The CMS said the annual Medicare payment error-rate study, released today, showed a drop in the error rate for 2003 compared to the previous year, as well as a long-term drop to 5.8% in fiscal 2003, which ended Sept. 30, from 13.8% in fiscal 1996. The error rate translates to an estimated cost of $11.6 billion, down from $23.2 billion when the HHS' inspector general's office began the study. Last year's error rate was 6.3%, and Medicare paid an estimated $13.3 billion in incorrect claims. The error rate represents the cost to Medicare of claims that include fraud and waste. "The annual error rate gives us an estimate of how much billing mistakes cost the American taxpayer, and that number is always too high," CMS Administrator Tom Scully said.
This was the first time the CMS prepared the study, which it took over from the HHS' inspector general's office in 2002. The study aroused the ire of Sen. Charles Grassley (R-Iowa) who chairs the Senate Finance Committee. Grassley said the 5.8% rate is not statistically valid. It "is a guesstimate. In actuality, the only statistically valid error rate that CMS reports is 9.8% or roughly $20 billion," Grassley wrote in a letter to Dara Corrigan, principal acting deputy inspector general.
The CMS said it experienced a low number of responses to the study's survey this year. Counting all nonresponders as errors would have raised the error rate for all providers to the 9.8% figure, Grassley cited. To adjust that figure, the CMS based the nonresponse rate on past inspector general experience with nonresponders. The CMS took over the study saying it would be able to include a broader statistical sampling of claims, to 128,000 from roughly 6,000 claims. The study also provides specific error rates for Medicare contractors and providers. Chiropractors (11.3%) and physical therapists (18.2%) had the highest error rates, excluding nonresponding claims. The error rate for inpatient PPS hospital claims was 3.5% and 4.08% for non-PPS inpatient claims including nonresponse claims.
William Mahon, president of the National Health Care Anti-Fraud Association, which represents government and commercial health insurers and their fraud investigators, said the trend appears to be moving in the right direction. "I trust that it's accurate, but it doesn't break down how much of that error rate is specific to fraud," said Mahon, who estimated that overall Americans pay $50 billion annually for healthcare fraud, or about 3% of the estimated $1.67 trillion spent on healthcare. -- by Mark Taylor