BALTIMORE--Aggressive oversight and new improvement efforts have cut the number of improper fee-for-service Medicare claims payments by half in one year, from 10.1 percent in 2004 to 5.2 percent in 2005, a $9.5 billion reduction in improper payments, CMS Administrator Mark McClellan announced Thursday.

Citing a drastic reduction in errors related to insufficient and missing documentation for claims as the chief reason for improvement, McClellan said "the unprecedented, $9.5 billion reduction in improper Medicare payments reflects our commitment to careful measurement and targeted oversight, and we intend to keep building on these efforts. We are measuring the accuracy of payments more closely, and that enables us to target our efforts more effectively with Medicare contractors and providers."

According to a CMS report, error rates for the fiscal intermediaries category dropped from 16.4 percent to 3.4 percent, and carriers' error rates dropped from 11.4 percent to 6.4 percent. The error rate for the DME and regional carriers category dropped from 11.1 percent to 8.6 percent, making it the category with the highest percentage of errors.

The error rate reduction has occurred despite a growing volume of claims and complexity of payment processing, CMS said. The agency pays more than 1 billion fee-for-service claims each year, and provides oversight to state payments for services provided under Medicaid and the State Children's Health Insurance Program.

In 2005, Medicare also made monthly payments to more than 450 Medicare health plans across the U.S.

CMS reviewed approximately 160,000 fee-for-service Medicare claims in 2005 as part of its Medicare error rate testing program. By providing accurate statistical information at the level of particular contractors and types of medical services, the agency said it can now identify where problems exist and target improvement efforts to address the problems.

In 2006, CMS will review Medicaid fee-for-service medical claims, and in 2007, will measure improper payments in the fee-for-service, managed care and eligibility aspects of Medicaid. CMS will then calculate state-specific error rates upon which a national Medicaid error rate can be estimated.

Also in 2007, CMS will begin to measure improper payments in SCHIP programs and will begin to select states for measurement once every three years, similar to the selection in the Medicaid improper payment effort.

"Program and fiscal integrity oversight is an integral part of CMS' financial management strategy, and we place a high priority on detecting and preventing improper or fraudulent payments," said McClellan, who noted he has asked Congress to include $720 million for Medicare program integrity in its budget and $80 million for oversight in other programs, including Medicaid.

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