FY 2022 Annual Performance Plan and Report - Goal 5 Objective 1

Fiscal Year 2022
Released June, 2021

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 Payment Integrity Information Act of 2019 (Pub. L. No. 116-117).

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.  In the previous administration, the Office of the Secretary led this objective.  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 2020, CMS exceeded its target of 7.77 percent with an actual improper payment estimate of 6.78 percent, or $16.27 billion.  The FY 2022 target will be established in the FY 2021 Agency Financial Report (AFR).  The FY 2021 target has not been established.  Due to HHS's temporary policy to stop documentation requests to providers as a result of the Public Health Emergency (PHE) for COVID-19 pandemic, the Medicare Part C Improper Payment Measurement medical record submission did not follow the same pattern as in previous years.  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 measures the payment error related to Prescription Drug Event (PDE) data, where most errors for the program exist.  CMS measures inconsistencies between information reports on PDEs and supporting documentation submitted by Part D sponsors: prescription record hardcopies (or medication orders as appropriate) and detailed claims information.  Based on these reviews, each PDE in the audit sample is assigned a gross drug cost error.  A representative sample of beneficiaries undergoes a simulation to determine the Part D improper payment estimate.

In FY 2020, CMS did not meet its target of 0.74 percent, reporting an actual improper payment estimate of 1.15 percent, or $927.50 million.  The increase from the prior year's estimate of 0.75 percent is due to year-over-year variability.  As the rate is already low, any variation can cause shifts that are relatively (but not absolutely) large.  The FY 2021 target is 1.14 percent.  The FY 2022 target will be established in the FY 2021 AFR.  Per OMB, starting with FY 2017, CMS will establish a target for only the next fiscal year.

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 2020 HHS AFR - PDF for information on the Medicare FFS improper payment methodology.

In FY 2020, CMS exceeded its target of 7.15 percent, with an actual improper payment estimate of 6.27 percent, or $25.74 billion.  This year's estimate decreased from the prior year's reported 7.25 percent improper payment estimate due to a reduction in improper payments for home health, and SNF claims.  Although the improper payment rate for these services and the gross Medicare FFS improper payment rate decreased, improper payments for hospital outpatient, IRF, SNF, and home health claims were major contributing factors to the FY 2020 Medicare FFS improper payment rate, comprising 34.22 percent of the overall estimated improper payment rate.  The FY 2021 target is 6.17 percent.  CMS will establish the FY 2022 target in the FY 2021 AFR.  Per OMB, starting with FY 2017, CMS will establish a target for only the next fiscal year.

CMS has 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 2020 HHS AFR - PDF for detailed information on corrective actions.

Reduce the improper payment rate in the Medicaid Program (Lead Agency - CMS; Measure ID - MIP9.1)⁴⁴

Reduce the improper payment rate in the Children's Health Insurance Program (Lead Agency - CMS; Measure ID - MIP9.2)⁴⁵

The Payment Error Rate Measurement (PERM) program measures improper payments for 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 2020 HHS AFR on measurements that CMS conducted in FYs 2018, 2019, and 2020.  Please refer to the 2020 HHS AFR - PDF 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 2020, HHS measured the third 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.  CMS completed the measurement of all states for compliance with provider revalidation requirements in FY 2020 in order to establish a baseline.  Moving forward, CMS will be able to track improvement in compliance with revalidation requirements as each cycle of states is measured a second time.

The national Medicaid improper payment (MIP 9.1) estimate for  FY2020  HHS AFR is 21.36 percent or $86.49 billion.  The national Medicaid component rates are 16.84 percent for Medicaid FFS, 0.06 percent for Medicaid managed care, and 14.94 percent for the Medicaid eligibility component.

The national CHIP gross improper payment (MIP 9.2) estimate for  FY 2020  is 27.00 percent or $4.78 billion.  The national CHIP component rates are 14.15 percent for CHIP FFS, 0.49 percent for CHIP managed care, and 23.53 percent for the CHIP eligibility component.

One area driving the FY 2020 CHIP improper payment estimate is the continued reintegration of the PERM eligibility component, which was revamped to incorporate the PPACA requirements in the PERM eligibility reviews.  A federal contractor conducts the eligibility measurement, allowing for consistent insight into the accuracy of CHIP eligibility determinations, and increases the oversight of identified vulnerabilities.  Based on the measurement of the first two cycles of states, eligibility errors are mostly due to insufficient documentation to affirmatively verify the eligibility determination or noncompliance with eligibility redetermination requirements.

In order to reduce the national Medicaid and CHIP improper payment rates, states are required to develop and submit states-specific Corrective Action Plans (CAPs) to CMS.  Each year, CMS also outlines actions the agency will implement to prevent and reduce improper payments for all error categories on a national level.  Please refer to the 2020 HHS AFR - PDF for detailed information on corrective actions.

⁴² CMS uses Payment Integrity Information Act (PIIA) standards, rather than GPRAMA standards, for performance reporting on improper payments.  According to A-123 guidance, programs with established valid and rigorous estimation methodologies should count reduction targets as being met if the 95% confidence interval includes the reduction target.

⁴³ Ibid.

⁴⁴ These measures are being suspended until three years of new eligibility data are gathered and can be inserted into a new baseline in FY 2021.  After establishing a full baseline, including eligibility, CMS will publish reduction targets in the FY 2021 HHS AFR.

• The FY 2021 AFR will report a target established for 2022.

⁴⁵ Ibid.

<< Return to Topics in this ReportTop of pageGoal 5. Objective 2 >>