Program Improper Payment Reporting

Topics on This Page:

• Improper Payment Reduction Outlook FY 2006 - FY 2010
• Medicare Fee-For-Service
• Medicare Advantage
• Medicare Prescription Drug Benefit
• Medicaid
• State Children's Health Insurance Program
• Temporary Assistance for Needy Families
• Foster Care
• Head Start
• Child Care and Development Fund

i. all risk susceptible programs whether or not an error measurement is being reported;
ii. where no measurement is provided, indicate the date by which a measurement is expected;
iii. if the Current Year (CY) is the baseline measurement year, indicate by either footnote or by “n/a” in the Prior Year (PY) column;
iv. if any of the dollar amount(s) included in the estimate correspond to newly established measurement components in addition to previously established measurement components, separate the two amounts to the extent possible;
v. include outlay estimates for CY +1, +2, and +3; and
vi. Agencies are expected to report on CY activity, or if this is not feasible, then activity from the most recent prior year is acceptable. Future year outlay estimates (CY+1, +2 and +3) should match the outlay estimates for those years as reported in the most recent President’s Budget.

Improper Payment Reduction Outlook FY 2006 - FY2010
($ in millions)

(a) PY Outlays for Medicare FFS are from the November 2006 Improper Medicare FFS Payments Report (based on CY 2005 claims).

(b) CY Outlays for Medicare FFS are from the November 2007 Improper Medicare FFS Payments Report (based on CY 2006 claims).

(c) Medicare FFS CY+1, CY+2, and CY+3 outlay numbers based on Mid-session Review (Medicare Outlays Current Law (CL).

(d) Medicare Advantage PY, CY, CY+1, CY+2, and CY+3 outlay numbers based on Mid-session Review (Medicare Outlays (CL)

(e) Medicare Prescription Drug Benefit PY, CY, CY+1, CY+2, and CY+3 outlay numbers based on Mid-session Review (Medicare Outlays (CL)

(f) Medicaid PY, CY, CY +1, CY +2, and CY +3 outlay numbers based on Mid-session Review (Medicaid Net Outlays (CL), excluding CDC Program Vaccine for Children obligations)

(g) Medicaid CY outlay number based on FY 2006 fee-for-service claims processed by the states during the first six months for which the preliminary rate was calculated.

(h) SCHIP PY, CY+1, CY+2, and CY+3 outlay numbers based on Mid-session Review (SCHIP Total Outlays (CL).

Improper Payment Reduction Outlook Notes:

1. HHS is in the process of developing a Medicare Advantage (Part C) error rate. In FY 2007, HHS prepared a Part C Risk Assessment and identified the payment system calculation as one risk susceptible area. HHS has provided an initial estimate of the Payment System Calculation Discrepancies (PSCD) for FY 2007 Medicare Advantage prospective payments from January-June 2007.  The PSCD Estimate is a measure of the accuracy of the payment system calculations of the prospective capitation payments. These discrepancies are not payment errors because a payment error would only occur after final reconciliation amounts have been determined for a given plan year. The PSCD Estimate is not based on final payments and is not a comprehensive measurement of the Part C payment error rate. HHS calculated a Medicare Advantage PSCD Estimate of 0.642 percent for payment made January- June 2007 and the PSCD gross amount for January – June 2007 totaled $234,267,567.
   
2. HHS is in the process of developing a Medicare Prescription Drug (Part D) error rate. In FY 2007, HHS prepared a Part D Risk Assessment and identified the payment system calculation as one risk susceptible area. HHS has provided an initial estimate of the Payment System Calculation Discrepancies (PSCD) for FY 2007 Prescription Drug prospective payments from January-June 2007. The PSCD Estimate is a measure of the accuracy of the payment system calculations of the prospective capitation payments. These discrepancies are not payment errors. The PSCD Estimate is not based on final payments and is not a comprehensive measurement of the Part D payment error rate. HHS calculated a Part D PSCD Estimate of 0.020 percent for payment made January- June 2007 and the PSCD gross amount for January – June 2007 totaled $4,102,667.
   
3. This preliminary error rate is from 17 States for 6 months only and was calculated in September 2007. CMS is completing the remaining 6 months and will report an annual 2006 Medicaid fee-for-service error rate in the 2008 PAR. This preliminary error rate does not reflect the late implementation of policies in the measurement cycle. These factors should be considered when reviewing the preliminary rate and may impact the final calculation of the annual error rate.
   
