SECTION III: OTHER INFORMATION (Sections 1-10)

FY 2017 HHS Agency Financial Report

Topics in this Section:  Other Financial Information | Reduce the Footprint | Summary of Financial Statement Audit and Management Assurances | Civil Monetary Penalty Adjustment for Inflation | Grants Oversight & New Efficiency Act Report | Payment Integrity Report (Section 1-10 | 11 | 12-13) | FY 2017 Top Management and Performance Challenges Identified by the Office of Inspector General

GRANTS OVERSIGHT & NEW EFFICIENCY ACT REPORT

The Grants Oversight and New Efficiency Act (GONE Act) was signed into law on January 28, 2016, with the aim to facilitate the closing of expired grants and to improve government efficiency.  The GONE Act requires agencies to submit annual reports to Congress that list each of their federal grant awards, the attributed dollar balances, and the challenges leading to delays in grant closeout.  Agencies must also explain why, for the 30 oldest federal grant awards, each grant has not been closed out.

The GONE Act covers grants that have been expired for 2 or more years and have not been closed out.  Agency heads must annually report to Congress whether the agency has closed out the covered grants discussed in previous reports.  FY 2017 marks HHS’s first GONE Act report submission.  For more information on the GONE Act, please see GONE Act.

  1. Challenges

Two primary challenges leading to delays in closing out grants and cooperative agreements relate to policy and system issues.  HHS utilizes its Payment Management System (PMS) to disburse grant funding.  HHS policy requires OpDivs to notify PMS when a grant should be closed; however, OpDivs are not required to monitor the action to ensure the grant is closed out.  In addition, PMS does not close out a grant until three different financial reports have been reconciled.  If the financial reports do not reconcile to the penny, the PMS system will not close out the grant.  These reconciliation issues lead to a large number of expired grants with small, undisbursed balances remaining open.

The management of pooled accounts in PMS is a system-related issue affecting timely grants closeout, as identified in GAO report GAO-16-362, Grants Management: Actions Needed to Address Persistent Grant Closeout Timeliness and Undisbursed Balance Issues.  Pooled accounts are created when a grantee wins multiple awards and the funding is pooled into the same account rather than delineated by funding source or project.  Pooling of funds allows recipients to withdraw funds from the account without citing the specific project for which the funding is needed.  As a result, HHS is unable to close pooled accounts until all associated funding in the account is reconciled.

  1. Corrective Actions

HHS implemented measures to reduce the number of open but expired awards.  These measures focus on closing expired reconciled accounts with zero dollar balances, developing strategies for resolving complex closeout issues, and monitoring the Department’s efforts to close expired awards.

In December 2016, HHS implemented the Clean Sweep exercise.  The Clean Sweep exercise engaged HHS OpDivs and PMS in a large-scale effort to identify and close federal awards whose accounts were reconciled and held zero dollar balances.  Clean Sweep resulted in the closure of over 30,000 federal awards across HHS.

In March 2017, HHS implemented the HHS GONE Act Monthly Reporting initiative.  The initiative required all OpDivs to submit monthly reports on their 30 oldest federal awards that met the GONE Act reporting criteria.  The monitoring effort encouraged OpDivs to continue reducing the number of expired federal awards with undispersed balances or overdrawn accounts.

In June 2017, HHS began an effort to address more complex closeout issues, such as pooling, and reconciling accounts with balances less than one dollar.  Working collaboratively with our OpDivs, HHS is in the process of identifying Department-wide strategies for closing accounts.

These efforts have culminated in the closure of 17,477 open but expired awards to date.

The GONE Act requires agencies to report grant and cooperative agreement data from their agency cash payment management system; however, some information is not practical to collect.  HHS’s PMS does not contain all of the data elements required for reporting (e.g., Federal Award Identification Number, Award Title, etc.).  To improve our grant systems, HHS has completed a time-intensive, manual crosswalk between two complex data sets from HHS’s PMS and the Tracking Accountability in Government Grants System, and is able to report all of its undisbursed and zero dollar balances in accordance with GONE Act reporting requirements.  HHS plans to update its policy to require OpDivs to track the status of their submitted closeout requests.  HHS is also striving to identify opportunities to eliminate the system-related issues in PMS that impede timely closeout of awards.

The table below summarizes HHS’s open but expired awards.

Table 1:  2017 GONE Act Reporting – Summary Table of Open but Expired HHS Awards

Category Age of Expiration>
2-3 Years >3-5 Years >5 Years
Number of Grants/Cooperation Agreements with Zero Dollar Balances 2,711 1,411 2,390
Number of Grants/Cooperation Agreements with Undisbursed Balances 7,843 3,574 5,186
Total Amount of Undisbursed Balanced $1,110,139,141.90 $319,994,880.31 $559,065,500.33

 

PAYMENT INTEGRITY REPORT

Overview

HHS is committed to improving payment accuracy in all of its programs.  While the Department has previously identified many tools and resources to prevent, detect, and reduce improper payments, it continues efforts to find and implement innovative solutions to improve payment integrity among its programs while reducing the burden on its stakeholders.

