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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Improper Fiscal Year 1999 Medicare Fee-for-Service Payments," (A-17-99-01999)

February 17, 2000

Complete Text of Report is available in PDF format (1.1 mb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


This final report provides results of our review of Fiscal Year (FY) 1999 Medicare fee-for-service claims. The objective of this review was to estimate the extent of fee-for-service payments that did not comply with Medicare laws and regulations. Based on our statistically valid sample, we estimate that improper Medicare benefit payments made during FY 1999 totaled $13.5 billion, or about 7.97 percent of the $169.5 billion in processed fee-for-service payments reported by the Health Care Financing Administration (HCFA). These improper payments, as in past years, could range from inadvertent mistakes to outright fraud and abuse.

Since we developed the first error rate for FY 1996, HCFA has demonstrated continued vigilance in monitoring Medicare payments and developing appropriate corrective action plans. In addition, our audit results clearly show that the majority of health care providers submit claims to Medicare for services that are medically necessary, billed correctly, and documented properly. For both FYs 1998 and 1999, we estimated that over 90 percent of fee-for-service payments met Medicare reimbursement requirements. We remain concerned, however, about continuing problems with provider documentation. Documentation errors increased by an estimated $3.4 billion over last year's estimate, largely as a result of errors by home health agencies, durable medical equipment suppliers, and physicians. Our recommendations address the need for HCFA to sustain its efforts in reducing improper payments.