Fiscal year 2013 marked the 10th year of the implementation of IPIA, which, as amended, requires executive agencies to identify programs and activities susceptible to significant improper payments, estimate the amount of improper payments in susceptible programs and activities, and report these improper payment estimates, including root causes, and the actions taken to reduce them. In response to these requirements, executive agencies, including DOD and HHS, annually report improper payment estimates and improper payment rates for certain programs in their AFRs. (See fig.1.) DHA uses private sector contractors—referred to as TRICARE purchased care contractors (TPCC)—to develop and maintain the private health care provider networks that make up the purchased care system, as well as process and pay claims. The TPCCs include three Managed Care Support Contractors (MCSC) that manage health care networks for most TRICARE benefits in the United States, one contractor to manage overseas claims, one contractor to manage TRICARE’s supplemental Medicare coverage program, one contractor to manage the pharmacy benefit, and three contractors to manage dental benefits. Under TRICARE, private providers or TRICARE enrollees submit claims to TPCCs who, on behalf of TRICARE, are responsible for adjudicating and paying the claims according to established policies and procedures. TPCCs subject claims to automatic edits to ensure accuracy and determine how the claims will be adjudicated—either paid or denied. For example, automated edits compare claim information to TRICARE requirements in order to approve or deny claims or to flag them for additional review. TPCCs also conduct more in-depth reviews of certain claims prior to payment.in fiscal year 2013. Medicare providers submit claims to Medicare Administrative Contractors (MAC), which are responsible for processing and paying these claims, among other activities. MACs subject claims to automatic prepayment edits to ensure accuracy, much like the automated edits in the TRICARE purchased care program. For example, some prepayment edits are related to service coverage and payment, while others verify that the claim submissions contain needed information, that providers are enrolled in Medicare, and that patients are eligible Medicare beneficiaries. The MACs processed 1.2 billion Medicare claims in 2013. DHA and CMS also subject a portion of TRICARE and Medicare claims to postpayment review by contractors to identify and recoup improperly paid claims. Most private health insurers also conduct postpayment reviews to identify improper payments, according to organizations we spoke to with knowledge of claims review practices. Multiple review methodologies exist depending on the objective of the review, but many require examination of the underlying medical record. For example, reviews examine the underlying patient medical record to validate that accurate codes were used, that services were rendered as the physician directed, were medically necessary, and were properly documented. The HHS-OIG, which carries out Medicare program integrity activities, uses medical record reviews to determine the scope of improper payments in targeted reviews of specific service types. HHS-OIG officials have stated that by reviewing medical records and other documentation associated with a claim, they can identify services that are undocumented, medically unnecessary, or incorrectly coded, as well as duplicate payments and payments for services that were not provided. For example, the HHS-OIG found that 61 percent of power wheelchairs provided to Medicare beneficiaries in the first half of 2007 were medically unnecessary or had claims that lacked sufficient documentation to determine medical necessity, which accounted for $95 million in improper Medicare payments. IPIA, as amended, requires federal executive branch agencies to (1) review all programs and activities, (2) identify those that may be susceptible to significant improper payments, (3) estimate the annual amount of improper payments for those programs and activities, (4) implement actions to reduce the root causes of improper payments and set reduction targets, and (5) report on the results of addressing the foregoing requirements. In response to these requirements and OMB implementing guidance, agencies generally publicly report their improper payment estimates each November in their AFRs. An improper payment is defined by statute as any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements. It includes duplicate payments, and any payment made for an ineligible recipient, an ineligible good or service, a good or service not received (except for such payments where authorized by law), and any payment that does not account for credit for applicable discounts. agencies to report as improper payments any payments for which insufficient or no documentation is found. IPIA, § 2(g)(2) (codified, as amended, at 31 U.S.C. § 3321 note). for improper payments.guidance is because of the variation in how federal programs operate. According to OMB officials, the latitude in the Although