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Dependence on the Medicaid program has increased exponentially over time. Currently, it is the single largest insurer in the United States, and in 2019, it accounted for more than half of all federal monies distributed to states. Regrettably, as the safety net program has grown, waste has also become more widespread. Improper payments are costing the program billions of dollars every year.

Despite being on the GAO's High Risk List since 2003, Medicaid's improper payment rate continues to surge and put more pressure on budgets. In 2018, the program's improper payment rate was at nine percent, and by 2020 it had risen to twenty-one percent. That equates to a shocking $143 billion. Still, according to analysts, these numbers are conservative estimates that do not take into account all the needed data. In reality, the improper payment rate is thought to be closer to twenty-seven percent or $100 billion annually.

Efforts to Reduce Improper Payments

Fiscal integrity has been problematic for Medicaid since its inception. So much so that over the last 56 years, a number of policy and legislative initiatives have occurred to address improper payments. These efforts mainly assess the risk of fraud, estimate the impact of TPL, increase reporting criteria, and increase data sharing. However, while these actions help bring the problem into scope, they do nothing to stop the improper payment rate from rising.

Besides these legislative efforts to manage costs, some policymakers have recommended transforming how the safety net program is funded to cut down waste. They think that Medicaid should be incentivized to use funding more responsibly and efficiently. One idea is to implement block grants. These grants would consider the size of the eligible population within a state and give the states the flexibility to allocate the money with limited oversight from the federal government. The states would be responsible for assuring that the appropriate care is being delivered to beneficiaries and that program resources are not wasted. Another suggestion is for Congress to establish tax-free health savings accounts to decrease the dependence on Medicaid and improve access to health care for those in need. The accounts would be financed with the savings achieved from reducing waste in the Medicaid program.

Reducing Improper Payments with Medicaid TPL Technology Solutions

While lawmakers look into program reform, one area of opportunity to substantially reduce costs exists within Medicaid's coordination of benefits. At the moment, the majority of Medicaid's improper payments actually stem from bad quality data and inefficient TPL processes, not deliberate fraud and abuse. Payers of last resort struggle to identify primary coverage on pharmacy and medical claims. Most of the data they have access to is not current, available, complete, or accurate. As a result, plans have no choice but to pay claims in error and chase reimbursement once other health insurance (OHI) is identified. Unfortunately, the actual monies recovered remain around twenty cents on the dollar.

Syrtis Solutions saw that Medicaid plans needed a way to identify active OHI coverage so that claims could be adjudicated properly. In 2010, they launched ProTPL, a real-time point of sale cost avoidance service for the payer of last resort market. ProTPL delivers powerful and accurate eligibility data that can be acted upon. The solution gives plans the ability to cost avoid pharmacy and medical claims and the associated costs of recovery. Furthermore, the coverage identified by ProTPL can not be found by other vendors. Syrtis Solutions is able to do this by checking claims against the nation's largest and most complete active healthcare coverage information database. Customers who implement the tool see an average 25% increase in OHI discovery. This means Syrtis' customers get the best and latest eligibility responses when they need them.

In March, Medicaid enrollment reached nearly 75 million people, and that number continues to climb. As a result, the chances for waste and improper payments are likely to increase. This is problematic considering that Medicaid is losing billions of dollars every year in improper payments already. Due to strained budgets, program integrity issues, and enrollment surges, some policymakers and states are considering innovative ideas and program reform to reign in costs and decrease waste. While these efforts are being considered, they have yet to be implemented. At this time, one of the most significant opportunities for reducing Medicaid's improper payments lies within the coordination of benefits. Plan administrators should look to TPL technology solutions for further efficiency and cost avoidance opportunities.

Throughout the last fifty-six years, Medicaid has helped deliver health services to the most vulnerable populations in the country. As member enrollment surges, Medicaid TPL and fiscal accountability have been problematic. To deal with these challenges, numerous legislative efforts have occurred to curb fraud, waste, and abuse. Unfortunately, these measures have done very little to protect program integrity and Medicaid's improper payment rate continues to climb.

Improper Payments and Medicaid TPL Legislation

The federal government's efforts to combat improper claims payments and improve TPL processes fall into four categories:

Evaluating the risk of fraud

Determining the impact of TPL

Requiring more reporting

Increased data sharing

Here is an overview of the legislation aimed towards improving Medicaid TPL and minimizing improper payments.

