DHHS has released its annual Agency Financial Report for FY 2018. The report provides an overview of improper payments in the Medicaid program, root causes for the payments, and corrective actions. In line with the agency’s goal of reforming, strengthening, and modernizing the nation’s healthcare system, HHS cites improved processes and technology solutions to strengthen the integrity of Medicaid and reduce the program’s improper payment rate.

Improper Payments Reduced

Each year DHHS has set targeted improper payment rates. Despite not meeting their goal in the last two years, the report does indicate a reduction in these payments. The improper payment rate in FY 2017 was 10.10 percent and in FY 2018 it was lowered to 9.79 percent.  HHS says that the reduced rate is a result of the department’s implemented strengthened reduction and recovery efforts.

Medicaid’s Calculations and Findings

The report estimates that Medicaid improper payments made by recipients of federal funding totaled $36.25 billion in 2018. The root cause categories for payments made in error included the inability to authenticate eligibility and access data ($11.6 billion), administrative or process errors ($16.6 billion), and insufficient documentation ($7.6 billion).

  • National Medicaid gross improper payment estimate = 9.79 percent ($36.25 billion)
  • National Medicaid net improper payment estimate = 9.63 percent ($35.67 billion)
  • Medicaid FFS improper payment rate = 14.31 percent
  • Medicaid managed care improper payment rate = 0.22 percent

Eligibility Discoveries and Corrective Actions

To prevent future improper payments and improve eligibility verification processes, states identified vulnerabilities in their systems and procedures with Eligibility Review Pilots. After reviewing Medicaid plans, the pilots identified eligibility errors stemming from caseworker and system vulnerabilities. The most significant findings were that states did not correctly establish income of beneficiaries and there was insufficient documentation to make eligibility determinations. Much of the documentation needed was missing.

The corrective actions to help address these program weaknesses focus on training, system solutions, and improved processes for maintaining documentation. Specifically, the measures include:

  • Holding provider training sessions and meetings with provider associations
  • Issuing provider notices, bulletins, newsletters, alerts, and surveys
  • Implementing improvements and clarifications to written state policies emphasizing documentation requirements
  • Performing more provider audits to identify areas of vulnerability and target solutions

Provider Discoveries and Corrective Actions

The department’s report indicates that errors as a result of non-compliance involving provider screening, enrollment, and national provider identifier (NPI) requirements have been a major contributor to Medicaid’s improper payments. The majority occurred either in instances where the information required from a claim was missing or states did not enroll providers with the appropriate process.

That being said, state compliance has improved and the program’s FFS improper payment rate decreased 2.06 percent last year. The report also discovered that improper payments cited on claims of revalidated providers who were not properly screened at revalidation was a new major contributor to the rate. HHS will measure all states for provider revalidation compliance in FY 2020.

In order to reduce these process or system errors, state corrective actions include: 

  • Implementing new claims processing edits
  • Converting to a more sophisticated claims processing system
  • Continuing to implement provider enrollment process improvements to make it easier for ordering and referring providers to enroll in the program

HHS Cites the Need for Medicaid Technology Solutions

In order to reduce Medicaid’s improper payments, the report acknowledges the importance of implementing IT solutions at the state level. States will need to modernize and improve their program’s systems in order to be more efficient and strengthen integrity. HHS has approved federal funding in nine states to implement analytics technologies that will be integrated into the state Medicaid Enterprise Systems. The state systems workgroup will also regularly meet to review program vulnerabilities and how they affect measuring improper payments. 

HHS has also created a plan to modernize the data systems for Medicaid to relieve state burden and improve the quality of data. The agency’s hope is that by leveraging technology solutions, Medicaid will have a more comprehensive data structure and improved oversight.

One initiative, in particular, is the development of the Transformed Medicaid Statistical Information System (T-MSIS). T-MSIS will procure high-quality data and reduce data requests from states. The system will aid in the submission of timely claims data, expand the MSIS dataset, and enable HHS to review the quality of submissions in real-time. As of August 2018, 48 states, Washington D.C., and Puerto Rico have begun submitting T-MSIS data.

While DHHS is working to reform, strengthen, and modernize the nation’s healthcare system, their recent report identified vulnerabilities that compromise the Medicaid program’s integrity. Improper payments are costing billions of dollars and continue to occur due to outdated systems, processes, and low-quality data. In order to achieve reduced improper payment rates moving forward, the Medicaid program must implement innovative technology solutions.