OMB’s implementation guidance allows such variation, several federal programs which pay for services based on claims submitted by beneficiaries or providers, including Medicare, examined the underlying documentation for each of a sample of claims to determine the validity of payments as part of their efforts to estimate improper payments in fiscal For example, CMS’s method for testing payments for errors year 2013. in Medicaid fee-for-service and Children’s Health Insurance Program fee- for-service includes both a claims processing review and medical record review.improper payments were identified through the medical record reviews in fiscal year 2013. Most Medicaid and Children’s Health Insurance Program With respect to IPIA’s required root cause analysis and corrective action reporting, the corrective actions agencies develop depend, in part, on the improper payments identified by their measurement methodology. OMB guidance on corrective actions states that agencies should continuously use their improper payment measurement results to identify new and innovative corrective actions to prevent and reduce improper payments. Internal control standards for the federal government also state that federal agencies should establish policies and procedures to ensure that the findings of audits and other reviews—including the improper payment measurement results—are promptly addressed and corrected. DHA’s approach to measuring improper payments in TRICARE was less comprehensive than that used by CMS for Medicare. Both methodologies evaluate a sample of health care claims paid or denied by the contractors that process program claims. However, while CMS’s methodology examined underlying patient medical records supporting each of the sampled claims, DHA did not evaluate comparable medical record documentation to discern whether each payment was supported. Consequently, TRICARE’s reported improper payment estimates were not comparable to Medicare’s estimates, and likely understated the amount of improper payments in the TRICARE program relative to the estimates produced by Medicare’s more comprehensive measurement methodology. The improper payment measurement methodology that DHA used to estimate the TRICARE improper payments reported in DOD’s fiscal year 2013 AFR was less comprehensive than the measurement methodology CMS used to estimate Medicare improper payments. Specifically, the supporting documentation that DHA’s methodology examined to test whether sampled health care claims were paid properly was less comprehensive than Medicare’s methodology, which examined medical record documentation for each sampled claim. According to DHA and CMS guidance, the agencies also developed their measurement methodologies for different purposes. TRICARE: DHA’s approach to measuring TRICARE improper payments examined whether the TPCCs processed and paid submitted claims according to TRICARE policies. Since 1994, DHA has employed a contractor to conduct postpayment claims reviews for the primary purpose of determining the accuracy of TPCCs’ claims processing and compliance with TRICARE policy, according to DHA’s claims review contractor guidance, and contractor and DHA officials. DHA officials reported that DHA has also aggregated these TPCC-specific compliance reviews to report the national TRICARE improper payment rate, as required by IPIA since 2003. While DHA has changed aspects of the compliance review methodology to meet reporting requirements for statistically significant estimates, and, according to DHA, to reflect legal and contractual changes impacting TRICARE, the basic process of reviewing claims has not changed in 20 years. As a result, DHA continues to only identify improper payments due to contractor compliance problems. To determine the TPCCs’ claims processing performance, the TRICARE claims review contractor examines a sample of paid and denied claim records, including any documentation used by the TPCC to adjudicate the claim. For each of the claims the DHA samples, the TPCC is required to send to the TRICARE claims review contractor copies of the processed claim, the beneficiary’s claim history, and any documentation it used to process the claim. According to DHA and claims review contractor officials, the documentation varies by claim and can include information from the DHA eligibility database or prior authorization and referral forms. DHA and claims review contractor officials reported that medical record documentation is only included in the improper payment claims review if the TPCC conducted a medical review as part of its original claim processing. According to the TRICARE claims review contractor, DHA officials, and the agency’s claims review guidance, the contractor conducts automated and manual reviews of the claim and supporting documentation to verify that the TPCC processed the claim according to TRICARE policy and contract requirements. For example, the claims review contractor uses automated auditing tools to verify the clinical accuracy of procedure codes listed on the claim. It also verifies that the beneficiary and provider were