1974 - ERISA

Congress passed the Employee Retirement Income Security Act (ERISA) in 1974. This law was directed at self-insured companies to ensure that they abided by the same health insurance requirements as other large group plans. In addition, it placed them under Medicaid TPL requirements.

2002 - IPIA

The Improper Payments Information Act (IPIA), passed in 2002, called for agencies to actively identify programs or activities subject to high levels of improper payments. Agencies were now directed to make an annual report to Congress regarding overpayments or underpayments and measures taken to resolve such issues. In compliance with the IPIA, the Payment Error Rate Measurement (PERM) was created. PERM reviews Medicaid and CHIP data to measure improper payments and estimate program-level error rates.

2005 - The Deficit Reduction Act

The Deficit Reduction Act (DRA) added additional entities to the list of those considered third parties. By law, all entities defined as third parties are obligated to observe Medicaid TPL processes, which includes supplying beneficiary eligibility data to states (much like ERISA dictates for self-insured plans).

2006 - Medicaid Integrity Program

The DRA also established the Medicaid Integrity Program (MIP) under section 1936 of the Social Security Act. The MIP was the first extensive federal initiative to deal with fraud, waste, and abuse. It enabled contractors to review provider activities, audit claims, identify improper payments, and educate providers on integrity issues. It also provided support to states to address fraud and abuse.

2008 - Qualifying Individual Program Supplemental Funding Act

The Qualifying Individual (QI) Program Supplemental Funding Act of 2008 adjusted state participation criteria of the Public Assistance Reporting Information System (PARIS). It called for states to link their eligibility systems through PARIS, providing data for matching purposes across participating entities. CMS discovered that beneficiaries crossing state lines were one source of improper payments due to the fact that a mechanism did not exist for states to share data and "match" beneficiary information.

2009 - Executive Order 13520

Executive Order 13520 was an attempt to lower Medicaid improper payments. It aimed to intensify efforts to eliminate payment errors, waste, fraud, and abuse while simultaneously ensuring that Medicaid and other federal programs would continue to serve their beneficiaries. EO 13520 identified federal programs with the highest dollar amount of improper payments and set up reduction and recovery target rates.

2010 - Improper Payments Elimination and Recovery Act

Congress passed the Improper Payments Elimination and Recovery Act of 2010 to improve data sharing, coordination between state agencies and third parties, and increase reporting guidelines. Some of the measures taken include:

Amendment of the IPIA to call for the leader of each federal agency to review and determine vulnerabilities in their programs that could lead to improper payments

Revisions of the criteria related to improper payment estimations

Requirement of a report from agencies as to whether it has " sufficient resources with respect to internal controls, human capital, and information systems and other infrastructure to prevent improper payments"

2015 - Fraud Reduction and Data Analytics Act

The Fraud Reduction and Data Analytics Act called for the Office of Management and Budget to establish new guidelines for federal agencies to enhance TPL management. Under the legislation, agencies needed to "establish financial and administrative controls to identify and assess fraud risks." In addition, agencies were expected to submit annual reports to Congress regarding their progress on these efforts.

2015 - Federal Improper Payments Coordination Act

Congress also passed the Federal Improper Payments Coordination Act in 2015. It dealt with administrative operations, reporting criteria, and data-sharing to improve TPL and cost avoidance. Under the act, the judicial branch, legislative branch, and state government agencies managing federal programs were permitted to make use of the U.S. Treasury Department's Do Not Pay Program.

2015 - Medicare Access and CHIP Reauthorization Act

The Medicare Access and CHIP Reauthorization Act of 2015 consisted of several sections relevant to Medicaid programs, including a section affecting TPL data sharing. It instructed the Secretary of HHS to explore "incentives for states to work with the Secretary under the Medicare-Medicaid Data Match Program."

ProTPL Saves Medicaid TPL Millions

Discovering Medicaid TPL is very difficult for program administrators as they struggle with bad quality data that is not up to date, usable, or accurate. Since they are unable to efficiently determine TPL before claims are paid, improper payments are costing Medicaid billions of dollars. Medicaid plans agree that cost avoidance makes more sense than pay and chase, but the ability to execute it effectively has not been widely available. Now, with the help of Syrtis Solutions' ProTPL, payers of last resort are able to cost avoid pharmacy and medical claims on the front end. ProTPL, reduces the need for recovery and the associated expenses while cost avoiding payments. Those involved in the process of Medicaid claims adjudication have been operating with the best tools they had available. Now, they have new and better tools through Syrtis.

