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FY 2019 Annual Performance Plan and Report - Goal 5 Objective 1








  
  
    

  
      



Fiscal Year 2019
Released April, 2018

**Topics on this page:** Goal 5. Objective 1 | Objective 5.1 Table of Related Performance Measures
Goal 5. Objective 1: Ensure responsible financial management
HHS is responsible for almost a quarter of Federal outlays and administers more grant dollars than all other Federal agencies combined. Ensuring the integrity of direct payments, grants, contracts, and other financial transactions requires strong business processes, effective risk management, and a financial management workforce with the expertise to comply with legislative mandates, including the Federal Managers’ Financial Integrity Act of 1982 (Pub. L. 97–255), the Federal Funding Accountability and Transparency Act of 2006 (Pub. L. 109–282), and the Improper Payments Elimination and Recovery Improvement Act of 2012 (Pub. L. 112–248).
All divisions contribute to the achievement of this objective. The Office of the Secretary leads this objective and the Department’s response to the HHS Major Management Priority and Challenge: Improper payment rates for Medicare and Medicaid.
Objective 5.1 Table of Related Performance Measures
Improper Payment Cluster
*Reduce the percentage of improper payments made under Medicare Part C, the Medicare Advantage (MA) Program (Lead Agency - CMS; Measure ID - MIP5)*
FY 2012
			FY 2013
			FY 2014
			FY 2015
			FY 2016
			FY 2017
			FY 2018
			FY 2019Target
			10.4 %
			10.9 %
			9 %
			8.5 %
			9.14 %
			9.5 %
			8.08 %
			TBDResult
			11.4 %
			9.5 %
			9 %
			9.5 %
			10 %
			8.3%
			Nov 15, 2018
			N/AStatus
			Target Not Met
			Target Exceeded
			Target Met
			Target Not Met
			Target Not Met
			Target Exceeded
			Pending
			PendingIn FY 2017, CMS exceeded its Part C Medicare Advantage (MA) error rate target of 9.50 percent, reporting an actual improper payment rate of 8.31 percent, or $14.35 billion. The decrease from the prior year’s estimate of 9.99 percent was driven primarily by submission of more accurate diagnoses by MA organizations for payment.
The FY 2018 target is 8.08 percent. The FY 2019 target will be established in the FY 2018 Agency Financial Report (AFR); per OMB starting with FY 2017 CMS will now establish a target for only the next fiscal year.
The Part C program payment error estimate reflects the extent to which plan-submitted diagnoses for a national sample of enrollees are substantiated by medical records.
Validation of diagnoses in medical records for sampled beneficiaries is performed during CMS’ annual Medical Record Review process, where medical records are reviewed by two separate coding entities in the process of confirming discrepancies for sampled beneficiaries. To calculate the Part C program’s error rate, the dollars in error are divided by the overall Part C payments for the year being measured.
CMS has implemented four key initiatives to improve payment accuracy in the Part C program:
**Contract-Level Audits:**Contract-level Risk Adjustment Data Validation (RADV) audits are CMS’s primary corrective action to recoup overpayments. RADV verifies, through medical record review, the accuracy of enrollee diagnoses submitted by MA organizations for risk adjusted payment. CMS expects that payment recovery will have a sentinel effect on the quality of risk adjustment data submitted by plans for payment, as contract-level RADV audits increase the incentive for MA organizations to submit valid and accurate diagnosis information, and encourage MA organizations to self-identify, report, and return overpayments they have received. Payment recovery for the pilot audits has been completed, totaling $13.7 million recovered in FYs 2012 through 2014. After completing the pilots, contract-level RADV audits of payment years 2011 through 2013 are in various stages of the audit process. For example, payment year 2013 audits continued in FY 2017, and CMS will initiate payment year 2014 audits in FY 2018. Furthermore, CMS expects to conduct recoveries for the 2011 and 2012 contract-level RADV audits (which began in FY 2014 and FY 2015, respectively) in FY 2018, which will be the first reviews to recoup funds based on extrapolated estimates.
**Regulatory Provision (Overpayment Recoveries):**As required by the Social Security Act, CMS regulations specify MA organizations report and return overpayments that they identify. In FY 2017, MA organizations reported and returned approximately $78.71 million in self-reported overpayments. CMS believes that this requirement will reduce improper payments by encouraging MA organizations to submit accurate payment information.
**Part C RAC:** Section 1893(h) of the Social Security Act required the implementation of a Medicare Part C Recovery Audit Contractor (RAC) program. CMS is currently exploring how to fit the Medicare Part C RAC program into the larger Medicare Part C program integrity efforts, including examining refinements that can be made to RAC operations that won’t result in activities that excessively burden plans.