eligible, the claimed services were covered TRICARE benefits, the TPCC calculated correct pricing and cost sharing, and prior authorization and medical necessity were documented when necessary, among other things. If a medical review was conducted by the TPCC, DHA and the TRICARE claims review contractor told us that the contractor does not typically re-evaluate the TPCC’s decision, but only ensures that the documentation exists. Based on a review of DHA’s claims review guidance and statements from DHA and claims review contractor officials, DHA’s improper payment measurement methodology also does not independently validate that the medical records support the diagnosis or procedure codes submitted on the claim. According to DHA guidance, if the TPCC did not provide a copy of the claim or processed the claim incorrectly based on the documentation provided, the claims review contractor will consider some or all of the payment as an error and action is taken to adjust the payments accordingly. DHA guidance provides TPCCs the opportunity to submit additional documentation to support their processing decisions and remove certain errors. After the audit results are finalized, DHA uses the information to calculate improper payment rates for each TPCC and to estimate its national improper payment rate. Medicare: CMS developed the Comprehensive Error Rate Testing (CERT) program to estimate the national Medicare improper payment rate to comply with IPIA, and to monitor payment decisions made by the MACs, according to CMS’s CERT guidance. CMS’s CERT program methodology focuses on compliance with conditions of Medicare’s payment policies by both the provider and MAC. The CERT program targets high-risk aspects of the Medicare program. Specifically, CMS officials told us that because Medicare maintains common shared systems that determine for all MACs whether a provider is enrolled in Medicare, and what the payment rate should be, CMS has deemed these aspects of the claims payment process to be at low risk of improper payments, and they are not examined through CERT. Instead, the CERT program focuses on problems that MACs cannot otherwise identify using automated means, according to CMS officials. CMS has employed contractors to carry out the CERT program since 2003. CMS has reported that the agency has modified the CERT measurement methodology to address identified trends and improve accuracy. CMS’s approach to measuring improper payments involves examining the medical record associated with a stratified random sample of processed Medicare claims to determine whether there is support for the payment, and to assess whether the payment followed Medicare’s coverage, coding, and billing rules. CMS’s CERT guidance specifies that, for each sampled claim, the CERT documentation contractor obtain the medical record and other pertinent documentation from the provider that submitted the claim. If the provider does not provide the medical record and other requested information, the CERT review contractor identifies the payment amount as an error. According to CMS’s CERT guidance and contractor officials, when medical records are received, the contractor’s clinical and coding specialists review the claim and the supporting medical records to assess whether the claim followed Medicare’s payment rules. Claims that do not follow Medicare’s payment rules or claims for which the provider submitted insufficient documentation to determine that the services were provided or medically necessary are classified as an error by the CERT reviewer and action is taken to adjust the payments accordingly. Medicare allows providers whose claims were denied by the CERT review contractor to appeal those claims, and if the error determination for a claim is overturned through the appeals process, the CERT review contractor adjusts the error accordingly. Once all the errors are finalized, the CERT statistical contractor calculates the national error rates. Table 1 compares the purpose of and documentation reviewed by the TRICARE and Medicare improper payment measurement methodologies. Compared to DHA’s methodology, CMS’s CERT methodology of examining underlying medical records to independently verify Medicare claims and payments more completely identifies potential improper payments, such as those caused by provider noncompliance with coding, billing, and payment rules. While DHA’s methodology is designed to identify improper payments resulting from TPCC claims processing compliance errors, it does not comprehensively capture errors that occur at the provider level or errors that can only be identified through an examination of underlying medical record documentation. Table 2 compares examples of the information verified by the TRICARE and Medicare improper payment measurement methodologies. CMS’s CERT methodology identifies certain improper payments that DHA’s TRICARE claims review methodology would not fully identify. Such improper payments accounted for nearly all of the 10.1 percent improper payment rate that CMS reported in fiscal year 2013. For example, differences include: Evidence of