Medicaid plans face the challenging task of recovering claims payments made in error when program recipients do not report primary coverage information at the time services are rendered. Plan beneficiaries do not share other coverage information for a multitude of reasons, but usually, they are not aware that other coverage exists. Without technology at the point of sale to prospectively identify other health insurance (OHI), payers of last resort cannot help but make claims payments incorrectly. Once it is discovered that a claim was the liability of another third party payer, Medicaid plans try to recover those payments with a method referred to as pay-and-chase. Unfortunately for payers trying to recoup improper claims payments, the actual monies recovered remain around twenty cents on the dollar. Within this post, we will examine a new approach to Medicaid third-party liability cost avoidance. We will discuss how e-prescribing functions and how its OHI databases can be used by Medicaid to cost avoid millions of dollars in payments made in error.

What Is E-Prescribing?

An e-prescribing infrastructure provides a safe and secure means to electronically connect patients, healthcare providers, pharmacies, and pharmacy benefits managers (PBMs). It outlines the ability to send error-free, accurate, and understandable prescriptions electronically from the provider to the pharmacy. For an e-prescribing system to function, there needs to be a master database that maintains consistent, accurate, and current demographic and necessary medical data on the patients seen and managed within its various departments. The need for prompt and accurate OHI data necessitates the cooperation of health plans and PBMs to provide ongoing active eligibility data to the database.

The Transaction Hub is the common link between the prescriber, pharmacy, and PBMs. The hub routes inquiries to PBMs and prescriptions to pharmacies. For this complicated process to operate, the eligibility and demographic data that passes through must be consistent, accurate, and current. This is achieved through a Master Patient Index.

A master patient index (MPI) is a database used in e-prescribing platforms to maintain consistent, accurate, and current demographic information and essential medical data on the patients seen and managed within its different departments. MPIs are intended to solve the common problem where multiple systems throughout the organization progressively become inconsistent with respect to the patient's most current data; for instance, when the patient's information changes and only one system is updated, the changes are not propagated to the others.

When the Transaction Hub receives patient demographics and medication from a provider, it will confirm the patient with the MPI, sending an electronic message to the PBM. In response, the PBM will send information on the patient eligibility, formulary, and medication history back to the Transaction Hub. The Transaction Hub then delivers this data back to the healthcare provider, who can make a decision about the prescription based on this information.

Leveraging an E-Prescribing MPI for Medicaid TPL Efforts

As previously stated, the key to an effective e-prescribing system is its MPI, which is continuously being updated by its partners. The eligibility and demographic data that passes through must be consistent, accurate, and current for the system to operate. While an e-prescribing MPI is built specifically for electronically writing prescriptions, we have found another powerful use for it in Medicaid TPL cost avoidance.

Anyone involved with Medicaid TPL understands that the market needs a technology-based solution to strengthen recovery. In 2010, Syrtis Solutions started the process of experimenting with the Surescripts MPI to see if we could deliver high-quality, active Rx coverage and corresponding medical coverage that existing systems cannot provide. 

Through active participation of almost every PBM and payer in the commercial healthcare marketplace, the Surescripts MPI of more than 280 million covered lives is the largest in the nation. Connectivity to the Surescripts MPI allows for superior OHI discovery.

ProTPL Case Study

In a case study with one of our Medicaid Managed Care customers, for which nearly 3 million transactions were processed, 38,754 utilizing members were discovered to have OHI. These discoveries resulted in the cost avoidance of $14.6 million in unnecessary claims payments.

The initial step to gaining insight into how ProTPL will benefit your Medicaid plan is for Syrtis Solutions to perform a no cost quantitative claims analysis. By checking your claims against the Surescripts MPI, we can, in empirical terms, show you exactly how much your organization can save.

Improper payments cost Medicaid $86.49 billion in 2020. A common misconception is that improper payments come from fraud and abuse when in fact the majority come from prosaic, ordinary problems like eligibility errors and antiquated data systems. Fraud in Medicaid may well still be a significant problem, but when improper payments are the outcome of eligibility errors as opposed to fraud, the true scope of the challenge can better be addressed.

