Medicare, Medicaid account for more than half of erroneous federal payments

Medicare and Medicaid programs together erroneously paid out $54.2 billion for medical claims in fiscal 2009, accounting for more than one half of the federal government’s total $98 billion in improper payments, the Office of Management and Budget reported.

OMB’s annual report of improper payments tracks the result of federal waste, fraud and sloppy documentation.

The error rate for Medicare’s fee-for-service programs doubled to 7.8 percent in 2009 compared with 3.6 percent error rate in 2008, according to the report. The error rate for Medicare Advantage, the government’s extended benefits plan for senior citizens, jumped to 15.4 percent from 10.6 percent. 

Centers for Medicare and Medicaid Services said it is combating the problem on several fronts. Among them, it expects to improve its ability to identify weaknesses in its payment methods through the wider adoption of electronic health record systems to be funded by the upcoming health IT stimulus plan.

“We hope to be able to use data available through the use of new electronic health record reporting that can help in the design of new and innovative approaches to finding emerging trends and vulnerabilities in high risk areas,” acting CMS administrator Charlene Frizzera said in a Nov. 18 statement.

CMS also said it has simply improved its ability to identify when fraud has occurred in the first place. Some of the erroneous Medicare payments were discovered as the result of  more rigorous methods that auditors are now applying to reviewing medical claims, Frizzera said.

For instance, auditors require more complete medical information about the claim and a legible signature on supporting documents.

OMB director Peter Orszag said the administration plans to boost agency accountability by publishing agency payment error rates online so the public can “see a list of the most egregious actors,” he said.

Agencies will also have to report results of their objectives for error reduction twice a year instead of annually. The administration will also create incentives for states, agencies and payment recipients to report and reduce payment errors, Orszag said in the report.

To support the transparency push, President Obama will sign an executive order to "rein in improper payments so that the right people receive the right payment for the right reason," Orszag said in the report.