medical necessity: As noted, the TRICARE claims review contractor’s medical necessity review is limited to confirming that the TPCC completed a medical review when required and the claim passed certain edits. Consequently, the review contractor may not identify payments for medically unnecessary services for the claims that a TPCC did not previously review. The claims review contractor would also fail to identify if the TPCC made an improper medical necessity determination for those claims that it was required to review because the claims review contractor does not re-review the TPCC’s determination. Conversely, CMS’s CERT methodology identifies such errors. Through the CERT program’s independent medical record review for each sampled claim, CMS has estimated that improper payments related to medically unnecessary services accounted for 2.8 percent of total Medicare payments and 26.6 percent of total improper payments in fiscal year 2013. Verification of correct coding: The TRICARE claims review contractor confirms that the codes used for reimbursement matches the diagnosis claimed and passed coding edits, but does not verify that the medical documentation validates the codes that were billed or diagnosis claimed. As a result, the TRICARE claims review methodology could fail to identify if a provider used, and the TPCC paid for, services based on an incorrect code. CMS’s CERT program identifies such errors and estimated that 1.5 percent of Medicare payments in fiscal year 2013 were improper because of incorrect coding. Such errors accounted for 13.7 percent of total estimated improper payments that year. Documentation of provider services: Since DHA’s claims review methodology does not request documentation from providers, it is unclear whether TRICARE providers maintain the required documentation to support the services they claim. In contrast, CMS estimated that 6.1 percent of Medicare payments were improper in fiscal year 2013 because of insufficient documentation, which accounted for 56.8 percent of total estimated improper payments. That is, the provider submitted some documentation, but the CERT reviewer could not conclude that some of the allowed services were actually provided at the level billed or were medically necessary. In addition, “no documentation” errors—where the provider submitted none of the requested medical records—accounted for 0.2 percent of Medicare payments or 1.4 percent of total improper payments in fiscal year 2013. DHA officials reported that TRICARE has other postpayment mechanisms in place to examine medical records and thus identify the types of improper payments that the TRICARE claims review program does not. However, the results of the other mechanisms are not reflected in the estimated improper payment rates that DHA reports. For example, DHA conducts quality monitoring reviews that analyze medical record documentation and identify problems such as paid services that were not medically necessary. DHA policy also requires the TPCCs to conduct quarterly internal reviews of a sample of medical records to determine the medical necessity of care provided, and determine if the diagnostic and procedural information of the patient—as reported on the claim—matches the physician’s description of care and services documented in the medical record. However, the potential problems identified by these reviews are not considered or publicly reported as improper payments in the DOD’s AFR. Due to the fundamental differences in DHA’s and CMS’s approaches to measuring improper payments, reported improper payment rates for TRICARE and Medicare are not comparable. By not examining underlying medical record documentation to discern if payments for claims are proper, DHA is likely not identifying all types of improper payments in TRICARE, and thus understating the rate of improper payments. OMB’s IPIA implementation guidance does not specifically dictate how agencies should test for improper payments. However, Medicare and certain other federal claims-based programs conduct more comprehensive reviews that include examination of the underlying documentation for each sampled claim to determine the validity of payment as part of their efforts to estimate improper payments under IPIA. The HHS-OIG and most of the organizations with knowledge of health care claims review practices that we spoke with also acknowledge that reviewing the underlying medical records is needed to verify appropriate payment. The root causes and related corrective actions that DHA reported in DOD’s fiscal year 2013 AFR are limited to addressing issues of contractor noncompliance with claims processing requirements. For example, DHA reported the following root causes for the 0.3 percent errors it found to be improper: incorrect pricing for medical procedures and equipment (47 percent), missing authorization or pre-authorization (14 percent), and cost sharing or deductible miscalculations (11 percent). These categories are largely processing errors that reflect DHA’s approach to identifying errors, and do not address underlying causes of improper payments not related