Analysis of Improper Payments Identified During the Payment Error Rate Measurement Program Reviews in 2006 and 2007

In this review of the Payment Error Rate Measurement (PERM) program, we analyzed medical review errors and data processing errors found in sampled Medicaid claims for FYs 2006 and 2007. The PERM program measures improper payments based on sampled Medicaid claims in 17 States (including the District of Columbia as a State) every year; each State is chosen once every 3 years.

Of the 1,356 medical review errors that we analyzed, 4 types accounted for 78 percent of the errors and 95 percent of the net improper Medicaid overpayments. The four error types were insufficient documentation, no documentation, services that violated State policies, and medically unnecessary services. Of the 202 data processing errors that we analyzed, 4 types accounted for 78 percent of the errors and 64 percent of the net improper Medicaid overpayments. The four error types were pricing errors, noncovered services errors, rate cell errors for managed care claims, and errors in the logic edits of claim processing systems.

We recommended that, for future years, CMS develop and provide to the States analytical data similar to the data in this report and encourage the States to use the data to help ensure that payments, including those funded by the American Recovery and Reinvestment Act of 2009, comply with Federal requirements. CMS concurred and said that it would implement the recommendation starting with the fiscal year 2010 measurement cycle.