Errors cost Medicare $12 billion

NEW YORK (Reuters Health) – Medicare made $12.1 billion in improper payments last year, a number that reflects an improvement over previous years but also points to persistent problems, according to a new audit.

Payment errors in fiscal year 2001 represented about 6.3% of the $191.8 billion in Medicare fee-for-service payments made that year, the lowest error rate to date, the office of Health and Human Services (HHS) Inspector General (IG) reported. In fiscal 2000, the error rate was 6.8%.

Improper payments are now almost half of the $23.2 billion that the IG first estimated for fiscal 1996, the year the error rate was first reported.

The report is based on a review of 6594 fee-for-service claims processed during fiscal years 2000 and 2001 on behalf of 600 beneficiaries nationwide.

This time, as in past years, errors ranged from careless mistakes and reimbursement for services provided but inadequately documented to outright fraud and abuse, the report said. Two types of errors–undocumented services and medically unnecessary services–"continue to be pervasive problems," accounting for more than 79% of total payments made in error over the past 6 years, it observed.

The report concluded by recommending that the Centers for Medicare and Medicaid Services (CMS) boost efforts to get Medicare contractors to expand provider training to ensure adequate documentation and proper coding. It also called for refining regulations and guidelines to ensure correct coding and documentation.

As part of a larger regulatory reform initiative, the HHS is working to clarify procedures and rules, "which will help physicians and other providers avoid unintended errors," noted Secretary Tommy G. Thompson.

CMS Administrator Tom Scully added that the agency is developing a financial system that will enable it to improve its management of the Medicare program.

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