FY 2023 Annual Performance Plan and Report - Strategic Goal 5: Objective 5.2

Fiscal Year 2023
Released March, 2022

Topics on this page: Objective 5.2: Sustain strong financial stewardship of HHS resources to foster prudent use of resources, accountability, and public trust | Objective 5.2 Table of Related Performance Measures

Objective 5.2: Sustain strong financial stewardship of HHS resources to foster prudent use of resources, accountability, and public trust

HHS supports strategies to sustain strong financial stewardship of resources. The Department continues to strengthen the financial management environment to prevent and mitigate deficiencies. HHS is focused on upholding accountability, transparency, and financial stewardship of HHS resources to ensure program integrity, effective internal controls, and payment accuracy. The Department is also building an enhanced financial management workforce that is better able to keep pace with changing contexts.

The Office of the Secretary leads this objective. All divisions are responsible for implementing programs under this strategic objective. The narrative below provides a brief summary of any past work towards these objectives and strategies planned to improve or maintain performance on these objectives.

Objective 5.2 Table of Related Performance Measures

The Foster Care program provides matching reimbursement funds for foster care maintenance payments, costs for comprehensive child welfare information systems, training for staff, as well as foster and adoptive parents, and administrative costs to manage the program. Administrative costs that are covered include the work done by caseworkers and others to plan for a foster care placement, arrange therapy for a foster child, train foster parents, and conduct home visits to foster children, as well as more traditional administrative costs, such as automated information systems and eligibility determinations. ACF estimates the national Foster Care payment error rate and develops an improvement plan to strategically reduce, or eliminate where possible, improper payments under the program. State-level data generated from the title IV-E eligibility reviews are used to develop a national error rate estimate for the program. Eligibility reviews are routinely and systematically conducted by ACF in the states, the District of Columbia, and Puerto Rico to ensure that foster care maintenance payments are made only for program-eligible children in eligible placements. The fiscal accountability promoted by these reviews has contributed to a general trend of reductions in case errors and program improvements.

The FY 2019 foster care error rate was 4.85 percent, which exceeded the target of 7 percent. In FY 2020, ACF set an error rate target of 6.00 percent, recognizing that changes in Title IV-E Foster Care eligibility requirements made by the Family First Prevention Services Act may contribute to increased improper payments as states adjusted to changes in law affecting eligibility, particularly for children placed in child care institutions. Due to the COVID-19 pandemic, ACF made the decision to postpone IV-E reviews beginning in the Spring of 2020 until it is again safe to travel and meet onsite. Therefore, ACF has not yet conducted reviews for states subject to the updated child care institution safety check requirements. The error rate for FY 2020 was, therefore, based on updated review data for six states as well as previous years’ data for other states. Encouragingly, the improper error rate decreased from 4.85 percent in FY 2019 to 3.36 percent in FY 2020 because five out of the six states that were newly reviewed had decreases in error rates. In particular, two states with large programs (and thus more impact) had substantial decreases of more than 13 percent in their state-level error rates.

ACF chose not to set an improper payment reduction target for FY 2021 and FY2022 given the ongoing COVID-19 public health emergency as it is uncertain when it will be safe to resume conducting onsite Title IV-E Reviews. In light of this uncertainty, as well as the unknown impact of the programmatic changes in title IV-E foster care eligibility made by the Family First Prevention Services Act on the improper payment rate, ACF will not report on the improper payment reduction rate in FY 2021 and FY 2022, and the target for FY 2023 will be determined at a later date. ACF will continue to work with all states to ensure that they have a clear understanding of changes in federal eligibility requirements and are prepared to successfully manage Title IV-E eligibility determinations for their Foster Care programs.

The purpose of the Child Support Enforcement program is to provide funding to states to support state-administered programs of financial assistance and services for low-income families to promote their economic security, independence, and self-sufficiency. This performance measure calculates efficiency by comparing total IV-D dollars collected and distributed by states with total IV-D dollars expended by states for administrative purposes; this is the Child Support Performance and Incentive Act (CSPIA) cost-effectiveness ratio (CER). The formula for determining the CER is the total collections distributed, plus the collections forwarded to other states and countries for distribution, and fees retained by other states, divided by the administrative expenditures, less the non-IV-D administrative costs. In FY 2020 the national CER ratio was $5.51. ACF saw significant improvement due to the surge in collections in this year while expenditures remained relatively constant. Since states continue to struggle to increase child support spending, the FY 2021 target of $5.20 is maintained for FY 2023.

