FY 2021 Annual Performance Plan and Report - Goal 5 Objective 1

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, which include 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).

HHS co-leads the government-wide Getting Payments Right Cross-Agency Priority (CAP) Goal.  Through this CAP goal, HHS aims to better understand the nature of improper payments and their relationship to payment integrity and to demonstrate stewardship of taxpayer dollars.  By identifying root causes of monetary loss, strategic uses of data, and mitigation strategies to avoid monetary loss for its large programs (e.g., Medicare, Medicaid, and the Child Health Insurance Program (CHIP)), HHS improves agency and government-wide results.  This focus on getting government payments right the first time and preventing monetary loss allows HHS to build public trust in the government.  

All divisions contribute to the achievement of this objective.  The Office of the Secretary leads this objective.  In consultation with OMB, HHS has determined that performance toward this objective is progressing.  The narrative below provides a brief summary of progress made and achievements or challenges, as well as plans to improve or maintain performance.

Objective 5.1 Table of Related Performance Measures

Reduce the percentage of improper payments made under Medicare Part C, the Medicare Advantage (MA) Program (Lead Agency - CMS; Measure ID – MIP5)

The Part C Medicare Advantage program payment error estimate reflects the extent to which plan-submitted diagnoses for a national sample of enrollees are substantiated by medical records.  CMS performs a validation of diagnoses in medical records for sampled beneficiaries during CMS’s annual Medical Record Review process, where two separate coding entities review medical records in the process of confirming discrepancies for sampled beneficiaries.  To calculate the Part C program’s error estimate rate, divide the dollars in error by the overall Part C payments for the year measured.

In FY 2019, CMS reported an actual improper payment estimate of 7.87 percent, or $16.73 billion.  The submission of more accurate diagnoses by MA organizations for payment drove the decrease from the prior year’s estimate of 8.10 percent.  The FY 2020 target is 7.77 percent.  The FY 2021 target will be established in the FY 2020 Agency Financial Report (AFR).  Per OMB, starting with FY 2017, CMS will establish a target for only the next fiscal year.

Reduce the percentage of improper payments made under the Part D Prescription Drug Program (Lead Agency - CMS; Measure ID - MIP6)

The 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 Prescription Drug Program (Part D) payment error estimate reflects the extent to which Prescription Drug Event (PDE) records submitted by Part D sponsors for a national sample of PDEs are substantiated by supporting documentation such as prescription record hardcopies, long-term care medication orders, and claims information from Part D sponsors.  CMS validates PDEs during CMS’s annual Payment Error Related to Prescription Drug Event Data Validation process, where two separate clinicians review supporting documentation.  To calculate the Part D program’s error estimate, divide the dollars in error by the overall Part D payments for the year measured.

In FY 2019, CMS exceeded its target of 1.65 percent, reporting an actual improper payment estimate of 0.75 percent, or $607.94 million.  The decrease from the prior year’s estimate of 1.66 percent resulted from errors being smaller in magnitude.

Reduce the improper payment rate in the Medicare Fee-for-Service Program (Lead Agency - CMS; Measure ID - MIP1)

CMS calculates the Medicare FFS improper payment estimate under the Comprehensive Error Rate Testing (CERT) program and reports the result in the HHS AFR.  CMS initiated the CERT program in FY 2003 and produced a national Medicare FFS improper payment rate for each year since its inception.  Please refer to the FY 2019 HHS AFR for information on the Medicare FFS improper payment methodology.

CMS exceeded its CY 2019 target.  The Medicare FFS improper payment estimate for CY 2019 is 7.25 percent or $28.91 billion.  The CY 2020 target is 7.15 percent and the CY 2021 target will be established in the FY 2020 AFR.  

CMS developed a number of preventive and detective measures for specific service areas with high improper payment rates, which include Skilled Nursing Facility, hospital outpatient, Inpatient Rehabilitation Facility, and home health 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.  Please refer to the FY 2019 HHS AFR for detailed information on corrective actions.

Reduce the improper payment rate in the Medicaid Program (Lead Agency - CMS; Measure ID - MIP9.1)⁴⁹

Reduce the improper payment rate in the Children’s Health Insurance Program (Lead Agency - CMS; Measure ID - MIP9.2)⁵⁰

The Payment Error Rate Measurement program measures improper payments in the FFS, managed care, and eligibility components of both Medicaid (MIP9.1) and CHIP (MIP9.2).  CMS measures improper payments in 17 states each year to calculate a rolling, three-year national improper payment rate for both Medicaid and CHIP.  CMS based the national Medicaid and CHIP improper payment rates reported in the FY 2019 HHS AFR on measurements that CMS conducted in FYs 2017, 2018, and 2019.  Please refer to the FY 2019 HHS AFR for information on the Medicaid and CHIP statistical sampling process and review period.

Since FY 2014, errors due to state noncompliance with provider screening, enrollment, and National Provider Identifier (NPI) requirements have driven the Medicaid improper payment rate.  Most improper payments cited on claims are those where a newly enrolled provider was appropriately screened by the state, did not have the required NPI on the claim, or was not enrolled.  While the screening errors described above are for newly enrolled providers, states also must revalidate the enrollment and rescreen all providers at least every 5 years. States were required to complete the revalidation process of all existing providers by September 25, 2016.  In FY 2019, HHS measured the second cycle of states for compliance with requirements for provider screening at revalidation. Improper payments cited on claims where a provider had not been appropriately screened at revalidation is a new major error source in the Medicaid improper payment rate. Another area driving the FY 2019 Medicaid improper payment estimate is the reintegration of the PERM eligibility component.  This is the first time in the history of the program that the eligibility component measurement has been conducted by a federal contractor; previously states conducted the measurement and self-reported results to HHS for reporting the national rate.

The current national Medicaid improper payment rate (MIP 9.1) reported in the 2019 HHS AFR is 14.90 percent or $57.36 billion.  The national Medicaid component rates are 16.30 percent for Medicaid FFS, 0.12 percent for Medicaid managed care and 8.36 percent for the Medicaid eligibility component.

The current national CHIP improper payment rate (MIP 9.2) reported in the 2019 HHS AFR is 15.83 percent or $2.74 billion.  The national CHIP component rates are 13.25 percent for CHIP FFS, 1.25 percent for CHIP managed care, and 11.78 percent for the CHIP eligibility component.

One area driving the FY 2019 CHIP improper payment estimate is the FY 2019 reintegration of the Payment Error Rate Measurement eligibility component. This is the first time in the history of the program that a federal contractor has conducted the eligibility component measurement.  Previously, states conducted the measurement and self-reported the results to HHS for calculation of the national rate.

HHS resumed the Medicaid and CHIP eligibility component measurements and report updated national eligibility improper payment estimates in FY 2019.  After establishing a full baseline, including eligibility, CMS will publish reduction targets in the FY 2021 HHS AFR.

The factors contributing to improper payments are complex and vary from year to year.  Each year CMS outlines actions the agency will implement to prevent and reduce improper payments for all error categories.  Please refer to the FY 2019 HHS AFR for detailed information on corrective actions.

CMS will receive corrective action plans from states to address their improper payments, and CMS will provide technical assistance to states as needed to help them reduce improper payments.  In FY 2018, CMS released a new strategy for Medicaid to address new program integrity challenges associated with the rapid Medicaid spending increase in the last decade due in part to Medicaid expansion.  The new initiatives in this strategy that CMS is now implementing include new audits targeting improper claims for federal matching funds, managed care medical loss ratios, rate setting, and state beneficiary eligibility determinations previously found to be high risk by the HHS Office of Inspector General.