HHS’s FY 2017 Payment Integrity Report includes a discussion of the following information, as required by the Improper Payments Information Act (IPIA) of 2002, as amended by the Improper Payments Elimination and Recovery Act (IPERA) of 2010 and the Improper Payments Elimination and Recovery Improvement Act (IPERIA) of 2012;Office of Management and Budget (OMB) Circular A-136; and Appendix C of OMB Circular A-123:

Additional information on HHS’s improper payment efforts may also be found at PaymentAccuracy.gov.  This website includes detailed information on HHS’s improper payment activities, including information that is not reported in the FY 2017 Payment Integrity Report

 

1.0 Program Descriptions

The following list, organized by Division, is a brief description of the risk-susceptible programs discussed in this report (risk-susceptible programs are required to estimate improper payments and report other information, like reduction targets and corrective actions).  For the programs that received funding under the Superstorm Sandy Disaster Relief Appropriations Act (Disaster Relief Act) of 2013, only two programs (Head Start and SSBG) are reporting improper payment estimates for FY 2017 (other programs that have expended all of the Disaster Relief Act funds are excluded from reporting improper payment estimates).

Risk-Susceptible Programs:

  1. Medicare FFS – A federal health insurance program for people age 65 or older, people younger than age 65 with certain disabilities, and people of all ages with End-Stage Renal Disease (ESRD).
  2. Medicare Part C – A federal health insurance program that allows beneficiaries to receive their Medicare benefits through a private health plan.
  3. Medicare Part D – A federal prescription drug benefit program for Medicare beneficiaries.
  4. Medicaid – A joint federal/state program, administered by the states, that provides health insurance to qualifying low-income individuals.
  5. CHIP – A joint federal/state program, administered by the states, that provides health insurance for qualifying children.
  6. Advanced Premium Tax Credit (APTC) – A federal insurance affordability program, administered by HHS and/or the states, to support enrollees in purchasing Qualified Health Plan (QHP) coverage from state and federal insurance exchanges.
  7. Cost-sharing Reduction (CSR) – A federal insurance affordability program, administered by HHS and/or the states, operated on behalf of QHP enrollees to reduce the cost of deductibles, copayments, and coinsurance.
  8. TANF – A joint federal/state program, administered by the states, that provides time-limited cash assistance as well as job preparation, work support, and other services  to needy families with children to promote work, responsibility, and self-sufficiency.
  9. Foster Care – A joint federal/state program, administered by the states, for children who need placement outside their homes in a foster family home or a child care facility.
  10. CCDF – A joint federal/state program, administered by the states, that provides child care financial assistance to low-income working families.
  11. Superstorm Sandy Head Start – A federal program that provides comprehensive developmental services for America’s low-income children from birth to 5 years of age and their families.  Head Start received additional appropriations through the Disaster Relief Act to address the construction and other needs that arose from Superstorm Sandy.
  12. Superstorm Sandy SSBG – A joint federal/state program, administered by the states, that supports programs designed to reduce dependency and promote self-sufficiency; to protect children, adults, and people with disabilities from neglect, abuse, and exploitation; and to help individuals who are unable to take care of themselves to stay in their homes or to find the best institutional arrangement.  SSBG received additional appropriations through the Disaster Relief Act to address services for individuals and construction costs for facilities that arose from Superstorm Sandy.

2.0 Risk Assessments

As required by the IPIA as amended and OMB implementing guidance, HHS reviews its non-risk-susceptible programs (including payment streams and activities) to determine if they are susceptible to significant improper payments.  The HHS IPERIA Risk Assessment Tool contains nine required risk factors, specific risks identified by the program that may lead to improper payments, and controls that may mitigate those risks.  By examining these areas, the risk assessment tool provides a comprehensive review and analysis of selected programs’ operations to determine if a payment risk exists and, if so, the nature and severity of the identified risks.

In FY 2017, HHS strengthened its risk assessment processes and reporting activities with added policies and procedures.  For example, the Department improved the HHS IPERIA Risk Assessment Template by incorporating lessons learned from the previous year’s risk assessments and by refining its approach for charge card risk assessments.  HHS completed 24 risk assessments (representing risk assessments of programs and charge cards), and concluded that the 24 programs were not susceptible to the risk of significant improper payments.  In addition, HHS is continuing to defer a final risk assessment conclusion for the Basic Health Program to allow the program to become more fully established.

3.0 Statistical Sampling Process

Each risk-susceptible program’s statistical sampling process is discussed in Section 11.0:  Program-Specific Reporting Information or Section 12.0:  Superstorm Sandy Reporting Information.  All programs that reported improper payment estimates complied with OMB-approved statistical sampling plans and confidence intervals, and are reporting improper payment estimates calculated by a statistical contractor.  In addition, all of the programs utilized the same statistical sampling measurement approaches as in the previous year.