By law, Medicaid plans are payers of last resort. This means if a beneficiary has health care coverage through any other third party, that third party must pay its legal liability first. If any liability remains, Medicaid plans will then pay. As the program grows, identifying liable third party payers for claims has become more and more difficult. Plans simply do not have access to the quality eligibility data needed to identify third party liability (TPL) before claims are paid. Much of the data historically used to avoid improper payments has not been current, available, complete, or accurate. As a result, Medicaid plans continue to make claims' payments in error.

Once new eligibility information is made available and plans discover overpayments, they then seek to recoup the funds with a process referred to as "pay and chase." This process has led to the development of a multibillion-dollar post-payment recovery industry. Unfortunately, for payers attempting to recoup improper claims payments, the actual funds recovered remain around 20 cents on the dollar.

Medicaid programs have struggled to effectively discover TPL for decades. One reason is that for the last 40 years, the technology needed to accurately identify TPL has not existed. In time, improper payments continued to rise, even landing Medicaid on the Government Accountability Office's high-risk list in 2003. Since then, a number of federal efforts have occurred to curb costs. Legislators have passed new laws, developed regulations, and held hearings over the issues, and government oversight offices (GAO and OIG) have given written reports to Congress. Despite legislation and existing TPL processes, the improper payment rate has only accelerated. While all the initiatives have helped to uncover the scope of the problem, at present, they do nothing to curb improper payments.

If Medicaid payers can determine whether a member has primary coverage before claims are paid, the need for post-payment recovery is reduced. Additionally, the subset of Medicaid beneficiaries who have unreported primary commercial coverage creates a tremendous opportunity for payers of last resort to get in front of the problem.

How can payers of last resort access timely, accurate eligibility data?

Presently, some of the best, most accurate, and current data on patients' health insurance coverage resides in ePrescribing infrastructures. Leveraging this resource allows for more timely identification of TPL by capturing the needed information on primary coverage that Medicaid members may have. EPrescribing, as a platform, electronically connects patients, providers, pharmacies, and pharmacy benefits managers, and ensures patient eligibility data are accurate and up to date.

Syrtis Solutions understood the potential of ePrescribing data to help Medicaid plans identify primary payers. The solution, ProTPL, uses ePrescribing eligibility data to provide Medicaid plans with a technology-based solution to prospectively avoid pharmacy and medical claims that are the liability of commercial payers. ProTPL is the only service in the marketplace that utilizes proprietary logic required to decipher the complex coding of pharmacy transactions and translate it into actionable eligibility data. Additionally, Syrtis uses its superior matching algorithm to find primary coverage on members that no other vendor in the marketplace can find.

Syrtis addresses the problem of improper payments on the front end, gathering better data and applying it to avoid claims costs and the expenses associated with recovery efforts. ProTPL has the added benefit of making the claims process smoother for all involved, including providers. Those involved in the process of Medicaid claims payments have been operating with the best available tools. Now, they have new and better tools through Syrtis Solutions.

Medicaid is the single largest payer of health care in the United States. As the government program has increased in size and scope, it has dealt with fraud, waste, abuse, and improper payments. Over time, there have been a number of federal efforts to curb costs; nonetheless, Medicaid has remained on the GAO's High-Risk List since 2003. Last month, CMS reported on fiscal year 2020 Medicaid estimated improper payments.

According to CMS, "the FY 2020 national Medicaid improper payment rate estimate is 21.36 percent, representing $86.49 billion in improper payments." Medicaid improper payments now represent more than twenty percent of federal Medicaid expenditures and one out of every four Medicaid dollars is spent improperly.

CMS estimated FY 2020 Medicaid improper payments with the PERM program by evaluating claims submitted from July 1, 2018 to June 30, 2019. They mentioned that the 2020 estimates are not comparable to years prior due to the reintegration of the PERM eligibility component. In the recent report period, adjustments were made to include ACA requirements. The report revealed that eligibility errors are driving Medicaid improper payments. In many instances, program recipients are ineligible either because of their income or they are not lawful residents. The report specified the following as the primary contributors to the increase in improper payments:

Eligibility errors from insufficient documentation to confirm eligibility determinations and non-compliance with redetermination requirements.

Non-compliance with provider revalidation of enrollment and rescreening.