to contractor compliance, such as errors made by providers who may not fully understand or comply with DHA policies. DHA cannot fully identify provider-level improper payment errors without reviews of the paperwork submitted by providers, including reviews of underlying medical records. DHA’s one corrective action for TRICARE for the past three fiscal years— to incentivize payment accuracy through contract bonuses and penalties based on audit results—may be a good method to promote contractor compliance, but it will not address providers’ noncompliance with billing rules. DHA officials said that they have not changed or added to the corrective action plan in at least three fiscal years because contract requirements are still in place to financially incentivize contractors to process health care claims correctly. Although DHA could include other corrective actions, the current approach only addresses improper payments caused by contractors’ claims processing errors. Under the IPIA, as amended, and implementing guidance, agencies are to identify program weaknesses, make improvements, and reduce future improper payments. Our prior work has found that DHA missed opportunities to prevent future improper payments; for example, in a May 2013 report examining IPIA compliance throughout DOD, we found that DOD did not adequately implement key IPIA provisions and OMB requirements for fiscal year 2011. We recommended that DOD’s corrective action plans be developed using best practices to ensure that root causes are addressed, improper payments reduced, and federal dollars protected. A senior DOD official told us that the agency planned to implement this recommendation by November 15, 2014; however, DHA cannot address these recommendations with respect to TRICARE until it has identified improper payments using a measurement methodology that goes beyond contractor compliance issues. CMS, by comparison, reported more detailed and constructive information about the 10.1 percent of Medicare payments it reported as improper in HHS’s fiscal year 2013 AFR. In addition to describing the types of errors that most frequently led to improper payments, CMS also provided contextual information about specific factors that contributed to the errors. For example, CMS reported that some improper payments were made for services that, while clinically appropriate, could be provided in less intensive settings and therefore did not meet Medicare’s medical necessity requirements. CMS also identified the provider types that contributed most substantially to each type of improper payment. For example, hospitals contributed substantially to medical necessity errors. CMS’s multiple corrective actions are more detailed and clearly tied to reported root causes of Medicare improper payments than TRICARE’s. For example, CMS is expanding the Medicare Recovery Audit Contractor program to allow prepayment reviews of certain types of claims with historically high amounts of improper payments, therefore preventing improper payments from being made in the first place; and implementing two policies pertaining to inpatient hospital claims that will specifically address the identified root cause of care being provided in inappropriately intensive settings. CMS provides MACs with contract-specific root causes of improper payment data on a quarterly basis. These data are used by MACs to update their corrective actions quarterly.actions allow CMS and its contractors to tailor efforts to address specific root causes of errors, and review its plans for reducing errors using Quarterly updates to corrective measurable targets, which help the agency know when it has made progress in addressing program weaknesses. In addition to reporting root causes and corrective actions in the AFR, CMS uses its Medicare improper payment results to address the agency’s stated goal of reducing Medicare improper payments due to programmatic weaknesses. For example, CMS annually develops and reports a more detailed analysis of improper payment findings than is provided in the AFR by providing specific examples of areas identified as particularly vulnerable to improper payments, analysis of root causes of those errors, and detailed error information by service and provider; and undertakes program-wide action to address improper payment findings. For example, after finding that durable medical equipment suppliers contributed substantially to insufficient documentation errors, CMS began a prior authorization demonstration in seven states to reduce improper payments for power mobility devices. In comparison with DHA, CMS has a more comprehensive approach to identifying Medicare improper payments and root causes, and addresses those weaknesses through its corrective actions. Without a more comprehensive approach, DHA will be limited in its ability to address the causes of improper payments in the TRICARE program. The extent of improper payments identified by agencies depends, in part, on how they test their program components for errors. TRICARE and Medicare are at similar risk for improper payments because both health care