3.1 Improper Payment Measurement Estimates

Improper payments are not necessarily expenses that should not have occurred.  For example, instances where there is insufficient or no documentation to support the payment as proper are cited as improper payments under current OMB guidance.  A significant amount of HHS’s improper payments are due to documentation errors where a lack of documentation or errors in the documentation limited HHS’s ability to verify information.  However, if the documentation was submitted or maintained, then the improper payments may have been proper.  A smaller proportion of improper payments are payments that should not have been made or should have been made in different amounts and are considered monetary losses to the government.

As mentioned earlier, statistical samples are used to calculate each program’s estimated improper payment rate and a projected amount of improper payments.  Table 1 in Section 9.0:  Improper Payment Reduction Outlook FY 2016 through FY 2018 presents each program’s gross and net improper payment rates.

The gross improper payment is the official program improper payment rate; it is calculated by adding the sample’s overpayments and underpayments and dividing by the sample’s total dollar value.  The net improper rate is calculated by subtracting the sample’s underpayments from overpayments and dividing by the sample’s total dollar value.

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4.0 Corrective Action Plans (CAPs)

Each program’s CAP for reducing the estimated rate of improper payments can be found in Section 11.0:  Program-Specific Reporting Information or Section 12.0:  Superstorm Sandy Reporting Information.  Generally, each program develops a multi-faceted approach to corrective actions with multiple efforts underway concurrently.  CAPs are used to set aggressive, realistic targets for reducing improper payments, and outline a timetable to achieve scheduled targets.  OMB approves all CAPs and reduction targets published in the Agency Financial Report (AFR).  Corrective actions can be in different stages, from development, to piloting, to steady state implementation, to completion.  The Department reviews CAPsannually to ensure plans focus on the root causes of the improper payments, thus making it more likely that targets are met.  If targets are not met, HHS will develop new strategies, adjust staffing and other resources, and possibly revise targets.

5.0 Accountability in Reducing and Recovering Improper Payments

Strengthening program integrity throughout the organization is a top Departmental priority, extending to HHS senior executives and program officials at each of HHS’s Divisions and programs.  As evidence of this focus, beginning with senior leadership and cascading down, performance plans contain strategic goals that are related to strengthening program integrity, protecting taxpayer resources, and reducing improper payments.  Senior executives and program officials are assessed as part of their semi-annual and annual performance evaluations on their progress toward achieving these goals.

6.0 Information Systems and Other Infrastructure

Section 11.0:  Program-Specific Reporting Information details each program’s information systems and other infrastructure.  Unless otherwise stated in Section 11.0, HHS has the information systems and other infrastructure it needs to reduce improper payments to the targeted levels in all of its programs that report an improper payment estimate.

7.0 Mitigation Efforts Related to Statutory or Regulatory Barriers

Section 11.0:  Program-Specific Reporting Information reports each program’s statutory or regulatory barriers, if any, to reducing improper payments.

8.0 FY 2017 Achievements

In FY 2017, HHS strengthened its efforts to reduce and recover improper payments in its programs.  While a few of these efforts are highlighted below, more detailed information on the programs’ performance and corrective actions can be found in Section 11.0:  Program-Specific Reporting Information and Section 12.0:  Superstorm Sandy Reporting Information.

Head Start

As of FY 2013, Head Start no longer reports annual improper payment estimates due to the strong internal controls, monitoring systems, and low reported error rates from FY 2009 through FY 2012.  In lieu of an annual error rate measurement, HHS provides oversight through Head Start’s existing internal controls and monitoring systems, and annually reports to OMB on its internal controls.  Overall, FY 2017 onsite monitoring results determined that there were no grantees with erroneous payments related to eligibility, indicating that the Department’s control and monitoring systems are working as intended.

Centers for Medicare & Medicaid Services (CMS) Program Integrity (PI) Board

CMS uses an agency-wide PI Board (comprised of CMS executive leaders) to identify and prioritize improper, wasteful, abusive, and potentially fraudulent payment vulnerabilities in its programs; direct corrective actions; and track issues to resolution.  To assist with these activities, the PI Board established an Improper Payment Action Plan workgroup to collect data from improper payment reports and formulate action plans for review by the PI Board.  The PI Board also established smaller working groups—referred to as Integrated Project Teams (IPTs)—to focus on specific projects to address the vulnerabilities.  Each IPT works independently under the PI Board’s direction and provides regular updates.  In FY 2017, the workgroups made significant strides.

