Department of Health and Human Services

Office of Inspector General -- AUDIT

"Improper Fiscal Year 2001 Medicare Fee-for-Service Payments," (A-17-01-02002)

February 21, 2002

Complete Text of Report is available in PDF format (481 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


This final report points out the results of our review of Fiscal Year (FY) 2001 Medicare fee-for-service claims. Based on our statistical sample, we estimate that improper Medicare benefit payments made during FY 2001 totaled $12.1 billion, or about 6.3 percent of the $191.8 billion in processed fee-for-service payments reported by the Centers for Medicare and Medicaid Services (CMS). These improper payments, as in past years, could range from reimbursement for services provided but inadequately documented to inadvertent mistakes to outright fraud and abuse.

The FY 2001 estimate of improper payments is almost half the $23.2 billion that we first estimated for FY 1996. As a rate of error, the current 6.3 percent estimate is the lowest to date, less than half the 13.8 percent reported for FY 1996.  Since we developed the first error rate for FY 1996, CMS has demonstrated continued vigilance in monitoring the error rate and developing appropriate corrective action plans. For example, CMS has worked with provider groups, such as the American Medical Association and the American Hospital Association, to clarify reimbursement rules and to impress upon health care providers the importance of fully documenting services. Such efforts have contributed to the large reduction in the rate.  However, continued vigilance is needed to ensure that providers maintain adequate documentation supporting billed services, bill only for services that are medically necessary, and properly code claims. These problems have persisted for the past 6 years.