ACF will continue to focus on increased efficiency of state programs through approaches such as automated systems of case management and enforcement techniques, administration simplifications, improving collaboration with families and partner organizations, and building on evidence-based innovations. The Child Support Program has continued to promote and advance key priorities that have a direct and positive impact on states, territories, and tribes and, most importantly, families. Maintaining investments in vital programs that serve to reduce poverty and improve families’ economic stability are effective ways to avoid public assistance costs and save money long-term. Furthermore, the Child Support Program serves mostly families with modest incomes who are more likely to spend the child support money quickly to meet basic household needs.

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 2021, CMS reported an actual improper payment estimate of 10.28 percent or $23.19 billion. During FY 2021, HHS implemented refinements to the denominator methodology to only include the population of MA payments reviewed and at risk for diagnostic error, which led to the increase in the FY 2021 error estimate. For prior years, the Part C denominator methodology reflected total MA payments, and included some payments that were non-risk adjusted or based on a different model resulting in a reported error rate that was biased downward, or potentially understated. Therefore, the FY 2021 reporting year is a baseline and should not be compared with prior reporting years.

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 in Medicare Part C. Detailed information on corrective actions can be found in the 2021 HHS AFR.

The Part D program 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 reported 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 2021, CMS reported an improper payment estimate of 1.58 percent, or $1.37 billion.

The improper payment estimate due to lacking or insufficient documentation is 0.65 percent or $0.56 billion, representing 41.19 percent of total improper payments. The increase from the prior year’s estimate of 0.43 percent is due to year-over-year variability, and is not statistically different from the prior year. As the rate is already low, variation in sampled error values or error category breakouts can cause minor shifts in the total estimated error rate.

The FY 2021 Medicare Part D improper payment root causes are drug or drug pricing discrepancies. Improper payments due to drug or drug pricing discrepancies occur when the prescription documentation submitted indicates that an overpayment occurred. Underpayments result when prescription record hard copies (or medication orders) indicates that CMS should have paid more.

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 in Medicare Part D. Detailed information on corrective actions can be found in the 2021 HHS AFR.

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 2021 HHS AFR for information on the Medicare FFS improper payment methodology.

CMS met its target 2021 target. The Medicare FFS improper payment estimate for FY 2021 is 6.26 percent, or $25.03 billion. While the factors contributing to improper payments are complex and vary by year, the primary causes continue to be insufficient documentation and medical necessity errors. Per OMB, starting with FY 2017, CMS will establish a target for only the next fiscal year.

CMS develops and refines multiple preventive and detective measures for specific service areas with high improper payment estimates, such as hospital outpatient, SNF, home health, hospice, and other areas. CMS believes implementing targeted corrective actions will prevent and reduce improper payments in these areas and reduce the overall improper payment estimate. Please refer to the 2021 HHS AFR for detailed information on corrective actions.

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 measures improper payments in 17 states each year to calculate a rolling, three-year national improper payment rate for both Medicaid and CHIP. The national Medicaid and CHIP improper payment rates reported in the FY 2021 HHS AFR is based on measurements that were conducted in FYs 2019, 2020, and 2021. Information on the Medicaid and CHIP statistical sampling process and review period can be found in the 2021 HHS AFR.

The national Medicaid improper payment estimate for FY 2021 is 21.69 percent or $98.72 billion. The national Medicaid component rates are 13.90 percent for Medicaid FFS, 0.04 percent for Medicaid managed care, and 16.62 percent for the Medicaid eligibility component.

Eligibility errors are mostly due to insufficient documentation to affirmatively verify the eligibility determination or noncompliance with federal eligibility redetermination requirements. The majority of the insufficient documentation errors represent both situations where the required verification of eligibility data, such as income, was not done at all and where there is an indication that eligibility verification was initiated but the state provided no documentation to validate the verification process was completed.

The national CHIP improper payment estimate for FY 2021 is 31.84 percent or $5.37 billion. The national CHIP component rates are 13.67 percent for CHIP FFS, 0.48 percent for CHIP managed care, and 28.71 percent for the CHIP eligibility component.

One area driving the FY 2021 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. CMS began utilizing the updated eligibility component beginning in the FY 2019 measurement cycle. Under the updated eligibility component, a federal contractor conducts the eligibility measurement, allowing for consistent insight into the accuracy of CHIP eligibility determinations and increased oversight of identified vulnerabilities.

The factors contributing to improper payments are complex and vary from year to year. 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. Detailed information on corrective actions can be found in the 2021 HHS AFR.