  • Health Insurance Exchange IPT:  The Health Insurance Exchange IPT conducted a fraud risk assessment consistent with best practices developed by the Government Accountability Office.  In its oversight role, the PI Board was briefed on the fraud risk profile and initial implementation activities.  As a result of this assessment, the Department implemented steps to prevent fraud during the exchange enrollment process, including clarifying requirements and implementing system improvements to strengthen enrollment controls and manage fraud risk related to data matching issues.  Improvements include a complaints review process, agent broker license verification, and investigations, as described below.
    • Complaints are reviewed for potential fraud and unauthorized enrollment of consumers and HHS works with issuers to rescind fraudulent policies.  As of September 30, 2017, HHS has reviewed over 10,000 complaints.  
    • The license verification project ensures that agents and brokers are licensed in the states where they are assisting with plan enrollments. 
    • Finally, HHS works to screen, prioritize, and investigate potential fraud and abuse leads that come from data analysis and tips from external parties.  
  • Documentation Improvement IPT:  The Documentation Improvement IPT transitioned into an agency-wide initiative known as the Documentation Requirements Simplification project.  In FY 2017, the PI Board approved the initiative’s goals, which are to clarify, simplify, and/or eliminate documentation requirements.  This initiative will reduce provider burden and inappropriate appeals while balancing program integrity concerns.  The PI Board approved the operational structure of the initiative and will inform topic selection and prioritization.  This structure includes the Documentation Requirements Simplification Change Control Board, which facilitates stakeholder engagement and drives decision-making.
  • ESRD Initiative and Opioid Misuse Initiative Workgroups:  The PI Board directed the ESRD Initiative workgroup to determine payment, quality, and innovation policy levers to effectuate transformational change within ESRD programs, as well as the Opioid Misuse Initiative workgroup to facilitate cross-agency collaboration to help address this national epidemic.  In January 2017, CMS released its Opioid Misuse Strategy paper, which outlines numerous efforts the agency has been and is taking to impact the national opioid misuse epidemic.

Provider Enrollment Moratorium

Section 1866(j)(7) of the Social Security Act authorizes HHS to impose a temporary moratorium on the enrollment of new providers and suppliers as a tool to prevent or combat fraud, waste, or abuse in Medicare, Medicaid, or CHIP in high-risk services and areas across the country.  Establishing a moratorium in certain geographic areas allows HHS to analyze and monitor the existing provider and supplier base, in order to focus additional fraud prevention and detection tools in these areas, while continuing to monitor beneficiary access to care.  HHS launched the first temporary (6-month) enrollment moratorium pursuant to this authority in 2013 for home health agencies (HHAs) and ground ambulance suppliers (emergency and non-emergency) in limited areas for Medicare, Medicaid, and CHIP.  Since then, HHS has extended and modified the temporary enrollment moratoria.  On July 29, 2016, HHS announced:

  • The moratoria were expanded state-wide for HHAs in Florida, Illinois, Michigan, and Texas and for new Medicare Part B, Medicaid, and CHIP non-emergency ambulance suppliers in New Jersey, Pennsylvania, and Texas;
  • HHS concurrently lifted the temporary moratoria on all Medicare Part B, Medicaid, and CHIP emergency ground ambulance suppliers; and
  • HHS launched the Provider Enrollment Moratoria Access Waiver Demonstration, which grants waivers to the state-wide enrollment moratoria on a case-by-case basis in response to access to care issues in certain geographic areas and requires heightened initial review and ongoing oversight of newly enrolling providers and suppliers. 

HHS extended the moratoria for an additional 6 months on January 29, 2017, and again for an additional 6 months on July 29, 2017.  Due to the lags in billing, HHS is unable to report on the impact of statewide moratoria.

Fraud Prevention System (FPS)

In June 2011, HHS launched the FPS, which analyzes all Medicare FFS claims using risk-based algorithms to: target investigative resources; generate alerts for suspect claims or providers and suppliers; and investigate the most egregious, suspect, or aberrant activity.  HHS and its program integrity contractors use the FPS information to prevent and identify improper payments using a variety of administrative tools and actions, including claim denials, payment suspensions, Medicare billing privilege revocations, and law enforcement referrals.

In implementing FPS 2.0, HHS and its contractor are modernizing the FPS to decrease development and implementation time for new analytic models and edits; implement edits that will reject and deny claims that do not meet Medicare rules and requirements prior to payment; expand the toolset to include analysis of social networks; improve the user interface, model management, and evaluation of prioritization rules; include business intelligence reporting tools connected to the live FPS 2.0 system, and allow claim level drill-down capabilities; and provide a testing environment to evaluate how a new analytic model will interact with existing models to impact workload.  HHS launched the FPS 2.0 on February 20, 2017.

During FY 2016, HHS took administrative action against 1,044 providers and suppliers, resulting in an estimated $527.06 million in identified savings.  These FY 2016 savings represent a $6.34 to $1 return on investment.  This return on investment calculation includes costs associated with both FPS 1.0 and the development of FPS 2.0, which became operational in FY 2017.  If the FPS 2.0 costs are excluded from the calculation, the ROI would be $8.20 to $1.  Simultaneously, the FPS also generated leads for 476 new investigations and augmented information for 212 ongoing investigations.  HHS will report FY 2017 savings from the FPS in the FY 2018 AFR.

