FY 2020 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).

All divisions contribute to the achievement of this objective.  The Office of the Secretary leads this objective.

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 (MA) program payment error estimate reflects the extent to which plan-submitted diagnoses for a national sample of enrollees are substantiated by medical records. Validation of diagnoses in medical records for sampled beneficiaries is performed during CMS’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 being measured.

In FY 2018, CMS reported an actual improper payment estimate of 8.10 percent, or $15.55 billion. The submission of more accurate diagnoses by MA organizations for payment drove the decrease from the prior year’s estimate of 8.31 percent. The FY 2019 target is 7.90 percent. The FY 2020 target will be established in the FY 2019 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.  Validation of PDEs is performed 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 being measured.

In FY 2018, CMS met its target of 1.66 percent, reporting an actual improper payment estimate of 1.66 percent, or $1.32 billion. Submission of more accurate payment data by Part D sponsors primarily drove the decrease from the prior year’s estimate of 1.66 percent.

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

The Medicare FFS improper payment estimate is calculated under the Comprehensive Error Rate Testing (CERT) program and reported in the HHS AFR. The CERT program was initiated in FY 2003 and has produced a national Medicare FFS improper payment rate for each year since its inception. Information on the Medicare FFS improper payment methodology can be found in the FY 2018 HHS AFR.⁴⁹

CMS exceeded its CY 2018 target. The Medicare FFS improper payment estimate for CY 2018 is 8.12 percent or $31.62 billion. The CY 2019 target is 8.00 percent and the CY 2020 target will be established in the FY 2019 AFR.

While the factors contributing to improper payments are complex and vary from year to year, the primary causes of improper payments continue to be insufficient documentation and medical necessity errors. CMS believes implementing targeted corrective actions will continue to prevent and reduce improper payments in these areas and reduce the overall improper payment rate. Detailed information on corrective actions can be found in the FY 2018 HHS AFR.

Reduce the improper payment rate in the Medicaid Program (Lead Agency - CMS; Measure ID - MIP9.1)⁵⁰

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

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 as a means to contain cost, reduce the burden on states, and make measurement manageable.  In this way, states can plan for the reviews and CMS can complete the measurement on time for HHS and AFR reporting.  At the end of a 3-year period, each state will have been measured once and will rotate in that cycle in future years, (e.g., the states measured in the 2015 AFR were also measured again in the 2018 AFR).  Information on the Medicaid and CHIP statistical sampling process and review period can be found in the FY 2018 HHS AFR.

The national Medicaid improper payment rate (MIP9.1) reported in the 2018 HHS AFR is based on measurements that were conducted in fiscal years 2016, 2017, and 2018.  HHS is not reporting FY 2019 improper payment targets for Medicaid and CHIP.  The current national Medicaid improper payment rate is 9.79 percent.  The national Medicaid component rates are 14.31 percent for Medicaid FFS and 0.22 percent for Medicaid managed care.  The Medicaid eligibility component is held constant at the FY 2014 reported rate of 3.11 percent.

The national CHIP improper payment rate (MIP 9.2) reported in the 2018 AFR is based on measurements conducted in fiscal years 2016, 2017, and 2018. The current national CHIP improper payment rate is 8.57 percent. The national CHIP component rates are 12.55 percent for CHIP FFS and 1.24 percent for CHIP managed care. The CHIP eligibility component is held constant at the FY 2014 reported rate of 4.22 percent. Additional detail about Medicaid and CHIP improper payment rates and underlying components is available in the FY 2018 HHS AFR.

As described in Sections 11.4: Medicaid and 11.5: CHIP of the FY 2018 HHS AFR, HHS will resume the Medicaid and CHIP eligibility component measurements and report updated national eligibility improper payment estimates in FY 2019.  Reduction targets will be published once a full baseline, including eligibility, has been established and reported in FY 2021.

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. Detailed information on corrective actions can be found in the FY 2018 HHS AFR.