4. HHS OIG conducted a pilot review of TANF cash assistance payments in three states. The error rates for the pilots ranged from 11.5 percent to 40 percent. Documentation errors comprised at least 22 percent of each of the error rates.
   
5. In FY 2007, the Child Care program completed pilot project measuring improper payments based on state eligibility criteria. The payment error rates for these pilots ranged from 2 percent to 18 percent based on a 90 percent confidence level.

A. Medicare Fee-For-Service

As part of the error rate measurement process, CERT and HPMP review a sample of Medicare FFS claims and estimate a projected improper payment amount based on errors found in the sample.  The Carriers, Fiscal Intermediaries, Medicare Administrative Contractors (MACs) and Durable Medical Equipment MACs are notified of the actual overpayments that were identified so they can implement the necessary adjustments.  Since 2004, CERT and HPMP identified $50,823,393 in actual overpayments and have collected $44,397,199 of those overpayments.  For the 2007 reporting period, the CERT program identified $888,291 in actual overpayments and, as of the final cut-off date for the report, collected $592,286.  HPMP identified $15,083,413 in actual overpayments and collected $12,542,875 as of the cut-off date for the report.

B. Medicare Advantage

Once a baseline error rate is established, HHS will develop a strategy to recover improper payments identified in the Medicare Advantage measurement program, if applicable.

C. Medicare Prescription Drug Benefit

Once a baseline error rate is established, HHS will develop a strategy to recover improper payments identified in the Medicare Prescription Drug Benefit measurement program, if applicable.

D. Medicaid

States must return the Federal share of overpayments based on identified errors in accordance with current statutory requirements at section 1903(d)(2) of the Social Security Act and related regulations at 42 CFR part 433, subpart F.

E. State Children’s Health Insurance Program

The SCHIP program did not measure an improper payment rate in FY 2007. In the future, quarterly Federal payments must be reduced in accordance with section 2105(e) of the Social Security Act and related regulations at 42 CFR Part 457, subpart B.

F. Temporary Assistance for Needy Families

Due to legislative restrictions, HHS is not able to recover improper payments in the TANF program.

G. Foster Care

As part of the error rate measurement process, foster care disallows improper payment maintenance payments and administrative costs associated with sample review cases as well as any other impropr payment identified during the review.

The states are required to “refund” (as applicable) the amount of funds that have been disallowed within 30 days of receipt of the disallowance letter, unless they choose to appeal some or all of the disallowance. HHS recovers the funds through increasing adjustments the state makes via its quarterly expenditure report. Since FY 2004, HHS has disallowed over $7 million in foster care maintenance payments and administrative costs as follows:

FY 2004          $1,601,415
FY 2005            1,017,790
FY 2006               704,607
FY 2007            3,691,254

TOTAL           $7,015,066

H. Head Start

As reflected in the low improper payment error rates for Head Start over the past few years, the incidence of improper payments has been minimal.  Cost disallowances for the Erroneous Payment Study have generally not been taken since income eligibility is a complex issue subject to various criteria.  Head Start is focusing its efforts on identifying grantees whose enrollment of over-income children is frequent, substantial, and willful.

I. Child Care and Development Fund

Improper payments under the CCDF are subject to disallowance procedures as set forth at 45 CFR 98.66 of the CCDF regulations.

In addition, pursuant to CCDF regulations at 45 CFR 98.60(i), a state Lead Agency is required to recover child care payments that are the result of fraud. The Lead Agency has discretion as to whether to recover misspent funds that were not the result of fraud, such as in cases of administrative error. Improperly spent funds are subject to disallowance regardless of whether the state pursues recovery.

In the event that improper payments are recovered, 45 CFR 98.60(g) provides that such payments shall (1) if received by the Lead Agency during the applicable obligation period (described in 45 CFR 98.60(d) and (e)), be used for activities specified in the Lead Agency’s approved plan and must be obligated by the end of the obligation period; or (2) if received after the end of the applicable obligation period, be returned to the Federal government.

Report Date: November 15, 2007 

Other sections of the Improper Payments Information Act Report

• Section I: Risk Assessments
• Section II: Statistical Sampling Process
• Section III: Corrective Action Plans
• Section IV: Program Improper Payment Reporting
• Section V: Recovery Auditing Reporting
• Section VI: Actions to Reduce and Recover Improper Payments
• Section VII: Agency Information Systems and Other Infrastructure
• Section VIII: Statutory or Regulatory Barriers
• Section IX: Overall Agency Efforts