National Benefit Integrity (NBI) Medicare Drug Integrity Contractor (MEDIC)

The NBI MEDIC performs data analysis to fight fraud, waste, and abuse in Medicare Part C and Part D.  The NBI MEDIC identifies improper payments and notifies plan sponsors to recover the corresponding overpayments.  HHS also utilizes the NBI MEDIC’s data analysis to select Part D plan sponsors and drugs for review through Part D plan sponsor self-audits.  As a result of the NBI MEDIC’s data analysis projects including Part D plan sponsor self-audits, HHS recovered $4.95 million from Part D sponsors during the first three quarters of FY 2017.  In addition, the NBI MEDIC refers certain information to law enforcement organizations.  According to notifications received from law enforcement during the first three quarters of FY 2017, NBI MEDIC referrals to law enforcement resulted in recoveries of $3.1 million for Part C and $40.8 million for Part D.  The majority of these savings were from court decisions ordering restitution.

Medicaid Integrity Program

Under the authority of Section 1936 of the Social Security Act, as amended by the Deficit Reduction Act (DRA) of 2005, HHS’s Medicaid Integrity Program has two broad responsibilities:

  • To hire contractors to review Medicaid provider activities, audit claims, identify overpayments, and educate providers and others on Medicaid program integrity issues. 
  • To support and assist state efforts to combat Medicaid provider fraud, waste, and abuse.

Increased Medicaid recoveries demonstrate the increased focus on Medicaid integrity.  For example, the Medicaid Integrity Program has provided federal staff specializing in program integrity and contractor support to states to bolster their activities and collections.  Since enactment of the DRA, total state Medicaid program integrity collections have grown from $265 million in FY 2006 to $568.04 million in FY 2017.  The Medicaid Integrity Program works in coordination with the Medicaid program integrity activities funded by the Health Care Fraud and Abuse Control program.  For example, these program integrity activities improve HHS’s financial oversight of Medicaid and CHIP by supporting reviews of proposed Medicaid state plan amendments; financial management reviews; and other activities.  These activities also recovered approximately $230 million and averted another $666 million in reimbursements in FY 2016.  The DRA also required HHS to establish a Comprehensive Medicaid Integrity Plan to guide the Medicaid Integrity Program’s development and operations.  HHS's most recent Comprehensive Medicaid Integrity Plan for FYs 2014 through 2018 is available at Medicaid Integrity.  As discussed in Section 11.40, HHS significantly expanded its efforts to assist states with meeting Medicaid screening and enrollment requirements throughout FY 2017.

Public Assistance Reporting Information System (PARIS)

PARIS is a federal/state partnership with all 50 states, the District of Columbia, and Puerto Rico that provides state public assistance agencies detailed information and data to detect and deter improper payments in TANF, Medicaid, Workers’ Compensation, Child Care, and the Supplemental Nutrition Assistance Program.

HHS, the Department of Veterans Affairs (VA), and the Department of Defense (DOD) partner to advance the PARIS project at no cost to states.  The DOD’s Defense Manpower Data Center provides computer resources to produce a match file using social security numbers submitted by the states, VA, and DOD as the key match indicator.  States verify the matched individual’s eligibility and take any necessary action.  HHS contributes to this effort by executing Computer Matching Agreements (CMA) and coordinating the quarterly matches.  Since its establishment, PARIS has strengthened program administration among its programs and state public assistance agencies.  For instance, New York closed or removed active individuals from 8,750 public assistance cases identified on the PARIS match for cost savings of $55.20 million during their most recent full state FY (April 2016 to March 2017).  More information can be found at PARIS.

Results of the Do Not Pay (DNP) Initiative in Preventing Improper Payments 

In June 2010, the President issued a Memorandum on Enhancing Payment Accuracy Through a “Do Not Pay List” in a network of databases where agencies can access relevant information before determining eligibility for federal funding.  Since 2010, HHS has worked to implement the DNP initiative.  HHS renewed a CMA with Treasury under the DNP initiative in FY 2017.  In addition, several of HHS’s Divisions are using DNP to check for recipients’ or potential recipients’ eligibility for payment and to prevent improper payments.  Further, Treasury-disbursed payments are matched against the Social Security Administration’s (SSA) Death Master File (DMF) and the General Services Administration’s excluded parties’ elements of the System for Award Management in the DNP portal to identify improper payments on a daily basis.  In FY 2017, the Department screened 1.21 million payments against IPERIA listed databases, representing $419.26 billion.  While the Department identified 22 potential improper payments over the past year as part of these daily matches, there were no confirmed matches in FY 2017.  Lastly, CMS is also checking certain payments against IPERIA-listed databases outside of the DNP portal.  In FY 2017, CMS screened 1.15 billion payments against IPERIA-listed databases, representing $390.8 billion.  Through these checks, CMS stopped 504,200 payments representing $1.6 billion.

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9.0 Improper Payment Reduction Outlook FY 2016 through FY 2018

The following table (Table 1) displays HHS’s proper and improper payment estimates for the current year (CY) FY 2017, the prior year (PY) FY 2016, and targets for FY 2018.  The table includes the following information by year and program, as applicable:  FY outlays, the estimated improper payment rate or future target rate (IP%), and estimated amount and percent paid or projected to be paid properly (PP) and improperly (IP).  In addition, for the CY, Table 1 includes:  the estimated amount and percent of overpayments (CY Over Payments), the estimated amount and percent of underpayments (CY Under Payments), the estimated net improper payment rate (CY Net IP%) and amount (CY Net $), and the corresponding estimated overpayments (CY Over Payments), when available.

