Medicare Saved $9.5B in Fiscal Year 2005 Through Reduction in Administrative Errors, CMS Says

Medicare saved about $9.5 billion in fiscal year 2005 by reducing errors by half, CMS officials announced Thursday, the AP/Wall Street Journal reports. Errors include payments for medically unnecessary services, incorrect billing submitted by providers and inadequate documentation to prove a service was necessary.

CMS Administrator Mark McClellan said new computer databases and the hiring of independent contractors to review claims have helped increase the number of claims reviewed for accuracy from 6,000 to 160,000. As a result, the error rate decreased from 10.1% in 2004 to 5.2% in 2005.

McClellan said that some errors resulted from fraud, but others are innocent mistakes. He cited as examples the ordering of glucose monitors for patients who did not meet program requirements and the treatment of back pain in a hospital when it was not medically necessary or could have been done in a lower-cost, outpatient setting.

Senate Finance Committee Chair Chuck Grassley (R-Iowa) said the reduced error rate this year means additional Medicare funding will be available for beneficiaries, adding, "It's remarkable that better management of the Medicare program has achieved the same level of savings in just one year as the Senate did in a five-year budget bill passed just last week."

McClellan said CMS will begin applying some of the Medicare monitoring practices to Medicaid, adding that states for the first time will be monitored to find their reimbursement error rates (AP/Wall Street Journal, 11/10).