Medicare Claims Administration Contractors' Error Rate Reduction Plans

WHY WE DID THIS STUDY

According to CMS's Comprehensive Error Rate Testing (CERT) program, Medicare claims administration contractors improperly paid an estimated $29.6 billion during the Federal fiscal year 2012 reporting period. The improper payment rate (error rate) was 8.5 percent, above the target rate of 5.4 percent. To reduce the error rate, CMS requires claims administration contractors to submit error rate reduction plans. In these plans, contractors must describe the corrective actions that they will take to lower their error rates. In addition to overseeing contractors' efforts to reduce their error rates, CMS has the authority to offer financial incentives to the new type of claims administration contractor, Medicare Administrative Contractors (MACs).

HOW WE DID THIS STUDY

We reviewed error rate reduction plans submitted for calendar year 2011 or 2012 to describe plan content and determine whether the plans included the required elements. To assess CMS's oversight of the plans, we analyzed interview responses about reviews of the plans by CMS staff. We also analyzed information about the incentives that CMS offered to MACs in 2011 and 2012 to reduce their error rates.

WHAT WE FOUND

Most error rate reduction plans included the required elements. However, corrective actions were not always relevant to claims administration contractors' CERT results and varied substantially in number. CMS oversight of error rate reduction plans is limited. CMS staff who reviewed the plans may have been unable to determine whether the plans addressed their most recent CERT results. Additionally, although some of the sampled plans did not include the five required elements or were for contracts with high error rates, CMS approved all sampled plans without recommending different or additional corrective actions. Finally, limitations in CMS's administration of incentives for error rate reduction may reduce their effectiveness.

WHAT WE RECOMMEND

CMS concurred with our four recommendations to (1) review its process for overseeing claims administration contractors' error rate reduction, (2) ensure that contractors submit clear plans for reducing their error rates, (3) provide additional guidance for contractors and CMS staff who review plans, and (4) provide error rate reduction incentives that are aligned with the contracts' error rates and performance periods.