Testimony before the United States House of Representatives 
 
Committee on Appropriations,  
 
Subcommittee on Labor, Health and Human Services, Education, and Related Agencies 
 
 
 
 
 
 
 
 
Hearing on Improper Payments 
 
Testimony of Daniel R. Levinson 
 
Inspector General 
 
U.S, Department of Health and Human Services 
 
 
 
 
 
 
 
 
 
 
 
 
March 17, 2011 
 
10:00 AM 
 
 
Room 2358 C, Rayburn House Office Building 
 
   
____________________________________________________________________________________________________  1 
U.S. House of Representatives, Committee on Appropriations, Subcommittee on Labor, Health and Human Services, Education, 
and Related Agencies, March 17, 2011  Testimony of:  
Daniel R. Levinson 
Inspector General  
U.S. Department of Health & Human Services  
______________________________________________________________________________ 
 
Good morning, Chairman Rehberg, Ranking Member DeLauro, and other distinguished 
Members of the Subcommittee.  I am Daniel Levinson, Inspector General of the U.S. Department 
of Health & Human Services (HHS or the Department).  Thank you for the opportunity to testify 
about the HHS Office of Inspector Generals (OIG) efforts to monitor and make 
recommendations to reduce improper payments.  My testimony will describe the scope of the 
problem and our recommendations to prevent improper payments, with a focus on improper 
payments that exist in the Departments two largest programs  Medicare and Medicaid.  I will 
also discuss OIGs efforts to oversee the Departments measurement of improper payments and 
to prevent, detect, and recoup wasteful payments.   
 
Improper Payments Cost Taxpayers Billions of Dollars Each Year 
In 2010, the Office of Management and Budget (OMB) designated 14 programs as high error 
based on improper payment information included in agencies annual performance and financial 
reports.  HHS administers five of these high-error programs  Medicare Fee-for-Service, 
Medicaid, Medicare Advantage, Childrens Health Insurance Program, and Medicare 
Prescription Drug Benefit.  For fiscal year (FY) 2010, HHS reported improper payments totaling 
$56.8 billion in Medicare Fee-for-Service and Medicaid alone. 
 
OIG has long been at the forefront of measuring, monitoring, and recommending actions to 
prevent improper payments, including developing the first Medicare payment error rate in 1996, 
a time when there were few existing error rate models in Government.  OIG identifies improper 
payments for specific products and services, assesses internal control and payment 
vulnerabilities, and makes recommendations to prevent future improper payments.  To maximize 
the impact of these reviews, we assess program risks and employ data analysis to target our 
audits, evaluations, and investigations.  
 
OIG Reviews the Measurement of Medicare and Medicaid Improper Payment Rates 
Measuring error rates is key to monitoring program integrity and the scope of inappropriate 
payments.  In 2003, CMS assumed responsibility for, and OIG began providing oversight of, the 
error rate process.  CMS established the Comprehensive Error Rate Testing (CERT) program to 
produce a Medicare fee-for-service error rate.   
 
OIG reviews CMSs estimates of improper payments and has analyzed the error rate by types of 
providers and by types of error.  This analysis supports CMSs efforts to reduce the error rate by 
detailing what types of errors are most frequent and which provider types are committing those 
errors, so that CMS can refine and target its remediation efforts accordingly.  For example, OIG 
____________________________________________________________________________________________________  2 
U.S. House of Representatives, Committee on Appropriations, Subcommittee on Labor, Health and Human Services, Education, 
and Related Agencies, March 17, 2011  found that in the FY 2009 CERT, inpatient hospitals, durable medical equipment suppliers, 
hospital outpatient departments, physicians, skilled nursing facilities, and home health agencies 
accounted for 94 percent of improper Medicare payments.  We also found that insufficient 
documentation, miscoded claims, and medically unnecessary services and supplies accounted for 
about 98 percent of the improper payments attributable to the six types of providers.  OIG is also 
planning audit work to follow up on error-prone providers, i.e., individual providers with 
erroneous claims in each of the past four CERT cycles, to test those providers populations of 
claims and identify improper payments. 
 
In addition to the CERT program, CMS developed the Payment Error Rate Measurement 
(PERM) program to measure improper payments in Medicaid and the Childrens Health 
Insurance Program (CHIP).  OIGs review of the PERM program has included testing and 
analysis of the PERM sampling and estimation methodology, the medical records request 
process, medical review, and the error estimation calculation.  Measuring payment errors and 
their causes in the Medicaid and CHIP programs is particularly challenging because of the 
diversity of State programs and the variation in their administrative and control systems.  OIG is 
performing audit work to determine whether problems similar to those discovered in the CERT 
program exist in the PERM program.  
 
OIG Reviews Identify Improper Payments and Recommend Corrective Actions 
OIG conducts targeted reviews to determine the scope of improper payments for specific service 
types and recommends actions to improve program safeguards.  By reviewing medical records 
and other documentation associated with a claim, we identify services that are undocumented, 
medically unnecessary, or incorrectly coded, as well as duplicate payments and payments for 
services that were not provided.  In doing so, we uncover payment vulnerabilities and make 
recommendations to address them.   
 
