Pennsylvania’s Error Rate Less than Half the National Average, Feds Say

A new federal report finds Pennsylvania’s Medicaid program has an error rate that is less than half the national average and well below estimates claimed in state-level audits, Governor Edward G. Rendell announced today.

Each year, the Medicaid program - also known as Medical Assistance - uses state and federal funds to purchase health care for more than 2 million Pennsylvanians in need of inpatient or outpatient hospital treatment, long-term care and other medical services. Medicaid recipients include the elderly, low-income families, people with disabilities and those with chronic illnesses.

Pennsylvania’s Medicaid error rate in 2009 was 4.07 percent, compared to a national average of 8.98 percent, according to an analysis by the Centers for Medicare and Medicaid Services, part of the U.S. Department of Health and Human Services. Pennsylvania’s error rate also has improved dramatically since 2006, when it was last reviewed by federal officials.

The federal findings put Pennsylvania’s error rate well below the double-digit estimates that state auditors have suggested.

“This is good news -- not only for Pennsylvania’s Medicaid consumers and health care providers, but for all taxpayers,” Governor Rendell said. “We have made great strides to reduce Medicaid payment error rates in recent years, and this shows those efforts are paying dividends for taxpayers.”

The department’s efforts helped save Pennsylvania taxpayers nearly $690 million in fiscal 2009-10 alone, including more than $614 million in Medicaid costs avoided or recovered from third-party sources and $75 million saved through fraud and abuse detection and other cost monitoring efforts.

The federal government uses a standardized Payment Error Rate Measurement, or PERM, to gauge improper payments in states’ Medicaid programs. The types of errors included in the measurement can range from clerical errors in how services are billed to improper payments for services deemed medically unnecessary.

Pennsylvania’s PERM report concludes that the commonwealth “has a low overall Medicaid error rate” compared to the national average and other states evaluated in 2009.

The report, which also estimates error rates in three specific categories of Medicaid operations, found:

• Pennsylvania’s error rate in fee-for-service Medicaid payments, which cover specific treatments provided to patients, is 3.77 percent.
• The commonwealth’s error rate for Medicaid eligibility determinations was 1.97 percent.
• Pennsylvania’s error rate in Medicaid payments to managed care organizations was 0.19 percent.

The federal Centers for Medicare and Medicaid Services review Medicaid error rates of states in three-year cycles. Pennsylvania was last reviewed in 2006, when its fee-for-service error rate was estimated at 5.21 percent.

“Even three years ago, Pennsylvania had an error rate far lower than state auditors are now claiming, and our performance has only improved since then,” Governor Rendell said. “In every single area of Medicaid reviewed by federal authorities, we have an error rate that is relatively small and getting smaller – so we know we are heading in the right direction in making our Medicaid program accountable and fiscally responsible.”

The report found many of Pennsylvania’s Medicaid errors could be traced back to insufficient documentation or an inability to secure adequate information from Medicaid recipients.

Acting Secretary of Public Welfare Michael Nardone noted that not all the identified errors would translate into a cost savings, in part because some reflect underpayments to providers rather than overpayments.

“Because not all Medicaid errors have a financial impact, it is misleading to say, for instance, that a 4 percent error rate represents an equal percentage of the state’s Medicaid budget,” Nardone explained.

Still, he said the federal report can help identify ways to further reduce the Medicaid error rate, and he stressed DPW is committed to reducing such errors to the greatest extent possible.

“About one in six Pennsylvanians relies on Medicaid to sustain or improve their quality of life,” Nardone said. “We owe it to those consumers – and all Pennsylvanians – to maintain accountability and fiscal responsibility in the Medicaid program.”

Reducing the error rate is just one way DPW has worked to ensure accountability in the Medicaid system. DPW also analyzes 27 million Medicaid claims each year to find patterns that might indicate potential fraud by providers or recipients and works to identify Medical Assistance consumers who have overused or misused services.

The department also uses a third-party liability review to examine whether Medicaid consumers are eligible for Medicare or have private insurance that could pay for some or all of their services. By collecting payments from other liable sources whenever possible, DPW can keep Medicaid costs down and, in turn, serve more Pennsylvanians in need.

For more information on Pennsylvania’s Medicaid program, visit the Department of Public Welfare online at www.dpw.state.pa.us.