Improper payments have consistently been a government-wide issue despite efforts to reduce them and identify root causes, including fraud. Incomplete, unreliable, or understated estimates; risk assessments that may not accurately assess the risk of improper payment; and noncompliance with criteria listed in federal law hinder the government’s ability to understand the scope of the issue. We have reported on a number of strategies, including implementing preventive and detective controls and addressing open recommendations, that can help agencies reduce improper payments. Improper payments remain a significant and pervasive government-wide issue. Since fiscal year 2003—when certain agencies began reporting improper payments as required by the Improper Payments Information Act of 2002 (IPIA)—cumulative improper payment estimates have totaled almost $1 trillion, as shown in figure 1. In fiscal year 2014, agencies reported improper payment estimates totaling $124.7 billion, a significant increase—almost $19 billion—from the prior year’s estimate of $105.8 billion. For fiscal year 2014, overpayments accounted for approximately 90 percent of the improper payment estimate, according to www.paymentaccuracy.gov, with underpayments accounting for the remaining 10 percent. The estimated improper payments for fiscal year 2014 were attributable to 124 programs spread among 22 agencies. Agencies reported improper payment estimates exceeding $1 billion for each of 12 different programs, which cumulatively accounted for $115.6 billion, or approximately 93 percent of the fiscal year 2014 government-wide estimate (see app. I). The estimated government-wide error rate increased from fiscal year 2013 to fiscal year 2014 (from 4.0 percent of program outlays to 4.5 percent). Programs with the highest reported error rates for fiscal year 2014 included the Earned Income Tax Credit (27.2 percent), School Breakfast (25.6 percent), and Farm Security and Rural Investment Act Programs (23.1 percent). Improper payment estimates for the Medicare, Medicaid, and Earned Income Tax Credit (EITC) programs accounted for more than 75 percent of the fiscal year 2014 improper payment estimate, as shown in figure 2. The increase in the 2014 government-wide improper payment estimate is attributed primarily to increases in estimated error rates in three major programs: Medicare Fee-for-Service, Medicaid, and EITC. Based on HHS’s fiscal year 2014 agency financial report, federal spending in Medicare and Medicaid is expected to significantly increase—on average, by 8.6 percent per year over the next 3 years. Consequently, it is critical that actions are taken to reduce improper payments in these programs. Over the past several years, we made numerous recommendations that if effectively implemented, could improve program management, help reduce improper payments in these programs, and help improve the government’s fiscal position. In fiscal year 2014, Medicare financed health services for approximately 54 million elderly and disabled beneficiaries at a cost of $603 billion and reported an estimated $60 billion in improper payments. Medicare spending generally has grown faster than the economy, and in the coming years, continued growth in the number of Medicare beneficiaries and in program spending will create increased challenges for the federal government. The Centers for Medicare & Medicaid Services (CMS), which administers Medicare, has demonstrated a strong commitment to reducing improper payments, particularly through its dedicated Center for Program Integrity. For example, CMS centralized the development and implementation of automated edits for national coverage policies— prepayment controls used to deny Medicare claims that should not be paid—to help ensure greater consistency in paying only those claims that align with national policies. In response to our recommendations, CMS has also taken steps to reduce differences among postpayment review contractor requirements when possible and has improved automated edits that assess all services provided to the same beneficiary by the same provider on the same day, so providers cannot avoid claim denials by billing for services on multiple claim lines or multiple claims. Additionally, in March 2014, CMS awarded a contract to a Federal Bureau of Investigation-approved contractor that will enable the agency to conduct fingerprint-based criminal history checks of high-risk providers and suppliers. Nevertheless, in our February 2015 update to our high-risk series, we reported that while CMS has demonstrated efforts to reduce improper payments in the Medicare program, estimated improper payment rates have remained unacceptably high. For fiscal year 2014, the Department of Health and Human Services (HHS) reported an estimated error rate of 12.7 percent for Medicare Fee-for-Service. Some components of this estimate—such as durable medical equipment and home health claims— have estimated error rates in excess of 50 percent, meaning that most payments for these items and services were estimated to be improper. Fully exercising its authority related to strengthening its provider and supplier enrollment provisions and addressing our other open recommendations related to prepayment and postpayment claims review activities would help CMS achieve reductions in Medicare improper payments. The following are examples of actions that could help reduce Medicare improper payments. Improving use of automated edits. To help ensure that payments are made properly, CMS uses controls called edits that are programmed into claims