For some services, we have found pervasive documentation errors.  For example, we found that 
during the first half of 2007, 60 percent of Medicare claims for standard and complex 
rehabilitation power wheelchairs did not meet one or more documentation requirements.  These 
claims accounted for $112 million in improper Medicare payments.  We have also found 
significant rates of documentation error for certain types of pain management services.  We 
recommended that CMS take several actions to address these errors, including improving 
controls, educating providers, and clarifying guidance. 
 
Medically unnecessary services are particularly concerning, as beneficiaries may be subjected to 
tests and treatments that serve no purpose and may even cause harm.  In some cases, as with 
durable medical equipment, beneficiaries may also be charged significant copayments for items 
or services that they did not need.  For example, we reviewed claims for certain types of support 
surfaces used to prevent and treat bedsores and found that more than one in five claims were 
medically unnecessary.  To address these and other types of errors, we recommended that CMS 
____________________________________________________________________________________________________  3 
U.S. House of Representatives, Committee on Appropriations, Subcommittee on Labor, Health and Human Services, Education, 
and Related Agencies, March 17, 2011  take a variety of actions to ensure that claims are paid appropriately, including conducting 
additional prepayment and postpayment medical reviews. 
 
In some cases, documentation or coding errors may signal broader vulnerabilities affecting 
patient care that need to be addressed to prevent improper payments and help ensure quality of 
care.  For example, we found that 82 percent of hospice claims for beneficiaries in nursing 
facilities did not meet at least one Medicare coverage requirement  requirements that are in 
place to protect beneficiaries health and wellbeing.  Problems we identified included failing to 
establish plans of care and providing fewer services than outlined in beneficiaries plans of care, 
potentially putting the beneficiary at greater risk.  To prevent these problems from recurring and 
to better protect hospice patients, we recommended that CMS educate hospice providers about 
coverage requirements, provide tools to hospice providers (e.g., guidance, templates, and 
checklists), and use targeted medical reviews and other oversight to improve compliance. 
 
Similarly, a recent review of Medicaid personal care services found that for 18 percent of claims, 
personal care service attendant qualifications were not properly documented, resulting in  
$724 million in improper payments.  Without documentation of attendant qualifications, it is 
difficult to determine whether vulnerable beneficiaries are receiving care from appropriately 
screened and trained individuals.  We recommended that CMS work with States to ensure that 
they verify attendants qualifications.  
 
In addition to medical record reviews designed to flag individual improper claims, OIG also 
conducts data analysis to identify broader patterns indicative of improper payments and potential 
fraud and abuse.  For example, through this type of analysis we have identified outliers who 
bill for services at an unusually high rate, as well as patterns in which certain geographic areas 
exhibit unusual billing, and also have matched claims and other data to identify billing patterns 
that raise concern.  These types of analyses can generate leads for investigations, audits, and 
further medical record review.  In addition, these reviews can lead to recommendations to CMS 
to strengthen its program oversight activities and prevent future improper payments.  For 
example, OIG recently reviewed high-utilization claims for blood-glucose test strips and lancet 
supplies, and identified an estimated $270 million in improper Medicare payments for these 
supplies.  We recommended that CMS contractors implement various payment edits, such as 
edits to identify claims with overlapping dates of service. 
 
OIG Will Continue to Monitor and Recommend Actions to Reduce Improper Payments 
OIGs work helps CMS to better identify, track, and prevent improper payments.  For example, 
based on OIG concerns that the Medicare error rates for certain provider types may be 
understated, CMS made substantial changes in the CERT medical record review process in 2009.   
In addition, we have recommended that CMS enhance prepayment review of claims, including 
the use of specific edits to address identified payment errors, and working with providers to 
educate and enforce program requirements, including documentation requirements.  We also 
____________________________________________________________________________________________________  4 
U.S. House of Representatives, Committee on Appropriations, Subcommittee on Labor, Health and Human Services, Education, 
and Related Agencies, March 17, 2011  have made recommendations aimed at preventing and reducing improper payments for specific 
items and services, as described above.  
  
OIG currently is conducting indepth reviews of claims and associated documentation for 
evaluation and management services, power wheelchairs, and Part A payments to skilled nursing 
facilities to determine whether these payments met Medicare coverage requirements.  We also 
are conducting data analysis to identify potential improper payments in a variety of areas, 
including lower limb prostheses, Part D drugs, portable X-ray, and home health care.  Additional 
planned work includes a review of prior year improper payments that have subsequently been 
overturned on appeal, a pilot project to obtain missing documentation identified during the 
comprehensive error rate testing, and a review of FY 2008 PERM testing, which includes an 
independent medical review of claims to determine if the conclusions reached by the CMS 
contractor are in accordance with PERM guidance.   
 
Conclusion 
Executive Order 13520 states that the Federal Government must make every effort to confirm 
that the right recipient receives the right payment for the right reason at the right time.  OIG is 
committed to this goal.  Thank you for your support of our mission.  I would be happy to answer 
any questions. 
 
____________________________________________________________________________________________________  5 
U.S. House of Representatives, Committee on Appropriations, Subcommittee on Labor, Health and Human Services, Education, 
and Related Agencies, March 17, 2011