Collaboration in Civic Spheres

Medicare’s improper payments totaled $48 billion-plus in 2010

by August 3rd, 2011

SUMMARY: In recent testimony to a U.S. House subcommittee, officials of the Government Accountability Office reported that improper payments in 2010 for the U.S. Department of Health and Human Services’ Medicare program totaled at least $48 billion, or 38 percent of the total by U.S. agencies. This includes overpayments, underpayments, unnecessary services, and coding and calculation mistakes; but the reporting system is not designed to detect Medicare fraud. The sub-total also does not include improper payments under Medicare prescription drug benefit, for which 2010 estimates were not provided by HHS. GAO stressed that it has made five key recommendations to HHS to better control Medicare improper payments, but that implementation is incomplete. Medicare’s $48 billion in improper payments for 2010 rose $12.6 billion from the total of $35.4 billion in 2009, or 26 percent.

BACKGROUND: Medicare spent an estimated $516 billion in 2010, to cover 47 million elderly and disabled beneficiaries. Medicare has four parts. Medicare Parts A and B are fee-for-service; Part A covering hospital and in-patient stays and Part B for outpatient, doctor and other services. Part C is known as Medicare Advantage, providing benefits through private health plans, and Part D is the Medicare prescription drug benefit program.

KEY LINK: “Improper Payments: Reported Medicare Estimates and Key Remediation Strategies,” Testimony to the U.S. House Subcommittee on Government Organization, Efficiency and Financial Management by Kay L. Daly, Director, Financial Management and Assurance; and Kathleen M. King, Director, Health Care; Government Accountability Office, July 28, 2011


  • Improper payments by U.S. government agencies totaled $125.4 billion in 2010 and includes overpayments and underpayments. According to the U.S. Department of Health and Human Services, its Medicaid program, administered by the The Centers for Medicare and Medicaid Services, accounted for almost $48 billion of those 2010 improper payments. That is 38 percent of the U.S. 2010 total. But the Medicare sub-total is incomplete, according to GAO, because it doesn’t include an estimate of any improper payments in Medicare’s prescription drug benefit program.
  • Medicare payments are classified as improper due to factors including poor documentation, “medically unnecessary” actions including provision of durable medical equipment or certain inpatient hospital services, or errors in coding or payment calculations. The process used to identify improper payments “is not designed to detect or measure the amount of Medicare fraud that may exist,” and the dollar cost of Medicaid fraud is not included in the $48 billion estimate for 2010.
  • The $48 billion in improper Medicare payments for 2010 was up $12.6 billion from the total of $35.4 billion in 2009, or 26 percent.
  • GAO has been tracking Medicare improper payments and recommending corrective strategies to HHS, but all of the five main recommendations have been implemented only partially, to date. The recommendations are to: strengthen service provider enrollment standards and practices; improve contractor oversight; do better reviews of claims before payments are made; concentrate post-payment reviews on the areas most prone to payment error; and develop a strong response to those key vulnerabilities.

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