programs pay providers on a fee-for-service basis, the programs’ providers overlap, both programs depend on contractors to process and pay claims, and TRICARE uses some of Medicare’s coverage and payment policies. However, DHA does not have as robust an approach to measuring improper payments in the TRICARE program as CMS has for the Medicare program. Specifically, DHA does not routinely examine medical record documentation in its approach to measuring TRICARE improper payments. While DHA has other reviews in place that analyze medical record documentation and could be leveraged to more comprehensively identify improper payments, the results of those reviews are not considered or reported as improper payments. This may account for why the reported improper payment rate for TRICARE is less than 1 percent while the reported rate for Medicare is 10 percent. Although TRICARE is a smaller program compared to Medicare, it still costs the government a significant amount of money—about $21 billion in fiscal year 2013 for the purchased care portion of TRICARE—and DOD has determined TRICARE to be susceptible to significant improper payments under IPIA, as amended. Without a robust measure of improper payment rates in the TRICARE program, DHA cannot effectively identify root causes and take steps to address practices that contribute to improper payments and excess spending. To better assess and address the full extent of improper payments in the TRICARE program, we recommend that the Secretary of Defense direct the Assistant Secretary of Defense (Health Affairs) to take the following two actions: 1. implement a more comprehensive TRICARE improper payment measurement methodology that includes medical record reviews, as done in other parts of its existing postpayment claims review programs; and 2. once a more comprehensive improper payment methodology is implemented, develop more robust corrective action plans that address underlying causes of improper payments, as determined by the medical record reviews. We provided a draft of this report to DOD and HHS for comment. In its written comments, reproduced in appendix I, DOD concurred with our recommendations. DOD also outlined the steps the department will take prior to implementation, including conducting discussions within the department; developing implementation plans; and hiring or contracting for the needed workforce to begin implementing the recommendations. DOD noted that taking these steps would take time. Given the potentially high cost of improper payments, we believe DOD should move expeditiously. HHS had no comments on the report. We are sending copies of this report to appropriate congressional committees, the Secretary of Defense, the Assistant Secretary of Defense (Health Affairs), the Secretary of Health and Human Services, the Administrator of CMS, and other interested parties. The report also will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or dsouzav@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. In addition to the contact named above, Lori Achman, Assistant Director; Rebecca Abela; Drew Long; Dawn Nelson; and Jennifer Whitworth made key contributions to this work. Improper Payments: Government-Wide Estimates and Reduction Strategies. GAO-14-737T. Washington, D.C.: July 9, 2014. Medicare: Further Action Could Improve Improper Payment Prevention and Recoupment Efforts. GAO-14-619T. Washington, D.C.: May 20, 2014. Medicare Program Integrity: Contractors Reported Generating Savings, but CMS Could Improve Its Oversight. GAO-14-111. Washington, D.C.: October 25, 2013. Medicare Program Integrity: Increasing Consistency of Contractor Requirements May Improve Administrative Efficiency. GAO-13-522. Washington, D.C.: July 23, 2013. DOD Financial Management: Significant Improvements Needed in Efforts to Address Improper Payment Requirements. GAO-13-227. Washington, D.C.: May 13, 2013. Medicare Program Integrity: Few Payments in 2011 Exceeded Limits under One Kind of Prepayment Control, but Reassessing Limits Could Be Helpful. GAO-13-430. Washington, D.C.: May 9, 2013. Medicaid: Enhancements Needed for Improper Payments Reporting and Related Corrective Action Monitoring. GAO-13-229. Washington, D.C.: March 29, 2013. Medicare Program Integrity: Greater Prepayment Control Efforts Could Increase Savings and Better Ensure Proper Payment. GAO-13-102. Washington, D.C.: November 13, 2012. Program Integrity: Further Action Needed to Address Vulnerabilities in Medicaid and Medicare Programs. GAO-12-803T. Washington, D.C.: June 7, 2012. Improper Payments: Remaining Challenges and Strategies for Governmentwide Reduction Efforts. GAO-12-573T. Washington, D.C.: March 28, 2012. Improper Payments: Moving Forward with Governmentwide Reduction Strategies. GAO-12-405T. Washington, D.C.: February 7, 2012. Medicare Integrity Program: CMS Used Increased Funding for New Activities but Could Improve Measurement of Program Effectiveness. GAO-11-592. Washington, D.C.: July 29, 2011. Improper Payments: Reported Medicare Estimates and Key Remediation Strategies. GAO-11-842T. Washington, D.C.: July 28, 2011. Improper Payments: Progress Made but Challenges Remain in Estimating and Reducing Improper Payments. GAO-09-628T. Washington, D.C.: April 22, 2009. Improper Payments: Status of Agencies’ Efforts to Address Improper Payment and Recovery Auditing Requirements. GAO-08-438T. Washington, D.C.: January 31, 2008. Improper Payments: Federal Executive Branch Agencies’ Fiscal Year 2007 Improper Payment Estimate Reporting. GAO-08-377R. Washington, D.C.: January 23, 2008. Medicare: Improvements Needed to Address Improper Payments for Medical Equipment and Supplies. GAO-07-59. Washington, D.C.: January 31, 2007. Strategies to Manage Improper Payments: Learning From Public and Private Sector Organizations. GAO-02-69G. Washington, D.C.: October 2001.

