November 10,2005

Grassley Praises Progress in Reducing Medicare’s Improper Payments

M E M O R A N D U M

To: Reporters and Editors
Re: New Report on Improper Medicare Payments
Da: Thursday, Nov. 10, 2005

Sen. Chuck Grassley issued a comment today about the just-released November 2005 Reporton Improper Medicare Fee-for-Service Payments. The report shows the improper rate has been cutin half, reducing improper payments by $9.5 billion. As chairman of the Committee on Finance, Sen.Grassley is responsible for Medicare legislation and oversight. He has put continued pressure onMedicare program administrators to reduce improper payments. His statement follows here.

“It’s remarkable that better management of the Medicare program has achieved the samelevel of savings in just one year as the Senate did in a five-year budget bill passed just last week.Congressional oversight plus a commitment to addressing the problem from AdministratorMcClellan are having a very positive effect. Taxpayers and beneficiaries deserve continued effortsby Medicare officials to reduce improper payments. Every dollar not wasted is another dollar forbeneficiaries.”

Following is today’s news release from the Center for Medicare and Medicaid Services.CMS NEWS

FOR IMMEDIATE RELEASE
CMS Media Affairs
November 10, 2005

MEDICARE REDUCES IMPROPER CLAIMS PAYMENTS BY HALF
CMS Expands Oversight to Include Medicaid, SCHIP and Prescription Drug Plans

Aggressive oversight and new improvement efforts have cut the number of improper fee-for-serviceMedicare claims payments by half in one year, from 10.1 percent in 2004 to 5.2 percent in 2005, a$9.5 billion reduction in improper payments, Centers for Medicare & Medicaid Services (CMS)Administrator Mark B. McClellan, M.D., Ph.D., announced today. Dr. McClellan also announcedthe first year of the national implementation to measure state-level Medicaid improper payments anda comprehensive strategy to assure appropriate payments to prescription drug plans.

“The unprecedented, $9.5 billion reduction in improper Medicare payments reflects our commitmentto careful measurement and targeted oversight, and we intend to keep building on these efforts,” saidDr. McClellan. “We are measuring the accuracy of payments more closely, and that enables us totarget our efforts more effectively with Medicare contractors and providers.”

The Medicare fee-for-service error rate has declined from 14.2 percent in 1996, when the Medicareimproper payment rate was first reported, to the current 5.2 percent. The unprecedented reductionin the error rate has occurred despite a growing volume of claims and complexity of paymentprocessing at CMS. CMS pays more than 1 billion fee-for-service claims each year, and providesoversight to state payments for services provided by health care professionals under Medicaid andthe State Children’s Health Insurance Program (SCHIP). In 2005, Medicare also made monthlypayments to more than 450 Medicare health plans across the U.S.

Building on the success of the Medicare Integrity Program for Medicare Parts A and B, CMS isdeveloping a comprehensive plan for a similar oversight program for payments to Medicare healthand prescription drug plans and Medicaid, all of which is reflected in the President’s 2006 budgetrequest. CMS has requested $720 million for the Medicare Integrity Program and an additional $80million to continue to expand its oversight to the other programs.

“Much of the success we’ve achieved so far in our oversight of the fee-for-service Medicare programis due to Congress’ support and we expect that will continue for our oversight of the managed careand Medicaid efforts,” said Dr. McClellan.

CMS reviewed approximately 160,000 fee-for-service Medicare claims in 2005 as part of itsMedicare error rate testing program. These detailed reviews, which span all types of Medicarepayments, were first conducted at the level of individual contractors last year. By providing accuratestatistical information at the level of particular contractors and types of medical services, CMS cannow identify where problems exist and target improvement efforts to address the problems. Thiseffort reflects the agency’s increased commitment to use more detailed data and analysis to identifyand eliminate improper payments and as a tool to better manage the Medicare contractors.

The significant reduction in the Medicare FFS error rate from 2004 to 2005 can be attributed largelyto marked improvement in the no documentation and the insufficient documentation error rates.

Since the CERT program began, CMS and the Medicare contractors focused a large part of theirefforts on educating providers about CERT and the importance of responding to CERT requests formedical records which has dramatically reduced the number of no documentation errors. Providereducation also helped reduce the insufficient documentation error rate to just over one percent:

0.7 percent had errors due to non-responses to request for medical records (3.1 percent in 2004);
1.1 percent of payments had errors due to insufficient documentation being submitted (4.1 percentin 2004);
1.6 percent due to medically unnecessary services (1.6 percent in 2004);
1.5 percent due to incorrect coding (1.2 percent in 2004); and
0.2 percent due to other errors (0.2 percent in 2004).

As part of the efforts to further reduce the Medicare error rate, CMS is requiring its fee-for-servicecontractors to:

Develop corrective action plans that include efforts to educate providers about the importance ofsubmitting thorough and complete medical records;

Identify which providers or contractors need to review their submission of claims and improve theireducational efforts, based on information that shows where the highest percentage of errors onoverused billing codes are occurring; and

Use the performance results to develop local efforts to lower their error rates by addressing the causeof the errors and outlining corrective steps.

“We’ve taken major steps to get more accurate information about the payments we make inMedicare, and those steps will help us reduce the error rates for Medicare,” said Dr. McClellan. “Weare now taking the successes we’ve achieved with our evidence-based strategies to cut the Medicareerror rate to help us achieve similar results for payments in Medicaid, SCHIP and Medicare managedcare and prescription drug plans.”

Taking similar steps to identify and measure errors and weaknesses at a provider and geographiclevel, CMS will develop better, comparable information on the accuracy of payments in Medicaid.These efforts will allow CMS to collect consistent information on error rates in Medicaid paymentsacross all states. Under the review program, states will be reviewed once every three years.

In addition, 2005 was the third year of the Payment Accuracy Measure (PAM) pilot project whichCMS used to measure the accuracy of state payments for Medicaid and SCHIP. In October, CMSissued an interim final regulation with comment that will implement a national program to identifyand reduce improper payments in Medicaid. In 2006, CMS will review Medicaid fee-for-servicemedical claims and in 2007, CMS will measure improper payments in the fee-for-service, managedcare and eligibility aspects of Medicaid. CMS will then calculate state-specific error rates uponwhich a national Medicaid error rate can be estimated. CMS will work with states to develop andreview the data, to identify the state programs that keep error rates down, and to expand the use ofeffective approaches.

Also beginning in FY 2007, CMS will begin to measure improper payments in SCHIP programs andwill begin to select states for measurement once every three years, similar to the selection in theMedicaid improper payment effort.

CMS is developing a comprehensive strategy to measure improper payments for the new prescriptiondrug benefit as it is implemented in the coming months. In 2005, CMS began an assessment of therisk for improper payments to Medicare Advantage plans. In 2006, CMS will take a series of stepsto measure the accuracy of these payments in detail and address potential risks. CMS will begin byreviewing the monthly payments made to the plans and conduct a review of all the data required forplan payments. Managed care payment reviews will examine whether beneficiaries are eligible toenroll in a plan, how payments are made and what occurs when a beneficiary’s enrollment isterminated.

Those efforts will be complemented through the work of the Medicare Rx Integrity Contractors(MEDICs) who will help identify and prevent fraud and abuse in the Medicare prescription drugprogram.

“Program and fiscal integrity oversight is an integral part of CMS's financial management strategyand we place a high priority on detecting and preventing improper or fraudulent payments,” said Dr.McClellan.

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