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Release of CMS 2020 Improper Payment Report

On November 16, 2020, the Centers for Medicare & Medicaid Services (CMS) released its 2020 Estimated Improper Payment Rates. Under the 2019 Payment Integrity Act, CMS is required to review Medicare Fee-For-Service (FFS), Medicare Part C, Medicare Part D, Medicaid, and the Children’s Health Insurance Program (CHIP) and estimate the amount of improper payments made under each program.

The reported improper payment data for CMS FY 2020 represents claims submitted July 1, 2018 through June 30, 2019. Due the COVID-19 pandemic, CMS temporarily halted all data requests to providers and state agencies regarding incorrect payments from March to August 2020. To compile the report, CMS adjusted calculation methods for reporting improper payment rates for the 2020 Agency Financial Report (AFR), using data already available at the time of the COVID-19 pandemic or data voluntarily provided. The calculated rates still meet national precision requirements.

The FY 2020 improper payment rate for Medicare FFS, which includes Part A and Part B, was estimated to be 6.27% or $25.74 billion. This represents a notable decrease from FY 2019, for which the improper payment rate was estimated as 7.25%, or $28.91 billion. The result of this decrease is likely due to reductions in the improper payment estimates for home health and skilled nursing facilities, which saw a $5.90 billion and $1 billion decrease, respectively. These decreases are likely due to several policy clarifications by CMS.

The FY 2020 improper payment rate estimate for Medicare Part C is 6.78%, or $16.27 billion, indicating a decrease from the rate of 7.87% or $16.73 billion in FY 2019. The reduction in improper payments from FY 2019 to FY 2020 for Part C is likely due to the increased submission of medical records that support submitted diagnoses. Medicare Part D estimated improper payment rates for FY 2020 are 1.15%, or $0.93 billion. This is an increase from the FY 2019 improper payment rates of 0.75% or $0.61 billion.

The FY 2020 Medicaid improper payments are estimated to be 21.36%, or $86.49 billion in payments, and 27% or $4.78 billion for CHIP. These estimates represent an increase from the FY 2019 of 14.9% or $57.63 billion for Medicaid and 15.83% or $2.74 billion for CHIP.  It is likely that the reintegration of the Payment Error Rate (PERM) program component, which was adjusted to include Affordable Care Act requirements for eligibility reviews, contributed to these increases.

According to CMS, “improper payment” rates do not necessarily mean the provider committed fraud. Improper payments can be payments that failed to meet certain statutory, regulatory, or administrative requirements or are payments that resulted in an overpayment or underpayment. However, since 2008, CMS has continued to expand the circumstances in which a provider’s Medicare privileges can be revoked. In 2008, 42 CFR § 424.535(a)(10), was added as a new reason for revocation. Section (a)(10) allows CMS to revoke a provider’s Medicare license if the provider does not document or does not provide CMS access to certain documentation. Additionally, in 2014, CMS broadened its revocation authority by adding 42 CFR § 424.535(a)(8)(ii). Section (a)(8)(ii) allows CMS to revoke a provider’s Medicare license if the provider displays a pattern or practice of submitting claims that do not meet Medicare requirements and is also referred to as an “abuse of billing privilege.” Despite this expansion of revocation circumstances, CMS has largely left the definition of “pattern or practice” open to interpretation. Thus, though improper payments do not immediately indicate fraud, they can still impact a provider’s ability to bill Medicare.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding new developments in Medicare and other rules and regulations that may have an impact on Medicare revocations. If you or your healthcare entity has any questions pertaining to healthcare compliance, please contact an experienced healthcare attorney  at 248-544-0888 or

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