[Federal Register: October 5, 2005 (Volume 70, Number 192)]
[Rules and Regulations]
[Page 58259-58277]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05oc05-20]
[[Page 58259]]
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Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 431 and 457
Medicaid Program and State Children's Health Insurance Program (SCHIP)
Payment Error Rate Measurement; Interim Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 431 and 457
[CMS-6026-IFC]
RIN 0938-AN77
Medicaid Program and State Children's Health Insurance Program
(SCHIP) Payment Error Rate Measurement
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Interim final rule with comment period.
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SUMMARY: This interim final rule sets forth the State requirements to
provide information to us for purposes of estimating improper payments
in Medicaid and the State Children's Health Insurance Program (SCHIP),
as required under the Improper Payments Information Act (IPIA) of 2002.
The IPIA requires heads of Federal agencies to annually estimate and
report to the Congress these estimates of improper payments for the
programs they oversee and, submit a report on actions the agency is
taking to reduce erroneous payments. We published a proposed rule on
August 27, 2004 to propose that States measure improper payments in
Medicaid and SCHIP and report the State-specific error rates to us for
purposes of computing the improper payment estimates for these
programs.
After extensive analysis of the issues related to having States
measure improper payments in Medicaid and SCHIP, including public
comments on the provisions in the proposed rule, we are revising our
proposed approach. Our new approach incorporates commenters'
suggestions to engage a Federal contractor by contracting with that
entity to complete the data processing and medical reviews and
calculate the State-specific error rates. Based on the States' error
rates, the contractor also will calculate the improper payment
estimates for these programs which will be reported by the Department
of Health and Human Services as required by the IPIA. This interim
final rule sets out the types of information that States would need to
submit to allow CMS to conduct medical and data processing reviews on
claims made in the fee-for-service (FFS) setting. CMS will address
estimating improper payments for Medicaid managed care and eligibility
and SCHIP FFS, managed care and eligibility at a later time.
This rule responds to the public comments on the proposed rule,
sets forth the requirements for States to assist us and the contractor
to produce State-specific error rates in Medicaid and SCHIP which will
be used as the basis for a national error rate, and outlines future
plans for measuring eligibility, which may include greater State
involvement than the level required for the medical and data processing
reviews.
DATES: Effective date: These regulations are effective on November 4,
2005.
Comment date: To be assured consideration, comments must be
received at one of the addresses provided below, no later than 5 p.m.
on November 4, 2005.
ADDRESSES: In commenting, please refer to file code CMS-6026-IFC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this regulation to http://www.cms.hhs.gov/regulations/ecomments.
(Attachments should be in Microsoft Word, WordPerfect, or
Excel; however, we prefer Microsoft Word.)
2. By regular mail. You may mail written comments (one original and
two copies) to the following address ONLY: Centers for Medicare &
Medicaid Services, Department of Health and Human Services, Attention:
CMS-6026-IFC, PO Box 8012, Baltimore, MD 21244-8012.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-6026-IFC, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses. If you
intend to deliver your comments to the Baltimore address, please call
telephone number (410) 786-7195 in advance to schedule your arrival
with one of our staff members. Room 445-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security
Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by mailing your
comments to the addresses provided at the end of the ``Collection of
Information Requirements'' section in this document.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Christine Jones, (410) 786-3722; or
Janet E. Reichert, (410) 786-4580.
SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
CMS-6026-IFC and the specific ``issue identifier'' that precedes the
section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all electronic
comments received before the close of the comment period on its public
Web site as soon as possible after they have been received. Hard copy
comments received timely will be available for public inspection as
they are received, generally beginning approximately 3 weeks after
publication of a document, at the headquarters of the Centers for
Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore,
Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4
p.m. To schedule an appointment to view public comments, phone 1-800-
743-3951.
I. Background
[If you choose to comment on issues in this section, please include
the caption ``BACKGROUND'' at the beginning of your comments.]
The Improper Payments Information Act of 2002 (IPIA), Public Law
107-300,
[[Page 58261]]
enacted on November 26, 2002, requires the heads of Federal agencies to
review annually programs they oversee that are susceptible to
significant erroneous payments to estimate the amount of improper
payments, to report those estimates to the Congress, and to submit a
report on actions the agency is taking to reduce erroneous
expenditures. The IPIA directed the Office of Management and Budget
(OMB) to provide subsequent guidance. OMB defines significant erroneous
payments as annual erroneous payments in the program exceeding both 2.5
percent of program payments and $10 million (OMB M-03-13, 05/21/03).
