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Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments


Improper payments to healthcare providers constitute a significant vulnerability for Medicaid, costing an estimated $17.5 billion in fiscal year 2014. Automated claims processing safeguards called "edits" are critical program integrity tools that are available to State Medicaid agencies to prevent these improper payments. The Affordable Care Act required all States to implement the Medicaid National Correct Coding Initiative (NCCI) edits by October 1, 2010. The NCCI edits are designed to encourage providers to code correctly by automatically denying fee-for-service Medicaid payments for services that do not meet basic medical or billing standards.


We used three data sources in our review. We surveyed all States about their progress and experiences implementing the NCCI edits. We asked all States to process a set of test claims to "spot check" their use of selected NCCI edits. We received their test claims results and survey responses in November 2014. We reviewed the cost savings estimates from the NCCI edits that States submitted to CMS covering the period from January 2012 to August 2015.


The effectiveness of the Medicaid NCCI edits was limited because some States had not fully implemented them and most did not use all of the edits correctly. States' inconsistent implementation and use of the edits may reduce their ability to promote correct coding by providers and prevent improper Medicaid payments. Additionally, States' lack of reporting of cost savings estimates, and the limitations of the estimates that were reported, inhibit CMS's ability to meaningfully estimate national NCCI cost savings. Despite these weaknesses, nearly all States reported that using the NCCI edits benefitted their Medicaid programs, and some voluntarily used the edits on claims paid under managed care.


We recommend that CMS (1) take appropriate action to ensure that States fully implement the NCCI edits, (2) provide technical assistance to States to ensure that they use the NCCI edits correctly, (3) issue guidance to States on how to estimate NCCI cost savings and take steps to ensure that States report as required, and (4) examine whether using the NCCI edits on claims paid under managed care is beneficial, and if so, take appropriate action. CMS concurred with all four recommendations.