Trend Report: States & Medicare Waste

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1 Trend Report: States & Medicare Waste Each year the Centers for Medicare and Medicaid Services (CMS) releases a report to Congress on the Recovery Audit Contractor (RAC) Program, an oversight program mandated by Congress to ensure that providers are fairly reimbursed and solvency of the Medicare Trust Fund maintained. Recovery Auditors review 2% of post-payment Medicare claims to ensure they were billed correctly according to Medicare policy. The CMS report, entitled the Recovery Auditing in Medicare For Fiscal Year 2014, focuses solely on Medicare Fee-For-Service (Part A and Part B) billings and contains state-by-state (including the District of Columbia) information detailing the total amount of overpayments and underpayments corrected per state. The Council for Medicare Integrity (CMI), a nonprofit organization that seeks to educate about Medicare solvency and the proper use of taxpayer dollars to fund the program, conducted an analysis on the overpayment data provided in the CMS report to rank states based on Medicare waste per beneficiary (for Part A and Part B claims). In addition to analyzing each state s overpayments per beneficiary, CMI also looked at each state s underpayments per beneficiary, or money that was returned to providers due to an under-billing of patient claims. Medicare Solvency Is An Urgent Issue Medicare loses more money to waste than any other Federal program. According to FY2014 Comprehensive Error Rate Testing (CERT) conducted by CMS, the Medicare FFS program has a 12.7% billing error rate. This error rate equates to the program losing $46 billion annually due to provider 1 misbilling. Unfortunately, the Medicare error rate continues to trend upward, having risen significantly each of the past two years (8.5% in FY2012, 10.7% in FY2013 and 12.7% in FY2014). The CERT report also reviews the types of claims that generate the most Medicare improper 2 payments. In FY2014, Claim Type Error Rate Waste Generated (in billions) Inpatient Hospitals 9.2% $10.4B Durable Medical Equipment 53.1% $5.1B Physician/Lab/Ambulance 12.1% $11.0B Non-Inpatient Hospital 13.1% $19.2B 1 GAO: Government Efficiency and Effectiveness, pp. 26, Retrieved from 2 Comprehensive Error Rate Testing, retrieved from ml?redirect=/cert

2 Medicare Trustees recently reported that due to rising enrollment in the program and current 3 spending levels, Medicare is slated to be bankrupt in just 15 years by But the news doesn t have to be so grim. Medicare is losing billions of taxpayer dollars each year that can simply be recouped or corrected to extend the life of the program. The only way to do so, however, is to stop ignoring the loss of taxpayer funds and focus the program more intently on Medicare integrity. It s more urgent than ever to rein in wasteful Medicare billing by shining a light on areas most prone to billing errors. This report seeks to take a look at Medicare billing geographically and by Medicare population to identify any possible misbilling trends that can be addressed. The 10 States with The Highest Medicare Waste 4 CMI analyzed the most recent CMS Medicare FFS overpayment data alongside CMS Part A and Part B 5 beneficiary data and ranked the states with the highest waste per beneficiary (Full list in Appendix C). A Medicare overpayment is a payment received by a provider in excess of amounts properly payable under Medicare statutes and regulations. Human error and incorrect coding most commonly cause overpayments. 3 Medicare Trustees Report, pp. 7 Retrieved from 4 FY2014 RAC Report to Congress, pp Retrieved from -Program/Downloads/RAC-RTC-FY2014.pdf 5 On its 50th anniversary, more than 55 million Americans covered by Medicare, CMS [press release]. Retrieved from

3 According to the CMI analysis, the District of Columbia, which has the nation s smallest number of Medicare beneficiaries, ranked at the very top of the list for waste per beneficiary, with $ in misbillings per beneficiary. The District of Columbia wasted more than double the amount of the number 10 ranking state, South Dakota, and more than 23 times the state with the least waste per beneficiary, Vermont, which improperly billed $7.58 per beneficiary. Interestingly, North Dakota and South Dakota, each among the states with the least number of Medicare beneficiaries, ranked in the top 10 states with highest Medicare waste per beneficiary. The 10 States With The Highest Returned Underpayments In addition to reviewing claims for overpayments, Recovery Auditors also actively look for underpayments, which if found, are adjusted to correctly compensate providers for the services they provided. Underpayments occur when a Medicare provider does not charge Medicare enough for a service. According to CMS, in FY2014, Recovery Auditors returned a total of $173,096, in 6 underpayments back to providers. CMI analyzed the most recent Medicare FFS data on underpayments and state Medicare Part A and Part B beneficiary data to determine which states were underbilling the most per beneficiary (Appendix D). Alabama tops the list of states with the most underpayments, meaning it received the most money back from the Medicare Trust Fund per beneficiary. 6 FY2014 RAC Report to Congress, pp. 13. Retrieved from -Program/Downloads/RAC-RTC-FY2014.pdf