Table 1
Estimated Proper and Improper Payments for HHS’s Risk-Susceptible Programs
FY 2016 – FY 2018 (in Millions)

Program or Activity PY
Outlays $		 PY
 IP %		 PY
IP $		 CY Outlays $ CY
PP %		 CY
PP $		 CY
IP %		 CY
IP $		 CY
Over Payment %		 CY
Over Payment $
Medicare FFS 373,650.45 Note (a) 11.00 41,084.65 380,761.97

 

Note (b)

 90.49 344,553.97 9.51

 

Note (1)

 36,208.00 9.21 35,081.74
Medicare Part C 161,944.04 Note (d) 9.99 16,182.66  172,768.08

 

Note (e)

 91.69 158,416.36  8.31 14,351.71 5.39  9,311.19 
Medicare Part D 70,235.94 Note (g) 3.41 2,393.94  77,450.28

 

Note (h)

 98.33  76,154.69  1.67  1,295.60 0.58  450.77 
Medicaid 345,973.72 Note (j) 10.48 36,253.25 363,839.35

 

Note (k) 

 89.90 327,108.22 10.10

 

Note (2)

 36,731.13 10.02 36,447.95
CHIP 9,233.06 Note (l) 7.99 737.59  14,305.14

 

Note (m)

 91.36  13,069.09 8.64

 

Note (3)

 1,236.05 8.59 1,229.31
APTC 23,843.66

 

Note (n) 

 N/A N/A 28,330.67

 

Note (n)

 N/A N/A Note (4)  N/A N/A  N/A
CSR 5,097.17

 

Note (o) 

 N/A N/A  4,952.49

 

Note (o)

 N/A N/A Note (4)  N/A N/A  N/A
TANF 15,496.33 Note (p) N/A N/A 16,503.95

 

Note (q)

 N/A N/A  N/A

 

Note (5) 

 N/A N/A N/A
Foster Care 692.00

 

Note (r)

 6.89 47.68 747.00

 

Note (s) 

 92.87 693.72 7.13 53.28 6.91 51.62
Child Care 5,547.09 Note (t) 4.34 240.74  5,746.27

 

Note (u) 

 95.87 5,508.95 4.13 237.32 3.85 221.14
Superstorm Sandy Head Start 71.78 0 0 2.91

 

Note (v)

 100.00 2.91 0 0  0  0 
Superstorm Sandy SSBG 198.33 0.68 1.35 63.61

 

Note (w) 

 99.99 63.60 0.014 0.009 0.014 0.009

 

Program or Activity CY
Under Payment %		 CY
Under Payment $		 CY
Net
IP %		 CY
Net
IP $		 CY+1
Est. Outlays $		 CY+1
IP %		 CY+1
IP $		 CY
Under Payment %
Medicare FFS 0.30 1,126.25 8.92 33,955.49 418,871.14

 

Note (c)

 9.40 39,373.89 0.30
Medicare Part C 2.92 5,040.53 2.47 4,270.66  208,665.86

 

Note (f)

 8.08  16,860.20 2.92
Medicare Part D  1.09  844.83 (0.51) (394.06) 84,065.00

 

Note (i)

  1.66  1,395.48  1.09 
Medicaid 0.08 283.18 9.94  36,164.77 374,018.11 7.93  29,659.64 0.08
CHIP 0.05 6.74 8.55 1,222.57 16,645.08 8.20 1,364.90 0.05
APTC N/A  N/A N/A N/A 31,950.00

 

Note (n)

  N/A N/A N/A
CSR N/A N/A N/A N/A 5,900.00

 

Note (o)

  N/A N/A N/A 
TANF N/A N/A N/A N/A 16,627.74

 

Note (q) 

 N/A N/A N/A
Foster Care 0.22 1.66 6.69 49.97 850.00

 

Note (s)

 7.00 59.50 0.22
Child Care 0.28 16.18 3.57 204.97 5,721.74 

 

Note (u)

 8.00

 

Note (6)

 457.74 0.28
Superstorm Sandy Head Start 0  0 0 0 N/A N/A N/A 0 
Superstorm Sandy SSBG 0 0 0.014 0.009 N/A N/A N/A 0

Note:  Totals do not necessarily equal the sum of the rounded components.