Non-compliance with provider enrollment, screening, and NPI criteria.

While reporting on improper payments brings the problem into focus, it does nothing to reduce them. States and Medicaid plans must identify ways to improve program oversight to minimize payments made in error.

It is important to note that improper payment rates are not necessarily indicative of fraud. Actually, many improper payments are the result of poor quality data and outdated methodologies. This is evident when states attempt to coordinate benefits but struggle to determine liable third parties of pharmacy and medical claims. Presently, the majority of eligibility data that states access for TPL discovery is not current, available, complete, or accurate. Without reliable, complete, and accurate data, Medicaid plans cannot help but make claims payments in error.

Syrtis Solutions saw the need for a solution to lower the improper payment rate within the Medicaid program. The company is unique in that it utilizes e-prescribing eligibility data to provide the payer of last resort market with a technology-based solution to prospectively cost avoid pharmacy and medical claims. By implementing ProTPL, Medicaid plans can maximize the efficiency of their adjudication processes while saving valuable resources.

Millions of Americans are looking to Medicaid for health care due to the pandemic driven recession. At the same time, improper payments are costing the program billions of dollars when resources are needed most. Moving forward, accurately identifying claims before they are paid, and cost avoidance solutions will be critical steps to maximizing program efficiency.

Since Medicaid's inception in 1965, the program has developed to become the largest provider of healthcare coverage in the country. As the size of the member population has increased, Medicaid third party liability (TPL) efforts and fiscal responsibility have been reoccurring issues. In order to protect Medicaid's solvency, there have been a number of legislative efforts focused on curbing fraud, waste, and abuse. Unfortunately, these actions have done very little to preserve the program's integrity and Medicaid's improper payment rate has hovered around 10% for the last decade.

Federal efforts to combat improper payments fall under the following areas: assessing the risk of fraud; determining the impact of TPL; calling for more reporting, which in turn creates administrative burden; and efforts to improve data-sharing. Here is a summary of legislation aimed at strengthening TPL and reducing improper payments.

EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 

ERISA was directed towards self-insured companies and required that they abided by the same health insurance criteria as other large group plans. This was important because self-insured plans were now subjected to Medicaid TPL requirements.

IMPROPER PAYMENTS INFORMATION ACT OF 2002

The IPIA focused on assessing and reporting improper payments. It required that agencies, on an annual basis, determine programs and activities susceptible to substantial improper payments. In addition, agencies needed to estimate the amount of overpayments or underpayments and then report on steps being taken to reduce the payments.

DEFICIT REDUCTION ACT OF 2005 

In an effort to reduce costs, Congress signed the DRA into law in 2006. It featured crucial Medicaid provisions and expanded the list of entities regarded as third parties. Similarly to ERISA, the DRA required all third parties to comply with Medicaid TPL processes and to provide beneficiary data to states so as to improve cooperation in data sharing.

The DRA also launched the Medicaid Integrity Program under section 1936 of the Social Security Act. The MIP was the first extensive Federal effort to deal with fraud, waste, and abuse. It allowed contractors to review provider activities, audit claims, identify improper payments, and educate providers on integrity issues. It also gave support to states to address fraud and abuse.

QUALIFYING INDIVIDUAL PROGRAM SUPPLEMENTAL FUNDING ACT OF 2008

The QI altered state participation requirements for the Public Assistance Reporting Information System (PARIS). Under the law, states were mandated to have in operation a Medicaid eligibility determination system for data matching through PARIS and medical assistance programs operated by other states.

EXECUTIVE ORDER 13520

In 2009, President Obama signed Executive Order 13520 "to reduce improper payments by intensifying efforts to eliminate payment error, waste, fraud, and abuse in the major programs administered by the Federal Government, while continuing to ensure that Federal programs serve and provide access to their intended beneficiaries." Some of the order's notable plans included identifying Federal programs with the highest dollar value of improper payments, establishing reduction and recovery target rates for these programs, guidance for implementation of the order, and reporting on how agencies intended to meet the targeted rates.

IMPROPER PAYMENTS ELIMINATION AND RECOVERY ACT OF 2010

The Improper Payments Elimination and Recovery Act took a number of steps to further improve data sharing, coordination between state agencies and third parties, and increase reporting requirements. These included:

Amendment of the IPIA to require the agency leaders, such as the Secretary of HHS, to review and identify susceptibilities in their programs that could lead to improper payments.

