The article reflects the impact of inaccurate payments on Medicare’s cost, reflected in the reports from the Office of the Inspector General (OIG) and Center for Public Integrity (CPI).

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Medicare Lost Billions Due to
Improper Payments – A
Detailed View
Inappropriate Medicare payments are always a
major concern. There are
several reports showing that
each year through improper
payments to hospitals and
doctors, Medicare is losing
billions. Earlier in 2012,
CMS announced several
demonstration programs that will target some
of the most common factors that lead to
erroneous payments.
Clear and concise medical
record documentation is
crucial for physicians to
receive accurate and timely
payment for services
provided to their patients.
Medicare Fee-for-Service
(FFS) program provides hospital insurance
(Part A) and supplementary medical insurance
(Part B) to eligible citizens. While Part A is
provided to persons 65 and over who qualify
for Social Security benefits and pay for

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hospital, skilled nursing facility and hospice
care, Part B is optional coverage that pays for
physician, outpatient hospital, home health,
laboratory tests, durable medical equipment
and other services not covered by Part A.
Inaccurate Payment in Evaluation and
Management Services – OIG Report
Incorrect coding includes both upcoding and
downcoding. The level of an E/M service is
based on seven components such as patient
history, physical examination, medical decision
making, counseling, care coordination, the
nature of the patient's problem(s), and time.
The physicians’ documentation must support
the medical necessity and level of the E/M
service. E/M coding involves translating
physician patient encounters into five digit CPT
codes for medical billing purposes.
A review conducted by the Office of the
Inspector General (OIG), released in May
2014, estimates that overpayments account
for 21 percent of the $32.3 billion spent on
Part B claims for evaluation and management
services in 2010. In total, the program paid
$6.7 billion for healthcare visits that were
improperly coded and lacked documentation.

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In 2012, another OIG study also concluded
that from 2001 to 2010, physicians had
increased their billing of higher level codes for
these services in all visit types.
For review purpose, the medical records
associated with 657 Medicare claims were
gathered and certified professional coders were
asked to see whether the records justified the
rates charged. More than half of the claims
were found to be billed at the wrong rate or
lacked documentation to justify the service.
Sometimes physicians billed for a lower-cost
service than the one they delivered, but more
often they billed for a more expensive one.
It was found that:
 42 percent of claims for E/M services in
2010 were incorrectly coded, which
included both upcoding and downcoding
(i.e., billing at levels higher and lower than
warranted, respectively), and
 19 percent were lacking documentation
They also found that claims from high-coding
physicians were more likely to be incorrectly
coded or insufficiently documented than claims
from other physicians.

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Based on the findings, OIG has recommended
CMS to:
• Educate physicians on coding and
documentation requirements
• Consider making E/M claims submitted by
high-coding physicians a priority in medical
review strategies; and
• Follow up miscoded claims identified in the
sample with payment adjustments, as
appropriate.
In 2011, through the Comprehensive Error
Rate Testing (CERT) program, CMS found that
E/M services were 50 percent more likely to be
paid for in error than other Part B services.
CPI Reports
An investigation report by the Center for Public
Integrity (CPI), a nonprofit, nonpartisan
investigative news organization in Washington,
D.C. found that Medicare Advantage health
plans received nearly $70 billion in improper
payments between 2008 and 2013.
Based on the analysis of Medicare Advantage
enrollment data from 2007 through 2011, as
well as thousands of pages of government

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audits, research papers and other documents,
the center finds that:
• Risk score errors led to nearly $70 billion in
“improper” payments to Medicare
Advantage plans from 2008 through 2013
— mostly overbillings, as per government
estimates.
• In at least 1,000 counties nationwide, risk
scores of Medicare Advantage patients
increased sharply in plans between 2007
and 2011, I increasing taxpayer costs by
more than $36 billion over estimated costs
for caring for patients in standard
Medicare.
• In more than 200 of these counties, the
cost of some Medicare Advantage plans
was at least 25 percent higher than the
cost of providing standard Medicare
coverage. The wide swing in costs was
most evident in five states: South Dakota,
New Mexico, Colorado, Texas and
Arkansas.
Often payment errors occur due to the use of
wrong medical codes and inaccurate
documentation. Physicians relying on
experienced healthcare documentation services
can get rid of such issues ensure clean claims
and receive reimbursement without delay.