**Training:** Historically, CMS has conducted fraud, waste, and abuse in-person and webinar training sessions for MA plans. Only one training session for MA plans was conducted in FY 2017 due to procurement activities that were underway and the termination of contractor support in mid-FY 2017. In late FY 2017, CMS procured a new contractor to support this initiative and will resume training in FY 2018.
*Reduce the percentage of improper payments made under the Part D Prescription Drug Program (Lead Agency - CMS; Measure ID - MIP6)*
FY 2012
			FY 2013
			FY 2014
			FY 2015
			FY 2016
			FY 2017
			FY 2018
			FY 2019Target
			3.2%
			3.1%
			3.6%
			3.5%
			3.4%
			3.3%
			1.66%
			TBDResult
			3.1%
			3.7%
			3.3%
			3.6%
			3.41%
			1.67%
			Nov 15, 2018
			N/AStatus
			Target Exceeded
			Target Not Met
			Target Exceeded
			Target Not Met
			Target Met
			Target Exceeded
			In Progress
			PendingThe purpose of this measure is to reduce the percentage of improper payments in the Part D Prescription Drug program. Measuring Part D payment errors protects the integrity of the Part D program by ensuring that CMS has made correct payments to contracting private health plans for coverage of Medicare-covered prescription drug benefits.
The Medicare Part D payment error estimate reported in FY 2017 represents payment error related to Prescription Drug Event (PDE) data.
The estimate for FY 2017 is 1.67 percent, or $1.30 billion. The decrease from the prior year’s estimate of 3.41 percent was driven primarily by submission of more accurate data by Part D sponsors for payment. The target for FY 2018 is 1.66 percent. The FY 2019 target will be established in the FY 2018 Agency Financial Report (AFR); per OMB, starting with FY2017 CMS will establish a target for only the next fiscal year.
CMS has implemented three key initiatives, described below, to improve payment accuracy in the Part D program:
**Training:**Historically, CMS has also conducted fraud, waste, and abuse in-person and webinar training sessions for Part D sponsors on payment and data submissions. Only one fraud, waste, and abuse training session for Part D sponsors was conducted in FY 2017 due to procurement activities that were underway and the termination of contractor support in mid-FY 2017. In late FY 2017, CMS procured a new contractor to support this initiative, and will resume trainings in FY 2018.
**Outreach:** CMS continued formal outreach to plan sponsors for invalid/incomplete documentation. CMS distributed Plan Sponsor Summary Reports to all plans participating in the national payment error estimate. This report provided feedback on their submission and validation results against an aggregate of all participating plan sponsors.
**Regulatory Provision (Overpayment Recoveries):**As required by the Social Security Act, CMS requires that Part D sponsors report and return overpayments that they identify (Section 11.22). CMS believes that Part D sponsors pay more attention to ensuring their data is accurate because of the overpayment statute and regulation. In FY 2017, Part D sponsors reported and returned approximately $2.83 million in self-reported overpayments.
*Reduce the improper payment rate in the Medicare Fee-for-Service (FFS) Program (Lead Agency - CMS; Measure ID - MIP1) [25]*
FY 2012
			FY 2013
			FY 2014
			FY 2015
			FY 2016
			FY 2017
			FY 2018
			FY 2019Target
			5.4 %
			8.3 %
			9.9 %
			12.5 %
			11.5 %
			10.4 %
			9.4 %
			9.3 %Result
			8.5 %
			10.1 %
			12.7 %
			12.1 %
			11.0 %
			9.5 %
			Nov 15, 2018
			Nov 15, 2019Status
			Target Not Met but Improved
			Target Not Met
			Target Not Met
			Target Exceeded
			Target Exceeded
			Target Exceeded
			Pending
			PendingThe Medicare Fee-for-Service (FFS) improper payment estimate is calculated under the Comprehensive Error Rate Testing (CERT) program and reported in the Department of Health and Human Services (HHS) Agency Financial Report (AFR). The CERT program was initiated in FY 2003 and has produced a national Medicare FFS improper payment rate for each year since its inception. Information on the Medicare FFS improper payment methodology can be found in the FY 2017 HHS AFR.[26]
CMS exceeded its FY 2017 target. The Medicare FFS improper payment estimate for FY 2017 is 9.51 percent or $36.21 billion. The decrease from the prior year’s reported improper payment estimate of 11.00 percent or $41.08 billion was driven by a reduction in improper payments for home health and Inpatient Rehabilitation Facility (IRF) claims. Although the improper payment rate for these services and the overall Medicare FFS improper payment rate decreased, improper payments for home health, Skilled Nursing Facility (SNF), and IRF claims were the major contributing factors to the FY 2017 Medicare FFS improper payment rate. While the factors contributing to improper payments are complex and vary from year to year, the primary causes of improper payments continue to be insufficient documentation and medical necessity errors.