Modifications of the requirements for improper payment estimations.

Requirement of a statement from agencies as to whether it has "sufficient resources with respect to internal controls, human capital, and information systems and other infrastructure to prevent improper payments."

FRAUD REDUCTION AND DATA ANALYTICS ACT OF 2015

The Fraud Reduction and Data Analytics Act required the Office of Management and Budget to develop new guidelines for Federal agencies. Under the act, Federal agencies needed to "establish financial and administrative controls to identify and assess fraud risks," and they were also required to submit annual reports to Congress regarding their progress on these efforts.

FEDERAL IMPROPER PAYMENTS COORDINATION ACT OF 2015

After the Fraud Reduction and Data Act of 2015, Congress successfully passed the Federal Improper Payments Coordination Act. This authorized the judicial branch, legislative branch, and also state government agencies overseeing Federal programs to make use of the U.S. Treasury Department's Do Not Pay Program. The DNP is a "no-cost robust analytics tool which helps federal agencies detect and prevent improper payments made to vendors, grantees, loan recipients, and beneficiaries." Through the Fraud Reduction and Data Act and The Federal Improper Payments Coordination Act, Congress addressed administrative procedures, reporting requirements, and data-sharing; all of which were designed to improve cost-avoidance and address TPL.

CHIP REAUTHORIZATION ACT OF 2015 

MACRA featured several policies pertaining to Medicaid programs, including a section impacting TPL issues. Sec. 510 "requires the Secretary to study and detail incentives for states to work with the Secretary under the Medicare-Medicaid Data Match Program to coordinate suitable actions to protect the federal and state share of expenses under the Medicare and Medicaid programs."

TECH SOLUTIONS FOR MEDICAID THIRD PARTY LIABILITY

The identification of Medicaid third party liability has become difficult for program administrators and is costing Medicaid plans billions of dollars in improper payments. Medicaid plans admit that cost avoidance makes more sense than pay and chase, but until now the ability to perform it successfully has not been widely available. With the help of Syrtis Solutions and their exclusive ePrescribing data, payers of last resort are now able to cost avoid pharmacy and medical claims on the front end. EPrescribing data surely was not initially intended for these purposes. However, its ability to mitigate the need for recovery and the associated expenses while cost avoiding payments is undeniable. Those involved in the process of Medicaid claims payments have been working with the best tools they had available. Now, they have new and superior tools through Syrtis.

In 1965, Title XIX of the Social Security Act established Medicaid to provide health care coverage to low-income people. Over time it has become one of the nation's largest payers for health care, insuring one out of five Americans. In FY 2017, the jointly funded program made up 9.5% of federal spending. As a result of Medicaid expansion and rising health care costs, the program has become an even greater part of state budgets. In order to ensure that the Medicaid program meets its goals and objectives, legislatures and plan administrators are looking to improve program integrity by resolving its vulnerabilities.

COB Challenges

There are presently 56 unique Medicaid programs and each state is responsible for administering its program while remaining compliant to federal guidelines. These broad requirements give states the flexibility to determine covered populations, services, delivery models, and methods of payment. In addition, states can also test and implement approaches outside of federal standards by using Section 1115 waivers.

While the option to tailor individual programs aids states in meeting their specific needs, complications arise in the Coordination of Benefits (COB) and Third Party Liability (TPL), which is "the legal obligation of third parties to pay part, or all of the expenditures for medical assistance furnished under a Medicaid state plan."

Factors like the complexity of COB and TPL, the continuous flux of the Medicaid population, and uncoordinated eligibility data between federal and state systems make the Medicaid program vulnerable to improper payments.

Medicaid Expansion Creates Additional Complexity

Medicaid expansion has undergone intense debate after the Affordable Care Act altered Medicaid eligibility in 2010. Two years later, the Supreme Court found expansion optional and since then 37 states have opted to expand their eligibility requirements. While more individuals are eligible for coverage, the increased population size has also added to the complexity of the program and highlighted the need for improved program integrity and recovery processes. Existing vulnerabilities, such as improper payments, must be addressed with effective cost avoidance solutions to ensure the program's sustainability.