9.1 Accompanying Notes for Table 1: Estimated Proper and Improper Payments for HHS’s Risk-Susceptible Programs

  1. Medicare FFS PY outlays are from the FY 2016 Medicare FFS Improper Payments Report (based on claims from July 2014 – June 2015).
  2. Medicare FFS CY outlays are from the FY 2017 Medicare FFS Improper Payments Report (based on claims from July 2015 – June 2016).
  3. Medicare FFS CY+1 outlays are based on the FY 2018 Midsession Review (Medicare Benefit Outlays current law [CL]).
  4. Medicare Part C PY outlays reflect 2014 Part C payments, as reported in the FY 2016 Medicare Part C Payment Error Final Report.
  5. Medicare Part C CY outlays reflect 2015 Part C payments, as reported in the FY 2017 Medicare Part C Payment Error Final Report.
  6. Medicare Part C CY+1 outlays are based on the FY 2018 Midsession Review (Medicare Benefit Outlays [CL]).
  7. Medicare Part D PY outlays reflect 2014 Part D payments, as reported in the FY 2016 Medicare Part D Payment Error Final Report.
  8. Medicare Part D CY outlays reflect 2015 Part D payments, as reported in the FY 2017 Medicare Part D Payment Error Final Report.
  9. Medicare Part D CY+1 outlays are based on the FY 2018 Midsession Review (Medicare Benefit Outlays [CL]).
  10. Medicaid PY outlays (based on FY 2015 expenditures) are based on the FY 2017 Midsession Review and exclude CDC Vaccine for Children program funding.
  11. Medicaid CY (based on FY 2016 expenditures) and CY+1 outlays (Medicaid - Outlays [CL] exclude CDC Vaccine for Children program funding), are based on the FY 2018 Midsession Review.
  12. CHIP PY outlays (based on FY 2015 expenditures) are based on the FY 2017 Midsession Review.
  13. CHIP CY (based on FY 2016 expenditures) and CY+1 outlays (CHIP Total Benefit Outlays with Children’s Health Insurance Program Reauthorization Act Bonus and Health Care Quality Provisions [CL]), are based on the FY 2018 Midsession Review.
  14. APTC PY and CY outlays are comprised of FY 2015 and FY 2016 expenditures, respectively; and are based on the FY 2018 Midsession Review.  CY+1 outlays are based on the FY 2018 Midsession Review.
  15. CSR PY and CY outlays are comprised of FY 2015 and FY 2016 expenditures, respectively; and are based on the FY 2018 Midsession Review.  CY+1 outlays are based on the FY 2018 Midsession Review.
  16. TANF PY outlays are based on the FY 2017 Midsession Review.
  17. TANF CY and CY+1 outlays are based on the FY 2018 Midsession Review (TANF total outlays including the Healthy Marriage Promotion and Responsible Fatherhood Grants programs, and excluding the TANF Contingency Fund). 
  18. Foster Care PY outlays are based on the FY 2017 Midsession Review, and reflect the federal share of maintenance payments.
  19. Foster Care CY and CY+1 outlays are based on the FY 2018 Midsession Review, and reflect the federal share of maintenance payments.
  20. Child Care PY outlays are based on the FY 2017 Midsession Review.
  21. Child Care CY and CY+1 outlays are based on the FY 2018 Midsession Review.
  22. Superstorm Sandy Head Start CY outlays are based on the remaining grant award amounts (minus drawdowns) as of June 30, 2017, and grants ended on August 30, 2017.  HHS identified $142,059 returned and estimated $234,770 will be de-obligated.
  23. Superstorm Sandy SSBG CY outlays are based on grantee expenditure amounts during the FY 2017 review period, and grants ended on September 30, 2017.
  1. Beginning in FY 2012, in consultation with OMB, HHS refined the improper payment methodology to account for the impact of rebilling denied Part A inpatient hospital claims for allowable Part B services when a Part A inpatient hospital claim is denied because the services (i.e.,  improper payments due to inpatient status reviews) should have been provided as outpatient services.  HHS continued this methodology from FY 2013 through FY 2017.  This approach is consistent with:  (1) Administrative Law Judge and Departmental Appeals Board decisions that directed HHS to pay hospitals under Part B for all of the services provided if the Part A inpatient claim was denied, and (2) recent Medicare policy changes that allow rebilling of denied Part A claims under Part B.

