“Improper Payment” Rates for 2020: Another Year, Another Attempt to Tarnish the Popular Medicaid Program

$100 billion—with a “b”—is a large number. So when the headline on the op-ed in the New York Post screams “Medicaid hemorrhaging $100B on Americans ineligible for the program” most readers will understandably frown and think: “This doesn’t sound good, even in a pandemic. What’s going on here?”

The author, Brian Blase, is not a fan of Medicaid, America’s most important health insurer for children and families. That much is clear. What’s less obvious is that this is all part of  the ritual trashing of Medicaid, which happens every year around this time of year. You can mark it on your calendar. The occasion is the publication of the HHS Agency Financial Report, which includes estimates of “improper payments” made by programs the Department administers.

This year’s 320-page AFR is no exception. It includes a section on “payment integrity” that estimates how much of the $1.2 trillion—with a “t”—in payments Medicare, Medicaid, CHIP, APTC, TANF, and other programs make are “improper”—that is, they do not meet statutory, regulatory, administrative, or other legally applicable requirements. The Department puts this information out because in programs this large and complicated, mistakes are inevitable, and they need to be identified, understood, and corrected going forward. It’s called governing.

For those who are not fans of Medicaid, these estimates are red meat. Last year’s estimates were used to attack the program in the Wall Street Journal. The year before that the Chair of the Senate Homeland Security and Government Affairs Committee released a report on “CMS’s “Poor Oversight of Fraud and Overpayments.” Just for the record, “improper payments” are not synonymous with fraud.

So, what about Blase’s claim of $100 billion? Well, it turns out that neither the CMS Fact Sheet that the op-ed cites, nor the AFR that the Fact Sheet summarizes, contains this number. What they do report is that the Department estimates there were $86.5 billion in “improper payments” in Medicaid in FY 2020.

The AFR breaks down the sources of the $86.5 billion into three buckets: eligibility, fee-for-service, and managed care. The majority of the “improper payments”—63%, or $54.8 billion—are attributable to eligibility. And an unknown portion of that $54.8 billion was in fact correctly paid but the reviewer of the claims sample could not determine if the payment was proper due to insufficient documentation.

Bottom line: the actual known monetary loss due to ineligible beneficiaries was $2.9 billion, or 3% of all “improper payments,” and seven-tenths of one percent of total federal Medicaid spending.

That said, the states and the eligibility systems contractors and the managed care plans and providers participating in the program need to reduce the number of errors they make. Even seven-tenths of one percent of Medicaid spending is too much to lose. Which, as my colleague Kelly Whitener has explained, is precisely why the Department conducts Payment Error Rate Measurement (PERM) reviews of state Medicaid programs each year and requires states to develop and implement Corrective Action Plans to address any “improper payments” identified.

But Blase’s assertion that “the federal government’s Medicaid improper payments now exceed $100 billion a year”—is not only wrong, but reckless.

It’s wrong because he arrives at the number by changing the methodology for calculating the estimates. To calculate the national Medicaid “improper payment” rate, the Department samples payments in 17 states each year, then combines the results for each of the three years to reflect the performance of all 50 states and DC. This year’s rate is based on the measurement period FY 2017 – FY 2019. Blase simply drops the results from FY 2017; using the results from only two years allows him to manufacture a higher “improper payment” rate and therefore a higher “improper payments” total. He also doesn’t adjust for the 37% of “improper payments” that do not fall in the eligibility bucket.

It’s also wrong because the CMS Fact Sheet that he cites is crystal clear that many payments considered “improper” were properly made but improperly documented: “A significant amount of improper payments is due to instances where a lack of documentation or errors in the documentation limits CMS’s ability to verify the payment was paid correctly. However, had the documentation been submitted or properly maintained, then the payments might have been determined to be proper.”

The claim is reckless because over 75 million low-income Americans, including 30 million children, rely on Medicaid for access to needed health care and protection from medical bankruptcy in the midst of a pandemic. It can only serve to undermine public confidence in the nation’s most crucial health care safety net.

There are weaknesses in some states’ eligibility and enrollment systems; my colleague Tricia Brooks has studied and written extensively about them. They can and need to be fixed. Responsible state officials and advocates are hard at work on solutions —not cooking the books to fabricate inflammatory claims.