Medicare FFS Improper Payment Rate Down 0.1 Percent for FY 2012

The fiscal year (FY) 2012 Medicare fee-for-service (FFS) program improper payment rate is 8.5 percent, which amounts to $29.6 billion in improper payments, according to a CMS fact sheet. The improper payment rate is down 0.1 percent from FY 2011, when the rate was 8.6 percent. CMS measures the error rates through the Comprehensive Error Rate Testing (CERT) program, which is designed to comply with the Improper Payments Elimination and Recovery Act of 2010 (IPERA) (P.L. 111-204).


CERT randomly selects a sample of Medicare FFS claims, requests medical records from providers who submitted the claims, and reviews the claims and medical records for compliance with Medicare coverage, coding, and billing rules. The CERT program does not label a claim fraudulent; since the CERT program uses random samples to select claims, reviewers are often unable to see provider billing patterns that would indicate potential fraud.

FFS Claim Type

The improper payment rate for durable medical equipment is 66 percent, which represents $6.4 billion in improper payments. The improper payment rate for inpatient hospitals is 6.8 percent ($7.7 billion); for physician/lab/ambulance services, 9.9 percent ($8.9 billion); and for non-inpatient hospital facilities, 4.8 percent ($6.6 billion).

Parts C and D

The FY 2012 Parts C and D payment error rates are based on calendar year 2010 payments. CMS reported a Part C composite improper rate estimate of 11.4 percent, 0.4 percent less than the FY 2011 composite improper payment rate of 11 percent. For the Part D program, CMS reported a composite improper error rate estimate of 3.1 percent for FY 2012, a 0.1 percent decrease from the FY 2011 baseline composite Part D improper payment error rate.

Medicaid and CHIP

The FY 2012 Medicaid improper payment error rate is 7.1 percent, which amounts to $19.2 billion in improper payments, 1 percent less than the FY 2011 Medicaid payment rate. The Children’s Health Insurance Program (CHIP) error rate for FY 2012 was 8.2 percent, totaling $ 0.7 billion. Medicaid and CHIP improper payment rates are measured through the Payment Error Measurement Program.