    HHS calculated an adjustment factor based on a statistical subset of inpatient claims that were in error because the services should have been provided as outpatient.  This adjustment factor reflects the difference between what was paid for the inpatient hospital claims under Medicare Part A and what would have been paid had the hospital claim been properly submitted as an outpatient claim under Medicare Part B.  Application of the adjustment factor decreased the overall improper payment rate by 0.13 percentage points to 9.51 percent or $36.21 billion in projected improper payments.  Additional information regarding the adjustment factor can be found on pages 166-167 of HHS’s FY 2012 AFR.
  2. HHS calculated and is reporting the national Medicaid improper payment rate based on measurements conducted in FYs 2015, 2016, and 2017.  The national Medicaid component improper payment rates are: Medicaid FFS: 12.87 percent and Medicaid managed care: 0.30 percent.  The Medicaid eligibility component improper payment rate is held constant at the FY 2014 reported rate of 3.11 percent as described in Section 11.40.
  3. HHS calculated and is reporting the national CHIP improper payment rate based on measurements conducted in FYs 2015, 2016, and 2017.  The national CHIP component improper payment rates are: CHIP FFS: 10.29 percent and CHIP managed care: 1.62 percent.  The CHIP eligibility component improper payment rate is held constant at the FY 2014 reported rate of 4.22 percent as described in Section 11.50.
  4. The APTC and CSR programs are not reporting improper payment estimates for FY 2017.  HHS completed a risk assessment on the APTC and CSR programs in FY 2016, and concluded the programs are likely susceptible to significant improper payments.  HHS is committed to working towards implementing an improper payment measurement program as required by the IPIA; as with similar HHS programs, it typically takes years to develop an effective and efficient improper payment measurement program.  The development of the measurement methodologies will be a multi-year process which consists of the development of measurement policies, procedures, and tools.  It also includes extensive pilot testing to ensure an accurate and efficient improper payment estimate, as well as acquisition activities for procurement of improper payment measurement contractors.  In FY 2017, HHS began developing improper payment measurement methodologies for the APTC and CSR programs, and will continue to pilot test these methodologies in FY 2018.  Given the length of time needed to implement a measurement program, HHS will continue to monitor and assess the programs for any changes and adapt accordingly.  HHS will continue to update its annual AFRs on the status of the measurement methodology development until each improper payment estimate is reported.  See Section 8.0 for information concerning program integrity activities relevant to the APTC and CSR programs.
  5. The TANF program is not reporting an error rate for FY 2017.  As discussed in Section 11.60, statutory limitations preclude HHS from requiring states to participate in a TANF improper payment measurement. 
  6. The Child Care and Development Block Grant Act (CCDBG) of 2014 reauthorized the CCDF program for the first time since 1996.  Regulations for the CCDBG, released in September 2016, will have a great impact on policies and procedures states put in place.  While the FY 2017 improper payment rate declined slightly from FY 2016, HHS anticipates increases in errors may occur as states implement new policies under CCDBG regulations.  Future targets may be adjusted, depending on future performance. 

10.0 Improper Payment Root Cause Categories

OMB guidance requires agencies to report improper payment root causes for risk-susceptible programs.  The following table (Table 2A) displays HHS’s improper payment root causes for FY 2017 for each risk-susceptible program.  The table includes categories of improper payments and the estimated amount of overpayments or underpayments associated with each improper payment category.  For reporting purposes, Administrative or Process Errors Made by Other Party may include health care providers, contractors, or any other organization administering federal dollars.  Additional information on the root causes and corrective actions for each risk-susceptible program can be found in each program-specific reporting section.

Table 2A
Improper Payment Root Cause Category Matrix for HHS’s Risk-Susceptible Programs
FY 2017 (in Millions)

Reason for Improper Payment Medicare FFS Medicare Part C Medicare Part D Medicaid CHIP
Over-payments Under-payments Over-payments Under-payments Over-payments Under-payments Over-payments Under-payments Over-payments Under-payments
Inability to Authenticate Eligibility             11,152.53 275.34 555.85 5.97

Failure to Verify Death Data

             38.81      
Administrative
or Process
Error Made by:		 State or Local Agency             21,791.19 7.84 580.40 0.66
  Other Party  4,915.16  1,117.59   5,040.53   844.83  303.18   8.69 0.11
Medical Necessity  6,334.76  8.67             0.13  

Insufficient Documentation to Determine

  23,831.83    9,311.19    450.77    3,162.24    84.24  
Total 35,081.74  1,126.25  9,311.19  5,040.53  450.77 844.83  36,447.95 283.18 1,229.31 6.74
Reason for Improper Payment Foster Care Child Care Superstorm Sandy Head Start Superstorm Sandy SSBG
Over-payments Under-payments Over-payments Under-payments Over-payments Under-payments Over-payments Under-payments
Inability to Authenticate Eligibility                

Failure to Verify Death Data

                
Administrative
or Process
Error Made by:		 State or Local Agency  51.62 1.66  65.28 16.18     0.009  
Other Party                
Medical Necessity                

Insufficient Documentation to Determine

     155.86          
Total  51.62 1.66  221.14 16.18 0.00 0.00 0.009 0.00

Note:  Totals do not necessarily equal the sum of the rounded components.

OMB guidance also requires agencies to report the estimated amount of improper payments made directly by the federal government and the amount of improper payments made by recipients of federal money by program (as reported in Table 2B below).  At HHS, all of the estimated improper payments for Medicare FFS, Medicare Part C, and Medicare Part D are made by the federal government or its representatives.  For the remaining programs that report improper payment estimates—Medicaid, CHIP, Foster Care, Child Care, Superstorm Sandy Head Start, and Superstorm Sandy SSBG—the estimated improper payments are made by recipients (for example, state agencies or grantees) of federal money.

Table 2B
Estimated Improper Payments Made by the Federal Government or
Recipients of Federal Funding
FY 2017 (in Millions)

Estimated Improper Payments Made by … Medicare FFS Medicare Part C Medicare Part D Medicaid CHIP Foster Care Child Care Superstorm Sandy Head Start Superstorm Sandy SSBG
… Federal Government 36,208.00 14,351.71 1,295.60            
… Recipients of Federal Funding       36,731.13 1,236.05 53.28 237.32 0 0.009

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