GAO: $77.3 Billion in Improper Medicare/Medicaid 2017 Payments, Including $1.82 Billion to Labs

Medicare made $36.2 billion and Medicaid $41.2 billion in improper payments in fiscal year 2017. That’s the finding of a report from the Government Accountability Office (GAO) based on CMS estimates published on March 27.

The Context
Each year, CMS uses estimates of fee-for-service (FFS) improper payments to identify Medicare and Medicaid overpayments for lab tests and other services and their causes during the previous fiscal year. The latest findings, which cover fiscal year 2017, may get more attention than in past years given the Administration’s citation of fraud and abuse as justification for making deep cuts in both programs.

Improper Payment Totals
The improper payment totals for each program are attributable to different types of errors, including insufficient documentation and no documentation. Here are the breakdowns for FY 2017:

• Total Medicare improper payments: $36.2 billion, including $23.6 billion due to insufficient documentation + $0.6 billion due to no documentation; and
• Total Medicaid improper payments: $41.2 billion, including $4.3 billion due to insufficient documentation + $2.5 billion due to no documentation.

Improper Payments Made to Labs
The GAO report also breaks down improper payment amounts by sector, including lab, home health, durable medical equipment and hospice. Findings for FY 2017:

• Total Medicare improper payments to labs: $1.05 billion, including $1.02 billion due to insufficient documentation and only $4 million due to no documentation; and
• Total Medicaid improper payments to labs: $77 million, including $76 million due to insufficient documentation and less than $1 million due to no documentation.

The Medicare v. Medicaid comparison of lab payments is a bit apples-to-oranges to the extent that what counts as a lab varies by calculation. Thus, labs counted for Medicare overpayments includes labs that are both clinically independent and which bill Medicare under Part B; Medicaid calculations, by contrast, include labs, X-ray and imaging services. GAO acknowledges that the categories aren’t directly comparable and that it “used the estimated improper payments to examine factors that contribute to improper payments for laboratory services due to insufficient documentation.”

Examples of Insufficient Lab Documentation
The report lists the following as examples of insufficient documentation in the Medicare lab category:

• Documentation from the referring physician did not support the order or an intent to order the billed lab tests; and
• Documentation from the referring physician did not support that the beneficiary currently has diabetes for a billed lab test for the management and control of diabetes.

Sneak Peek for FY 2018
CMS hasn’t yet released its Medicaid FFS Supplemental Payment Data for FY 2018—it’s scheduled to do so later this spring. But the FY 2018 Medicare data are out. And the GAO report for FY 2017 includes appendix offering an early glimpse into the FY 2018 numbers:

• Estimated total of $31.6 billion in improper Medicare payments made;
• Estimated $1 billion in Medicare overpayments made to labs; and
• Approximately 26% of improper payments to labs were the result of insufficient documentation.