occur in the course of the enrollment process, prospectively before claims are paid, and retrospectively after an improper claims payment has been made.

In the enrollment phase, Medicaid applicants are approved and their self-reported TPL is validated and reported to the state. The main challenge is that over 13% of the Medicaid population has unreported TPL. Applicants are often not aware of other health insurance or fail to disclose it at the time of enrollment. At the point of service-- when recipients are presenting insurance information to care providers-- they might not furnish proof of primary coverage. The system is undoubtedly complex, and members may not realize that they have valid primary coverage, and even if they do, it is unlikely that they are familiar with the concept of payers of last resort. Compounding the confusion, the Medicaid population is in near-constant flux, with individuals becoming eligible and ineligible for services depending on a number of factors such as income and disability status.

Once an applicant is enrolled, plans undertake ongoing prospective identification of other insurance coverage. The difficulties here are the same issues that are responsible for the high amount of improper payments in the Medicaid program. That is, existing data mining and matching models are antiquated and need constant verification. Sometimes, a Medicaid plan uses an outside vendor to conduct monthly eligibility checks in an attempt to discover a Medicaid member's TPL. However, the data available to these vendors suffer the same antiquation and inaccuracy problems. Though health plans make an effort to discover TPL in as timely a manner as possible, there are many obstacles.

The final point at which health plans can discover TPL is retrospectively after claims are paid in error. At present, pharmacy and medical claims reviews are profoundly retrospective, which creates a multitude of problems for improper payments. Consequently, a post-payment recovery process, known as 'pay and chase,' is needed to recoup the claims payments that were made in error.

Beyond simple mistakes at the point of service with providers, there are fundamental problems in the health care data used by the federal government that lead to the loss of literally billions of dollars a year.

One of the major challenges facing Medicaid is the lack of high-quality eligibility data. In testimony before Congress in 2012, HHS Regional Inspector General Ann Maxwell gave an alarmingly unfavorable assessment relating to the reliability of data the federal government uses to detect overpayments and fraud in the Medicaid program. She explained, "much of the data used to identify improper payments and fraud is not current, available, complete, [or] accurate."

Identifying primary commercial coverage is extremely difficult for payers of last resort. Due to the complexity of COB, the near-constant flux in the program's population, and bad quality eligibility data health plans rely greatly on retrospective identification and recovery. Unfortunately, this is costing Medicaid billions in waste. To coordinate claims effectively, payers of last resort must look to new data solutions that determine TPL before claims are paid in error.

To learn more, click here. 

SEPTEMBER MEDICAID NEWS

Syrtis Solutions issues a monthly Medicaid news roundup to help you stay informed. The monthly recap focuses on developments, research, and legislation that relates to Medicaid program integrity, cost avoidance, coordination of benefits, third party liability, improper payments, fraud, waste, and abuse. Below is a list of last month's Medicaid news.

Open September's news here. 

MEDICAID TPL SOLUTION PRESENTS A CONSIDERABLE SAVINGS OPPORTUNITY

 

Dependence on the Medicaid program has increased exponentially over time. Currently, it is the single largest insurer in the country, and in FY 2019, it accounted for more than half of all federal monies distributed to states. Regrettably, as the safety net program has grown, waste has also become more widespread. Improper payments are costing the program billions of dollars every year.

Despite being on the GAO's High Risk List since 2003, Medicaid's improper payment rate continues to surge and put more pressure on budgets. In 2018, the program's improper payment rate was at nine percent, and by 2020 it had grown to twenty-one percent. That equates to a shocking $143 billion. However, according to analysts, these numbers are conservative estimates that do not take into account all the needed data. In reality, the improper payment rate is thought to be closer to twenty-seven percent or $100 billion annually.

Initiatives to Decrease Improper Payments

Fiscal integrity has been a problem for Medicaid since its conception. So much so that over the last 56 years, various policy and legislative efforts have occurred to focus on improper payments. These efforts primarily evaluate the risk of fraud, estimate the effect of TPL, increase reporting requirements, and increase data sharing. Unfortunately, while these actions help bring the problem into scope, they do nothing to prevent the improper payment rate from climbing.

Apart from these legislative efforts to manage costs, some policymakers have suggested transforming how the safety net program is funded to decrease waste. They think that the program should be incentivized to use funding more responsibly and efficiently. One thought is to implement block grants. These grants would take into consideration the size of the eligible population within a state and give the states the flexibility to distribute the funds with limited oversight from the federal government. The states would be responsible for ensuring that the appropriate care is being delivered to beneficiaries and that program resources are not wasted. Another idea is for Congress to establish tax-free health savings accounts to lessen the dependence on Medicaid and improve access to health care for those in need. The accounts would be financed with the savings achieved from decreasing waste in the Medicaid program.

Reducing Improper Payments with Medicaid TPL Tech Solutions

While lawmakers think about program reform, one area of opportunity to dramatically reduce costs lies within Medicaid's coordination of benefits. Currently, the majority of Medicaid's improper payments actually stem from bad quality data and inefficient TPL processes, not deliberate fraud and abuse. Payers of last resort struggle to identify primary coverage on pharmacy and medical claims. Much of the data they have access to is not current, available, complete, or accurate. Consequently, plans have no choice but to pay claims in error and chase reimbursement once other health insurance (OHI) is found. Unfortunately, the actual funds recovered are around twenty cents on the dollar.

Syrtis Solutions realized that Medicaid plans needed a way to identify active OHI coverage so that claims could be adjudicated properly. In 2010, they introduced ProTPL, a real-time point of sale cost avoidance service for the payer of last resort market. ProTPL supplies powerful and accurate eligibility data that can be acted upon. The solution gives plans the ability to cost avoid pharmacy and medical claims and the associated costs of recovery. Additionally, the coverage identified by ProTPL can not be found by other vendors. Syrtis Solutions is able to do this by checking claims against the nation's largest and most complete active healthcare coverage information database. Customers who implement the tool see an average 25% increase in OHI discovery. This means Syrtis' customers get the best and latest eligibility responses when they need them.

In March, enrollment in the Medicaid program reached nearly 75 million people, and that number continues to rise. As a result, the chances for waste and improper payments are likely to increase also. This is problematic considering that Medicaid is losing billions every year in improper payments already. Due to strained budgets, program integrity issues, and enrollment surges, some policymakers and states are considering innovative ideas and program reform to reign in costs and decrease waste. While these efforts are being considered, they have yet to be implemented. At this time, one of the most significant opportunities for reducing Medicaid's improper payments lies within the coordination of benefits. Plan administrators should turn to TPL technology solutions for further efficiency and cost avoidance opportunities.

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AUGUST MEDICAID NEWS RECAP

 

Syrtis Solutions distributes a monthly Medicaid news recap to help you stay up-to-date. The monthly summary highlights developments, analysis, and legislation that relates to Medicaid integrity, cost avoidance, coordination of benefits, improper payments, fraud, waste, and abuse. Below is a summary of last month's notable Medicaid articles.

Click this link to open the news.