Government-Run Health Insurance Program Made Almost $19 Billion in Improper Payments in 2008

By Marie Magleby | April 30, 2009 | 8:00 PM EDT

Medicaid made $19 billion dollars in improper payments in 2008. (AP photo)

( - Medicaid, the government-run health insurance program for low income people that is administered by state governments and funded by federal taxpayers, made almost $19 billion in improper payments in 2008, according to a report by the Government Accountability Office last week. 

These improper payments equaled the largest share--26 percent--of all improper government payments in 2008.
But most of those payments were the result of errors, not deliberate fraud, according to the U.S. Department of Health and Human Services (HHS), which oversees Medicaid. 

Improper payments include payments to ineligible persons or for ineligible services, duplicate payments, payments for services not received or full payments made when discounts might apply. 

According to the report, the U.S. government made an estimated $72 billion overall in improper payments last year. Of that total, Medicaid doled out almost $19 billion. Seventy-seven other programs were responsible for the remaining $53 billion, and 11 other programs did not report estimates for 2008.
But in an April 22 appearance before Congress, Deborah Taylor, acting director and chief financial officer of the Centers for Medicare & Medicaid Services at HHS, testified that procedural glitches, not fraud, are the biggest cause of the problem.
“Most of the improper payments . . . are generally not due to willful fraud,” she told a panel of the Senate Homeland Security and Governmental Affairs Committee. “Rather, most of these errors are the result of documentation and processing mistakes.”
These mistakes include inadequate documentation--which accounted for 90 percent of the improper payments--pricing errors and payment for non-covered services. Taylor also noted that “improper payments due to payment system errors are routinely resolved and payment adjustments are made.”

Peter Ashkenaz, deputy director of media affairs for the Centers for Medicare and Medicaid Services, explained that “inadequate documentation” is something of a misnomer.

“The law requires Medicare to pay claims within 14 days of receiving them,” Ashkenaz told “Given so little time to verify the services the doctor or hospital performed before paying for them, Medicare often makes the payments first. After the fact, they look for possible problems.
"If there's a pattern, if we find that the same provider is sending lots of claims for service around the same time, if there's some sort of pattern that we notice, we start to look into it."
Neither the HHS nor the GAO report estimated the extent of actual fraud. However, several entities are trying to combat the problem, the HHS agency said.
The Medicare Integrity Program spends $720 million each year to review medical claims, audit health maintenance organizations, oversee Medicare secondary pay and educate and train health-care providers.
Five states--Florida, Illinois, Texas, New York and California--are considered “hot spots” for Medicare/Medicaid fraud. The Center for Medicare & Medicaid Services has contracts with partners in those states--and others--to fight waste, fraud and abuse.
The Improper Payments Information Act of 2002 requires executive branch agencies to make annual reports of programs and activities that are prone to making improper payments, the associated costs and what is being done to minimize these payments.
While the GAO reported that these agencies have made progress as a whole, it also noted obstacles yet to overcome; some programs have not reported estimates, and others need additional oversight to ensure more accurate estimates. Ten of the programs that did not submit improper payment estimates spent a total of $61 billion that were susceptible to improper payments in 2008.
One Medicare-related program, the Prescription Drug Benefit program, did not report improper payment estimates for 2007 or 2008. According to the GAO report, the Department of Health and Human Services “reported that it would estimate improper payments in the future for this program.”
Services like Medicare and Medicaid that have complex eligibility rules are especially prone to making improper payments, GAO Director Kay Daly told
You have many programs that have similar but different eligibility rules,” Daly said. For example, some programs calculate children older than 18 into the income of a household while others do not.
“It depends on the program, and when you have different ones it’s not clear what you exclude, include--that becomes very difficult to try and administer in a real-life situation,” she added.