**Home Health Claims:** Insufficient documentation for home health claims continues to be prevalent, despite the improper payment rate decrease from 42.01 percent in FY 2016 to 32.28 percent in FY 2017. The primary reason for these errors was that the documentation to support the certification of home health eligibility requirements was missing or insufficient. Medicare coverage of home health services requires physician certification of the beneficiary’s eligibility for the home health benefit (42 CFR 424.22).
**SNF Claims:**Insufficient documentation was the major error reason for SNF claims. The improper payment rate for SNF claims increased from 7.76 percent in FY 2016 to 9.33 percent in FY 2017. The primary reason for these errors was that the certification/recertification statement was missing or insufficient (e.g., one required element was missing). Medicare coverage of SNF services requires certification and recertification for these services (42 CFR 424.20).
**IRF Claims:** Medicare necessity (i.e. services billed were not medically necessary continues to be the major error reason for IRF claims, despite the improper payment rate decrease from 62.39 percent in FY 2016 to 39.74 percent in FY 2017. The primary reason for these errors was that the IRF coverage criteria for medical necessity were not met. Medicare coverage of IRF services requires that there must be a reasonable expectation that the patient meets all of the coverage criteria at the time of admission to the IRF (42 CFR 412.622(a) (3)).
CMS uses data from the CERT program and other sources of information to address improper payments in Medicare FFS through various corrective actions. CMS has developed a number of preventive and detective measures for specific service areas with high improper payment rates such as home health, SNF, and IRF claims. CMS believes implementing targeted corrective actions will continue to prevent and reduce improper payments in these areas and reduce the overall improper payment rate. Detailed information on corrective actions can be found in the FY 2017 HHS AFR.
*Reduce the improper payment rate in the Medicaid Program (Lead Agency - CMS; Measure ID - MIP9.1)*
FY 2012
			FY 2013
			FY 2014
			FY 2015
			FY 2016
			FY 2017
			FY 2018
			FY 2019Target
			7.4 %
			6.4 %
			5.6 %
			6.70 %
			11.53 %
			9.57 %
			7.93 %
			TBDResult
			7.1 %
			5.8 %
			6.7 %
			9.78 %
			10.48 %
			10.10 %
			Nov 15, 2018
			N/AStatus
			Target Exceeded
			Target Exceeded
			Target Not Met
			Target Not Met
			Target Exceeded
			Target Not Met but Improved
			Pending
			Pending*Reduce the improper payment rate in the Children’s Health Insurance Program (CHIP) (Lead Agency - CMS; Measure ID - MIP9.2)*
FY 2012
			FY 2013
			FY 2014
			FY 2015
			FY 2016
			FY 2017
			FY 2018
			FY 2019Target
			N/A
			N/A
			N/A
			6.50 %
			6.81 %
			7.38 %
			8.20 %
			TBDResult
			N/A
			N/A
			N/A
			6.80 %
			7.99 %
			8.64 %
			Nov 15, 2018
			Nov 15, 2019Status
			N/A
			N/A
			N/A
			Target Not Met
			Target Not Met
			Target Not Met
			Pending
			PendingThe Payment Error Rate Measurement (PERM) program measures improper payments in the Fee-For-Service (FFS), managed care, and eligibility components of both Medicaid (MIP9.1) and CHIP (MIP9.2). CMS measures improper payments in 17 states each year as a means to contain cost, reduce the burden on states, and make measurement manageable. In this way, states can plan for the reviews and CMS can complete the measurement on time for HHS and AFR reporting. At the end of a three-year period, each state will have been measured once and will rotate in that cycle in future years, (e.g., the states measured in the 2014 AFR were also measured again in the 2017 AFR). Information on the Medicaid and CHIP statistical sampling process and review period can be found in the FY 2017 HHS AFR.
The national Medicaid improper payment rate (MIP9.1) reported in the 2017 AFR is based on measurements that were conducted in FYs 2015, 2016, and 2017. The FY 2019 target will be established in the FY 2018 AFR. Per OMB, starting with FY 2017, CMS will now establish a target for only the next fiscal year.
The current national Medicaid improper payment rate is 10.10 percent. The national Medicaid component rates are: Medicaid FFS: 12.87 percent and Medicaid managed care: 0.30 percent. The Medicaid eligibility component is held constant at the FY 2014 reported rate of 3.11 percent.