Summary: Improper payments—payments that were made in an incorrect amount or should not have been made at all—are a contributor to excess health care costs. For programs identified as susceptible to significant improper payments, federal agencies are required to annually report estimates of improper payments, their root causes, and corrective actions to address them. In fiscal year 2013, DOD spent about $21 billion for TRICARE and estimated improper payments of $68 million, or an error rate of 0.3 percent. That year, HHS estimated that $36 billion, or 10.1 percent, of the total $357 billion in Medicare payments were improper. GAO was mandated to examine improper payments in TRICARE and Medicare. This report addresses (1) TRICARE and Medicare improper payment measurement comparability; and (2) the extent to which each program identifies root causes of, and develops corrective actions to address, improper payments. GAO examined DHA and CMS documentation related to improper payment measurement and corrective actions, reviewed relevant laws and guidance, and interviewed agency officials and contractors. The Defense Health Agency (DHA), the agency within the Department of Defense (DOD) responsible for administering the military health program known as TRICARE, uses a methodology for measuring TRICARE improper payments that is less comprehensive than the methodology used to measure improper payments in Medicare, the federal health care program for the elderly and certain disabled individuals. Both methodologies evaluate a sample of health care claims paid or denied by the contractors that process the programs' claims. However, DHA's methodology only examines the claims processing performance of the contractors that process TRICARE's purchased care claims. Unlike Medicare, DHA does not examine the underlying medical record documentation to discern whether each sampled payment was supported. Without examining the medical record, DHA does not verify the medical necessity of services provided. The agency also does not validate that the diagnostic and procedural information reported on the claim matches the care and services documented in the medical record. Comparatively, the Department of Health and Human Services' (HHS) Centers for Medicare & Medicaid Services' (CMS) approach to measuring Medicare improper payments examines medical records associated with a sample of claims to verify support for the payment. This methodology more completely identifies improper payments beyond those resulting from claim processing errors, such as those related to provider noncompliance with coding, billing, and payment rules. By not examining medical record documentation to discern if payments are proper, TRICARE's reported improper payment estimates are not comparable to Medicare's estimates, and likely understate the amount of improper payments relative to the estimates produced by Medicare's more comprehensive methodology. The root causes of TRICARE improper payments and related corrective actions that DHA has identified are limited to addressing issues of contractor noncompliance with claims processing requirements, and are less comprehensive than the corrective actions identified by CMS. For example, DHA has identified the same single corrective action for each of the last three fiscal years to promote contractor compliance, but it only addresses improper payments caused by contractors' claims processing errors. CMS, by comparison, reports more comprehensive information about root causes of improper Medicare payments, develops corrective actions that more directly address root causes, and uses the information to address the agency's goal of reducing future improper payments. For example, for fiscal year 2013, CMS determined that some payments were improper because the services could have been provided in less intensive settings and CMS subsequently implemented two policies to address the problem. In contrast, DHA's less comprehensive approach limits its ability to address the causes of improper payments in the TRICARE program. DOD should implement more comprehensive TRICARE improper payment measurement methods that include medical record reviews, and develop more robust corrective action plans. DOD concurred with GAO's recommendations and identified steps the department will need to take for implementation. HHS had no comments on the report.