Understand how we got here — and how to move forward.


July 25, 2017

CMS made $16B in improper MA payments in 2016, GAO says

Daily Briefing

CMS in fiscal year (FY) 2016 made about $16 billion in improper payments to Medicare Advantage (MA) insurers despite using strategies intended to help prevent such payments, according to written testimony from the Government Accountability Office's (GAO) director of health care, which was published last week. 

Join the webconference on August 7: Medicare Payment Update for CY 2018

Testimony details

The testimony is based on GAO reports from 2016 and 2017 that addressed improper MA payments. For those reports, GAO:

  • Analyzed CMS' risk adjustment data validation (RADV) audits;
  • Compared CMS' activities with its protocol for validating Medicaid encounter data and federal internal control standards;
  • Interviewed CMS officials; and
  • Reviewed research and CMS documents.

The testimony focuses on:

  • CMS' progress toward validating encounter data to use when adjusting payments to MA insurers for risk;
  • Factors  hindering CMS' efforts to identify and recover improper payments through payment audits; and
  • Updates on the status of GAO's prior recommendations.


According to the testimony, GAO has found that about 10 percent of the MA payments CMS made in FY 2016 were improper because of several shortcomings related to how CMS identified and recovered improper payments. GAO said those deficiencies include CMS' failure to:

  • Complete RADV audits in a timely manner, which GAO said "jeopardize[s] CMS' goal of eventually conducting annual RADV audits";
  • Conduct targeted RADV audits for MA contracts with the highest potential for improper payments;
  • Correct flaws in the agency's method of calculating improper payment risk for each MA contract, such as using all available data to identify the contracts with the greatest potential for improper payment recovery; and
  • Expand the use of Recovery Audit Contractors (RAC) in the MA program as required by federal law.

James Cosgrove, director of health care at GAO, in written testimony said because of those deficiencies, "the soundness of billions of dollars in Medicare expenditures remains unsubstantiated."

According to the testimony, CMS has taken initial steps to address issues related to how the agency identifies and recovers improper MA payments, including:

  • Improving the accuracy of the agency's method for identifying MA contracts with the highest potential for improper payments;
  • Improving the timeliness of RADV audits; and
  • Modifying the agency's process for selecting which MA contracts will undergo RADV audits to focus on identifying "those most likely to have improper payments."

Jonathan Morse, acting director of program integrity at CMS, said the agency currently is working to identify payment errors for payment years 2012 and 2013.

Learn the 3 steps to establishing an intentional Medicare risk strategy

In addition, GAO said CMS is:

  • Evaluating a strategy for incorporating RACs in the MA program; and
  • Starting to use encounter data and diagnosis data from MA organizations to identify contracts with the highest potential for improper payments.

GAO said CMS also is making progress toward developing a plan to use encounter data in its risk adjustments, but that the agency still needs to validate the accuracy and completeness of MA encounter data "before using it to risk adjust payments."

Further, Cosgrove in testimony before the House Ways and Committee's Subcommittee on Oversight on last week said "fundamental changes are necessary" to improve how CMS recuperates overpayments it makes to health insurers. According to Kaiser Health News, GAO in a report released in April found that CMS had spent about $117 million on MA audits since 2010, but had recuperated under $14 million in improper payments  (Schulte, Kaiser Health News, 7/19; Beaton, HealthPayerIntelligence, 7/20; GAO release, 7/19; GAO report, 7/19).

Join the webconference on August 7: Medicare Payment Update for CY 2018

Examine CMS’s changes to Hospital Outpatient and Ambulatory Surgical Center Payments in CY 2018, including standard updates to payment structure, payment rates, quality updates, and the broader implications of these changes.

Join us on Monday, August 7 at 3 pm ET to learn about CMS's changes to hospital outpatient payment rates, structure of outpatient payment, and outpatient quality reporting..

Register Now

Have a Question?


Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.