processing systems to compare claims data with Medicare requirements in order to approve or deny claims or flag them for further review. In November 2012, we reported that use of prepayment edits saved Medicare at least $1.76 billion in fiscal year 2010, but savings could have been greater if prepayment edits had been more widely used. To promote greater use of effective prepayment edits and better ensure that payments are made properly, we recommended that CMS (1) improve the data collected about local prepayment edits to enable CMS to identify the most effective edits and the local coverage policies on which they are based and (2) require Medicare administrative contractors to share information about the underlying policies and savings related to their most effective edits. CMS concurred with both recommendations and has begun to take steps to implement them. Monitoring postpayment claims reviews. CMS uses four types of contractors to conduct postpayment claims reviews to identify improper payments. In July 2013, we found that although postpayment claims reviews involved the same general process regardless of which type of contractor conducted them, CMS had different requirements for many aspects of the process across the four contractor types. Some of these differences might impede efficiency and effectiveness of claims reviews by increasing administrative burden for providers. Furthermore, in July 2014, we reported that CMS did not have reliable data or provide sufficient oversight and guidance to measure and fully prevent inappropriate duplication of reviews. We recommended that CMS monitor the database used to track recovery audit activities to ensure that all data were submitted, accurate, and complete. CMS concurred with the recommendation and said it would seek contract modifications to add quality assurance performance metrics related to the completeness and timeliness of data. Removing Social Security numbers from Medicare cards. The identification number on Medicare beneficiaries’ cards includes as one component the Social Security number of the beneficiary (or other eligible person’s, such as a spouse). This introduces risks that beneficiaries’ personal information could be obtained and used to commit identity theft. In September 2013, we reported that CMS had not taken steps to select and implement a technical solution for removing Social Security numbers from Medicare cards. To better position the agency to efficiently and cost-effectively identify, design, develop, and implement a solution to address this issue, we recommended that CMS direct the initiation of an information technology project for identifying, developing, and implementing changes that would have to be made to CMS’s affected systems. Consistent with our recommendation, when the Medicare Access and CHIP Reauthorization Act of 2015 was enacted into law in April 2015, it included a provision requiring and providing funding for the Secretary of Health and Human Services, in consultation with the Commissioner of Social Security, to establish cost-effective procedures to ensure that a Social Security account number (or derivative thereof) is not displayed, coded, or embedded on Medicare beneficiary cards and that any identifier displayed on such cards is not identifiable as a Social Security account number (or derivative thereof). As of July 2015, CMS had started the Social Security Number Removal Initiative in response to the law and was in the process of establishing a program management organization to continue the planning and execution of the initiative. Implementing actions authorized by the Patient Protection and Affordable Care Act (PPACA). In addition to provisions to expand health insurance coverage, PPACA provides CMS with certain authorities to combat fraud, waste, and abuse in Medicare. We reported in our February 2015 update to our high-risk series that CMS should fully exercise its PPACA authority related to strengthening its provider and supplier enrollment provisions. For example, CMS should require surety bonds—a three-party agreement in which a company, known as a surety, agrees to compensate the bondholder if the bond purchaser fails to keep a specified promise—for certain at- risk providers and suppliers. Strengthening verification of providers and suppliers. As we reported in June 2015, we estimated that about 22 percent of Medicare providers’ and suppliers’ practice location addresses were potentially ineligible. For example, we identified 46 instances out of a generalizable sample of 496 addresses in which practice location addresses were inside a mailing store similar to a UPS Store. We also identified other locations that were potentially ineligible, including vacant addresses and unrelated establishments. In addition, we found 147 out of about 1.3 million physicians listed as eligible to bill Medicare who, as of March 2013, had received a final adverse action from a state medical board for crimes against persons, financial crimes, and other types of felonies but were either not revoked from the Medicare program until months after the adverse action or never removed. We recommended that CMS modify the software integrated into the provider enrollment database to include specific flags to help identify potentially questionable practice location addresses, revise guidance for verifying practice locations, and collect additional license information. CMS agreed with our recommendations to modify its software and collect license information but did not agree to revise its guidance for verifying practice location addresses.