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Plenty of blame to go around for Medicaid's growing improper payment rate


Last month, the Department of Health and Human Services (HHS) released its Fiscal Year 2015 Agency Financial Report, which included improper payment rates within the Medicare and Medicaid programs.

There were a few positive takeaways. For one, improper inpatient claims dropped from 9.2 percent in 2014 to 6.2 percent in 2014, and Medicare fee-for-service payments saw a .6 percent decrease overall.

But one often-criticized program stuck out like a sore thumb: Medicaid. The program's improper payment rate now sits at 9.8 percent, a significant leap from 6.7 percent in 2014, and nearly double the 5.8 percent rate in 2013.

This is sure to ruffle a few feathers. In June, members of the House of Representatives Subcommittee on Oversight and Investigations grilled Shantanu Agrawal, M.D., deputy administrator and director of the Center for Program Integrity at the Centers for Medicare & Medicaid Services (CMS), about Medicaid's skyrocketing improper payment rate. Representatives focused much of their attention on the fact that after seeing a slight increase in 2014, CMS had inexplicably raised its target rate from 5.6 percent to 6.7 percent for 2015. Prior to the subcommittee hearing, then-chairman Tim Murphy (R-Pa.) wrote a letter to CMS Administrator Andy Slavitt requesting information regarding the rationale for raising the target in 2015.

As it turns out, even that adjusted target rate was blown clear out of the water. Worse still, HHS believes that Medicaid's improper payment rate will increase even more before it gets better. Next year, the agnecy predicts improper payments will jump to 11.53 percent, before declining to 10.48 percent in 2017 and 7.36 percent by 2018.

CMS was quick to issue its own explanation. In a blog post, Patrick Conway, M.D., principle deputy administrator and chief medical officer of CMS, said the increase is a result of provider enrollment and screening requirements outlined by the Affordable Care Act.

"We often see such increases when new requirements take effect, as states and providers often need time to modify their operations in order to comply with the updated standards," he wrote.

This has been a common refrain from CMS officials. During the June subcommittee hearing, Agrawal offered an identical explanation, indicating that "the biggest driver" of improper payments "are those provider enrollments and screening standards."

This is a hard pill to swallow. After all, the enrollment and screening standards that Conway and Agrawal are referencing were finalized in March 2011. To assist with new requirements that outlined provider screening and enrollment procedures, Medicare provided states access to the Medicare Provider Enrollment, Chain, and Ownership System (PECOS) so state agencies would have access to information for providers already enrolled in Medicare. The regulation also outlined ways that states should share information with one another to ensure physicians barred from on state's Medicaid program are not able to bill in other jursidictions.

But that transition has not been particularly smooth. According to the Government Accountability Office (GAO), states have expressed frustration with PECOS because CMS has not provided full access to the system, requiring manual searches for individual providers described as "inefficient and administratively burdensome," according to testimony from Seto Bagdoyan, director of forensic audits and investigative service with the GAO. 

Now, CMS finds itself in a situation where, as Agrawal admitted, implementation of these enrollment and screening procedures still varies tremendously among states, even five years after the regulations went into effect.

In fairness, CMS has agreed to address the gaps identified by the GAO, and in June, the agency released guidance on implementing fingerprint-based criminal background checks on Medicaid providers. But there's also an overwhelming sense that CMS is deflecting an awful lot of blame for the improper payment increase onto a regulation that is nearly 5 years old and 50 states that are struggling with compliance. While it's fair to say that state agencies have a pretty clear role in meeting these regulations, it appears CMS has done very little to ease their burden. It's worth noting too, that according to recent HHS estimations, the 2018 the improper payment rate will still be higher than it was in 2013, which might lead you to wonder why a regulation intended to crack down on improper payments is causing more problems.

You wouldn't be the only one. There's no question ACA regulations have a unique impact on improper payment rates, but it seems unrealistic that the regulation alone accounts for a 60 percent spike over the past two years without some inefficiency along the way. In dismissively laying blame on the law, CMS conveniently ignores its own responsibilities in bringing states up to speed.

If improper payment rates continue at this rate, that's something that will be harder to ignore, for both CMS leadership and lawmakers alike. - Evan (@HealthPayer)