4 Mississippi, Texas, New Mexico, Colorado, and Oklahoma appear on both the Top 10 States for Medicare Waste and also the Top 10 States for Underpayments, suggesting that these states have high levels of misbilling in general when it comes to Medicare claims. The 10 States With The Least Medicare Waste CMI also looked at the ranked list to determine which states have the least waste per beneficiary. Vermont tops the list of states with the least Medicare waste per beneficiary, improperly billing only $7.58 per Medicare patient. Vermont has 23 times less waste than the top state for Medicare waste, District of Columbia with $ wasted per beneficiary. Vermont misbilled three times less per beneficiary than Massachusetts, which ranks number 10 on the list of states with least Medicare waste. States with the Least Underpayments CMI also looked at the ranked list to determine the states that had the least underpayments per Medicare beneficiary.

5 According to CMI analysis, Maryland has the least Medicare underpayments, with only $0.27 returned to Medicare providers per beneficiary. Maryland also appeared on the list of top states with least Medicare waste, suggesting that those in Maryland make fewer Medicare billing errors per beneficiary. Three states, New York, New Jersey, and Pennsylvania each serve more than 1 million Medicare beneficiaries, but appear on the list of top 10 states with least underpayments, suggesting these states rarely make billing mistakes that generate underpayments. About The Council For Medicare Integrity: The Council for Medicare Integrity is a 501(c)(6) non-profit organization. The Council s mission is to educate policymakers and other stakeholders regarding the importance of healthcare integrity programs that help Medicare identify and correct improper payments.

6 APPENDIX A: State-by-state Data Provided By CMS

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8 APPENDIX B: CMS State-by-state Data on Beneficiaries

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10 APPENDIX C: State Rankings By Overpayments Per Beneficiary State Overpayments/beneficiaries per state DC $ AR $ MS $ ND $ LA $ OK $ CO $ TX $97.35 NM $94.50 SD $86.26 CA $80.41 AZ $78.35 CT $78.13 KY $76.10 AK $69.90 NC $67.58 TN $67.46 MT $66.66 OH $66.37 UT $65.52 WV $64.19 PA $63.86 VA $62.72 NY $62.52 SC $61.65 IN $61.32 KS $61.27 WY $58.91 FL $58.63 AL $58.17 GA $55.51 DE $54.86 NJ $53.45 IL $50.98 IA $50.75 MI $49.83 NV $49.24 NE $46.43 MO $40.41 HI $38.37 WA $25.12 MA $22.74 MD $19.07 OR $16.73 RI $15.64 ME $14.04

11 ID $12.40 MN $11.90 WI $10.60 NH $10.28 VT $7.58

12 APPENDIX D: State Rankings By Underpayments Per Beneficiary State Underpayments per beneficiary AL $13.93 GA $9.71 TN $9.40 MS $6.45 NC $6.36 TX $5.84 VA $5.64 NM $5.53 CO $5.42 OK $5.27 FL $5.15 LA $5.10 OH $4.57 KY $4.45 IN $4.36 AR $4.14 WV $4.02 CA $3.66 AK $3.17 MA $3.02 MN $2.86 RI $2.57 OR $2.53 SC $2.48 WI $2.46 AZ $2.38 MI $2.24 HI $2.10 NV $2.07 IL $2.05 WA $1.87 NH $1.84 ME $1.64 MO $1.56 VT $1.55 ND $1.52 KS $1.51 DC $1.49 ID $1.36 UT $1.31 SD $1.30 MT $1.11 PA $1.01 IA $1.00 NJ $0.86 CT $0.74

13 WY $0.73 NE $0.72 NY $0.51 DE $0.50 MD $0.27