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Medicare Claims Administrators Improperly Paid Almost $30B

Although Medicare claims administration contractors have a goal to have only a 5.4 percent rate of errors in paying claims, Medicare claims administration contractors improperly paid an estimated $29.6 billion during federal fiscal year 2012, pushing the improper payment rate to 8.5 percent.

To reduce the error rate, the Centers for Medicare and Medicaid Services requires claims administration contractors to submit error rate reduction plans describing how the contractors plan to reduce their error rates.

The Health and Human Services Department’s Office of Inspector General in a newly released report reviewed the error rate reduction plans submitted for calendar years 2011 and 2012 to determine if the plans met necessary criteria. The GAO found while most error rate reduction plans included the required elements, CMS oversight of these plans is limited and sometimes CMS approved a sampling of plans for contracts with high error rates without recommending corrective action.

In federal fiscal 2011, claims administration contractors collectively processed about 1.2 billion claims. The primary goal of each contractor is to pay the proper amount for covered, medically necessary and correctly coded services.

Because of the large number of claims contractors must process, they do not manually review each claim submitted by providers. 

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