$36.2 Billion In Improper Payments

A High-Risk Issue from the Government Accountability Office (GAO) reported, "Medicaid covered about 75 million people in fiscal year 2018, at an estimated cost of $629 billion--$ 393 billion of which was paid by the federal government. CMS has projected that Medicaid spending will grow at an average rate of 5.7 percent per year from fiscal years 2017 through 2026. In fact, Medicaid spending is expected to reach $1 trillion by fiscal year 2026."

The GAO estimated that improper payments represented 9.8 percent ($36.2 billion) of Medicaid spending in 2018.

Medicaid has been on the GAO's high-risk list since 2003 due to the lack of federal oversight, it's size, and the complexity of the program. As health care costs rise and program eligibility expands, it is becoming a major expenditure for the federal government and state budgets. Legislators and plans will need to pursue technology solutions for cost avoidance and recovery efforts in order to save money.

Medicare and Medicaid accounted for $40 billion dollars in improper payments in 2017 and the Medicaid program has been on the GAO's High Risk List since 2003 due to insufficient fiscal oversight. However, last month CMS reported that the agency achieved the lowest improper payment reduction rate for the programs in 8 years. This makes 2018 the second consecutive year that the rate has been below the 10% threshold following the compliance efforts set up in the Improper Payments Elimination and Recovery Act of 2010.

Leading up to this point, CMS has made a concentrated attempt to decrease improper payments by prioritizing claims identification, reporting, and technology solutions that address payment error vulnerabilities.

CMS Administrator Seema Verma said, "Our accomplishments over the past year were the result of a focused effort to target root causes of improper payments. CMS also implemented a targeted review strategy that focused on provider education, assistance and burden reduction. The agency's actions emphasized prevention-oriented activities."

Defining and understanding this wasteful spending is a prime focus for effective oversight according to the administrator. She recognizes that not all improper payments are fraud but that these payments do not "meet statutory, regulatory, administrative or other legally applicable requirements."

CMS determined that the reduced rate was a consequence of their targeted review strategy that focuses on provider education, assistance, burden reduction, and prevention activities that simplify and clarify policy. Furthermore, the agency also favors the utilization of innovative solutions from the private sector that will combat improper payments and assist Medicaid and Medicare providers.

In spite of the success, the agency is looking to reduce the rate even further. Verma says, "While we have made progress on reducing the improper payments rate, we are not satisfied and more work needs to be done to achieve increased and consistent reductions in the future by implementing already existing initiatives as well as innovative processes."

HOW IMPROPER PAYMENTS OCCUR

The vast majority of improper payments occur in government-funded health care systems due to antiquated data systems and methodologies. Specifically, the data employed by the federal government to detect overpayments and fraud is unreliable.

In 2012, HHS Regional Inspector General Ann Maxwell declared, "... much of the data used to identify improper payments and fraud is not current, available, complete, [or] accurate."

Within Medicaid, the coordination of benefits and determining who is responsible for a claim is complex. It demands timely data and the use of numerous data sources. Also, eligibility data is uncoordinated between federal and state systems and it is often not accurate.

PREVENTION OF IMPROPER PAYMENTS

At the legislative level, Congress made efforts to remedy improper payments with the introduction of the Improper Payments Elimination and Recovery Improvement Act of 2012 and the Fraud Reduction and Data Analytics Act of 2015. Unfortunately, without reliable, complete, and accurate data, Medicaid will continue to make payments in error.

Additional initiatives to combat Medicaid's improper payments are developing from the private sector. Syrtis Solutions (Syrtis) has introduced a technology-based solution to aid the program in determining third party liability (TPL) before medical and pharmacy claims are paid improperly. Our company discovered that Medicaid's traditional TPL discovery methods' are primarily retrospective and fail to capture 13.4% of individuals who have unreported primary commercial coverage. As a result, Medicaid loses billions in improper claims payments; consequently, inefficient post-payment recovery processes are used to recoup the improper payments. To make matters worse, these post-payment recovery initiatives only recover less than $0.20 on the dollar.

CMS's announcement in November was a significant accomplishment in light of the high rate of improper payments within government-funded programs. For the first time in history, improper payment reduction rates were reported for Medicare, Medicaid, and the Children's Health Insurance Program. As Congress and federal agencies are working to keep the momentum by implementing legislation and prevention activities, the private sector is also creating innovative solutions to decrease waste and help these programs operate more effectively.