The way HHS measures payment errors could lead to widespread misunderstanding about the nature and extent of fraud in the Medicaid program, according to the Medicaid and CHIP Payment and Access Commission.

Members at a meeting on Thursday said that the payment error rate measurement—PERM—provides policymakers and the public with too little, and possibly misleading, information about how and why payment errors occur.

Errors in payments to providers were much higher for fee-for-service compared to managed care, according to the most recent HHS Agency Financial Report. The error rate for fee-for-service Medicaid was 16.30% compared with just 0.12% for managed care Medicaid.

But this year’s report was significant because it’s the first year that Medicaid and Children’s Health Insurance Program estimates incorporated errors based on eligibility since the Affordable Care Act mandated substantial eligibility changes in 2014. The report found an eligibility-based error rate of 8.36% for Medicaid, which led some commentators to say that the program is rife with fraud.

An eligibility error “does not mean in any way, shape or form” that a Medicaid beneficiary has committed fraud or that a provider is billing for a service they didn’t provide, said MACPAC member Dr. Christopher Gorton, a consultant and former president of public plans at Tufts Health Plan. Errors are often due to the complexity of reporting and administrative work required to comply with the rules, he said.

“The improper payment rate is not a measure of fraud,” said Moira Forbes, policy director for MACPAC. “Fraud is a criminal decision that requires investigation. (PERM) is just a measure of improper payments.”

Most Medicaid and CHIP payment errors are due to states’ failure to comply with provider screening, enrollment and national provider identifier requirements, according to HHS’ report. Eligibility errors usually result from a lack of information to determine eligibility such as proof of income. But few errors were due to ineligible beneficiaries, according to MACPAC’s staff. Some CHIP enrollees were determined ineligible because they belonged in Medicaid, not because they were ineligible for benefits.

“Medicaid critics are jumping to the conclusion that when you say, ‘an eligibility error’ that there was intent on someone’s part to commit fraud,” said Tricia Brooks, a research professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.

The payment error rate measurement for eligibility doesn’t include people who were denied coverage, even though they were eligible.

The CMS plans to propose a new rule next spring that “would strengthen the integrity of the Medicaid eligibility determination process including verification, changes in circumstance and redetermination,” according to the Trump administration’s most recent regulatory agenda.

“My sense is that it’s. . . going to tighten up the rules and it’s going to impose more red tape,” said Brooks. “I think that things are going to get worse before they get better as a result of . . . that eligibility rule.”

Both fee-for-service Medicare and Medicaid are inherently high-risk programs because there are more than 100 million beneficiaries and over a million providers, according to William Scanlon, former managing director of health care issues at the U.S. Government Accountability Office and a former member of the Medicare Payment Advisory Commission.

“If you don’t set a lot of relatively detailed specifications for how and what you’re going to pay for, you would be accused of misuse of public funds,” he said. “Therefore, the rules are going to be complicated.”

MACPAC members were also concerned that error rates for fee-for-service Medicaid are not comparable to error rates for managed care payments. The error rate for managed care only measures monthly capitation payments at the state level, which are mostly automated and subject to simple payment rules. It doesn’t look at payments from managed care organizations to providers. Fee-for-service payments are more complex to measure because fees vary based on service, provider and other factors.

“It’s comparing apples and fish,” said Forbes.

Provider screening and enrollment rules are supposed to keep bad actors from participating in Medicaid, said Andy Schneider, an audience members who also is a research professor at the Georgetown University Center for Children and Families. He’s concerned that HHS’ approach to measuring error rate doesn’t capture whether managed care organizations are paying providers correctly, even though many Medicaid beneficiaries are covered by managed care.

“It’s extremely important . . . that the program not be perceived as being overrun by bad actors,” Schneider said. “We have no idea what’s going on in the managed care side . . . it’s a fundamental program integrity matter.”

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MACPAC thinks HHS needs new measures for Medicaid payment errors –