Medicare fee-for-service improper payments decline by over $20 billion since 2014

Photo: Kiyoshi Hijiki/Getty Images

The Centers for Medicare and Medicaid Services has announced that  aggressive corrective actions have led to an estimated $20.72 billion reduction of Medicare fee-for-service improper payments over seven years.
Improper payments can be overpayments or underpayments, or payments in which there was insufficient information to determine whether a payment was proper or not, CMS said. Most improper payments involve situations in which a state or provider missed an administrative step. 

While fraud and abuse may lead to improper payments, CMS said it is important to note that the vast majority of improper payments do not constitute fraud, and improper payment estimates are not fraud rate estimates.


The 2021 Medicare fee-for-service estimated improper payment rate (claims processed July 1, 2020 to June 30, 2021) is 6.26%  ̶   an historic low. This is the fifth consecutive year the Medicare FFS improper payment rate has been below the 10% threshold for compliance established in the Payment Integrity Information Act of 2019. 

Inpatient rehabilitation facility claims had a $1.81 billion decrease in estimated improper payments from 2018 to 2021. 

Durable medical equipment claims saw a $388 million reduction in estimated improper payments since 2020 due, in part, to a nationwide expansion of prior authorization of certain DME items.

The FY 2021 Part C improper payment estimate reported is 10.28%. The 2021 Part C error rate estimate is not comparable to prior years because CMS refined the error rate calculation methodology.

The FY 2021 projected Part D improper payment rate is 1.58%. The slight increase is likely due to year-over-year variability.
The 2021 Medicaid improper payment rate was 21.69%, and the Children’s Health Insurance Program improper payment rate was 31.84%. 

In the 2021 national Medicaid rate, 88% of improper payments were due to insufficient documentation. The majority of insufficient documentation errors represented situations in which the required verification of eligibility data, such as income, was not appropriately documented.


CMS has undertaken an effort to assess all improper payment programs to evaluate the best way to distinguish true improper payments from potentially proper payments, specifically focusing on errors due to inadequate documentation errors. 

In addition, CMS is evaluating the best approach to allow CMS and states to prioritize identification and compliance actions against instances that represent “true” improper payments to the program.


“CMS is undertaking a concerted effort to address the root causes of improper payments in our programs,” said CMS Administrator Chiquita Brooks-LaSure. “The continued reduction in Medicare fee-for-service improper payments represents considerable progress toward the Biden-Harris Administration’s goal of protecting CMS programs’ sustainability for future generations. We intend to build on this success and take the lessons we’ve learned to ensure a high-level of integrity across all of our programs.”
“CMS is committed to reducing and preventing improper payments,” said Jonathan Blum, CMS principal deputy administrator and COO. “It is important to understand that only a small fraction of improper payments represent a payment that should not have been made – and an even smaller percentage represent actual cases of fraud.”

Twitter: @SusanJMorse
Email the writer: [email protected]