For FYs 2015 through 2018, CMS will not conduct the eligibility measurement component of PERM. In place of these PERM eligibility reviews, all states are required to conduct eligibility review pilots that provide more targeted, detailed information on the accuracy of eligibility determinations. The pilots use targeted measurements to: provide state-by-state programmatic assessments of the performance of new processes and systems in adjudicating eligibility, identify strengths and weaknesses in operations and systems leading to errors, and test the effectiveness of corrections and improvements in reducing or eliminating those errors. During this time, for the purpose of computing the overall national improper payment rates, the Medicaid and CHIP eligibility component improper payment rates are held constant at the FY 2014 national rate of 3.11 percent and 4.22 percent, respectively.
CMS used the eligibility review pilots to test updated PERM eligibility processes, and prepare states for the resumption of the PERM eligibility component measurement. Based on the pilots, CMS updated the eligibility component measurement methodology and published a final rule (82 FR 31158, July 5, 2017) to update the methodology for the PERM eligibility component. CMS will resume the eligibility component measurement under this final rule and report an updated national eligibility improper payment estimate in FY 2019.
Since FY 2014, the Medicaid improper payment estimate has been driven by errors due to state non-compliance with provider screening, enrollment, and National Provider Identifier (NPI) requirements. First, all referring/ordering providers are required to be enrolled in Medicaid or CHIP and claims must contain the referring/ordering provider NPI. Second, states are required to screen providers under a risk-based screening process prior to enrollment. Finally, the attending provider NPI is required to be submitted on all electronically filed institutional claims. CMS began reviewing against these requirements for FY 2014 improper payment reporting. Therefore, in FY 2014, CMS saw the first ever increase in the Medicaid improper payment rate when the first cycle of states was reviewed against the new requirements. The Medicaid rate increased in FY 2015 when CMS reviewed the second cycle of states against the new requirements. FY 2016 represented the first “baseline” improper payment rate reflecting the new requirements because all 50 states and the District of Columbia were measured under the same requirements. FY 2017 represents the first cycle of states that has been measured a second time.
Compliance with provider screening, enrollment, and NPI requirements for the 17 states measured in FY 2017 improved, and the improper payment rate related to non-compliance decreased. The Medicaid FFS improper payment rate for non-compliance with these requirements decreased for these states from 5.74 percent in FY 2014 to 4.03 percent in FY 2017. Although the 17 states reviewed this year had better compliance results compared to their previously measured cycle, non-compliance with the provider screening, enrollment, and NPI requirements is still a major contributor to the improper payment rate. Additionally, improper payments due to no or insufficient medical documentation increased in FY 2017.
The national CHIP improper payment rate (MIP 9.2) reported in the 2017 AFR is based on measurements conducted in FYs 2015, 2016, and 2017. The current national CHIP improper payment rate is 8.64 percent. The national CHIP component rates are: CHIP FFS: 10.29 percent and CHIP managed care: 1.62 percent. The CHIP eligibility component is held constant at the FY 2014 reported rate of 4.22 percent. Additional detail about Medicaid and CHIP improper payment rates and underlying components is available in the FY 2017 HHS AFR.
Similar to Medicaid, CMS began reviewing against provider screening, enrollment, and NPI requirements for FY 2014 improper payment reporting. In FYs 2014 and 2015, the CHIP improper payment estimate increased when CMS reviewed the first two cycles of states against the new requirements. FY 2016 represented the first “baseline” improper payment rate reflecting the new requirements because all 50 States and the District of Columbia were measured under the same requirements. FY 2017 represents the first cycle of states that has been measured a second time.
The CHIP improper payment estimate increased due to continued state difficulties coming into compliance with the provider screening, enrollment, and NPI requirements. The CHIP FFS improper payment rate for non-compliance with these requirements increased for these states from 4.69 percent in FY 2014 to 5.73 percent in FY 2017. A higher percentage of CHIP providers are not enrolled in Medicare. Therefore, there are more CHIP providers where states cannot rely on Medicare’s screening in lieu of conducting state screening. Additionally, managed care improper payments increased in FY 2017 due to recipients that aged out of CHIP.
The factors contributing to improper payments are complex and vary from year to year. In order to reduce the national Medicaid and CHIP improper payment rates, states are required to develop and submit Corrective Action Plans (CAPs) to CMS. Each year CMS outlines actions the agency will implement to prevent and reduce improper payments for all error categories. Detailed information on corrective actions can be found in the FY 2017 HHS AFR.
[25] On August 29, 2014, CMS announced that, to more quickly reduce the volume of inpatient status claims currently pending in the appeals process, CMS is offering an administrative agreement to any hospital willing to withdraw their pending appeals in exchange for timely partial payment (68 percent of the net allowable amount). The settlement is intended to ease the administrative burden for all parties. Any claims in the sample that are included in a settlement will still be considered improper for the measurement.
[26]https://www.hhs.gov/about/agencies/asfr/finance/financial-policy-library/agency-financial-reports/index.html.
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Content created by Office of Budget (OB) Content last reviewed April 26, 2018 Back to top
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