WASHINGTON, D.C. — The Centers for Medicare & Medicaid Services released its latest improper payment estimates, reporting tens of billions of dollars in payments that failed to meet program requirements in fiscal year 2025, while emphasizing that the vast majority were not the result of fraud but of missing or insufficient documentation.
CMS said improper payment measurement is designed to protect program integrity, not to serve as a fraud metric. Improper payments can include overpayments, underpayments, or cases where reviewers lacked enough information to determine whether a payment was correct. In many instances, CMS said, a missed administrative step by a state or contractor would have resulted in a proper payment had it been completed.
For Medicare Fee-for-Service, the estimated improper payment rate in FY 2025 fell to 6.55%, or $28.83 billion, down from 7.66% or $31.70 billion the prior year. CMS said the figure has now remained below the 10% statutory compliance threshold for nine consecutive years.
Medicare Part C, which covers Medicare Advantage plans, posted an estimated improper payment rate of 6.09%, or $23.67 billion, up from 5.61% or $19.07 billion in FY 2024. CMS said most Part C errors stemmed from documentation that failed to support beneficiary diagnosis data submitted for payment.
The Medicare Part D prescription drug program recorded an estimated improper payment rate of 4.00%, or $4.23 billion, compared with 3.70% or $3.58 billion the previous year.
Improper payment estimates for Medicaid rose to 6.12%, or $37.39 billion, up from 5.09% or $31.10 billion in FY 2024. CMS said more than 77% of Medicaid improper payments were tied to insufficient documentation, a category that is generally not indicative of fraud or abuse. The Children’s Health Insurance Program saw an estimated improper payment rate of 7.05%, or $1.37 billion, with more than half attributed to missing documentation.
CMS attributed the increase in Medicaid and CHIP error rates largely to the unwinding of COVID-19 public health emergency flexibilities, including the resumption of eligibility redeterminations and provider revalidation requirements that restarted in April 2023.
The Affordable Care Act’s Advance Payment of the Premium Tax Credit program for the federally facilitated exchange reported a lower estimated improper payment rate of 0.89%, or $657.46 million, down from 1.01% or $562.93 million in FY 2024. CMS said nearly half of those errors resulted from manual processing mistakes, such as accepting documentation with name or date-of-birth discrepancies. About 43% of the errors were deemed “technically improper,” meaning the payment went to the correct recipient for the correct amount but failed to meet procedural requirements.
Under the Payment Integrity Information Act of 2019, improper payments are considered significant if they exceed $10 million and 1.5% of program outlays, or $100 million in total. CMS said most FY 2025 improper payments occurred when reviewers could not confirm compliance because documentation was incomplete or missing.
More information on CMS’ improper payment measurement programs is available at https://www.cms.gov/data-research/monitoring-programs/improper-payment-measurement-programs. The full HHS Agency Financial Report can be viewed at https://www.hhs.gov/afr.
CMS said it will continue to focus on documentation improvements and administrative compliance to reduce improper payments while maintaining access to care for beneficiaries.
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