For those programs with significant erroneous payments, Federal
agencies must provide the estimated amount of improper payments and
report on what actions the agency is taking to reduce them, including
setting targets for future erroneous payment levels and a timeline by
which the targets will be reached.
In the report to the Congress, Federal agencies must include: (1)
The estimate of the annual amount of erroneous payments; (2) a
discussion of the causes of the errors and actions taken to correct
those causes; (3) a discussion of the amount of actual erroneous
payments the agency expects to recover; and (4) limitations that
prevent the agency from reducing the erroneous payment levels, that is,
resources or legal barriers.
The Medicaid and SCHIP programs were identified by OMB as programs
at risk for significant erroneous payments. OMB has directed the
Department of Health and Human Services (DHHS) to report the estimated
error rate for the Medicaid and SCHIP programs to OMB by November 15 of
each year.
There currently is no systematic means of measuring payment errors
at the State and national levels for Medicaid and SCHIP. Through the
Payment Accuracy Measurement (PAM) and Payment Error Rate Measurement
(PERM) pilot projects that operated in Fiscal Years (FYs) 2002 through
2005, we determined that it is feasible to estimate improper payments
for Medicaid and SCHIP and refined a claims-based review methodology.
This methodology was designed to estimate State-specific payment error
rates within +/-3 percent of the true population error rate with 95
percent confidence. Moreover, through weighted aggregation, the State-
specific estimates can be used to make national level error rate
estimates for Medicaid and SCHIP that meet OMB's confidence and
precision requirements.
Since Medicaid and SCHIP are administered by State agencies
according to each State's unique program characteristics, State
participation in estimating improper payments was critical during the
pilot projects and continues to be necessary and important for the
Secretary to comply with the requirements of the IPIA. Obtaining and
considering State input in IPIA requirements has necessarily been time-
consuming; however, the end result is an interim final rule with
comment period that is more responsive to our stakeholders' concerns.
II. Provisions of the Proposed Rule
We published a proposed rule on August 27, 2004 (69 FR 52620) that
contained provisions for all States to annually estimate total improper
payments in Medicaid and SCHIP. Based on medical, data processing, and
eligibility reviews on a monthly random selection of a total of
approximately 800 to 1,200 fee-for-service (FFS) and managed care
claims (stratified between the components) each for Medicaid and SCHIP,
States would produce and report to us State-specific payment error
rates in Medicaid and SCHIP. We would then calculate a national error
rate for these programs. States would take actions to address causes of
errors identified through the claims reviews. States also would submit
an annual report to us detailing the causes of errors and specifying
actions to be taken to reduce the level of improper payments. The
process for recoveries of improper payments under Medicaid is already
set in statute. States must return the Federal share of overpayments
identified through the medical and data processing reviews of the
sampled claims within 60 days in accordance with existing statutory and
regulatory requirements governing recoveries (section 1903(d)(2) of the
Social Security Act (Act) and 42 CFR part 433, subpart F). Recoveries
of the Federal share of improper payments based on eligibility errors
are subject to the provisions of section 1903(u) of the Act and related
regulations at 42 CFR part 431, subpart P.
The intended effect of the proposed rule was to have States measure
improper payments, to target corrective actions in response to
identified errors, to reduce the rate of improper payments, and to
produce a corresponding increase in program savings at both the State
and Federal levels. The proposed rule would have allowed us to comply
with the IPIA requirements.
This rule is being promulgated as interim final with comment period
due to the significant departure in the approach to estimate improper
payments in Medicaid and SCHIP by engaging a Federal contractor rather
than requiring States to produce error rates. We plan to publish a
final rule that responds to comments made on this interim final rule.
We expect the determination of the eligibility error rate to require
State participation and seek comments through this interim final rule
on how such a rate could best be calculated within current Medicaid and
SCHIP laws and regulations, and with minimal imposition on State
resources. We anticipate producing a Medicaid FFS error rate for the FY
2007 Performance and Accountability Report (PAR) based on reviews
conducted in FY 2006. In FY 2007, we expect to measure improper
payments in the FFS, managed care and eligibility components of
Medicaid and SCHIP to be reported in the FY 2008 PAR. We are also
seeking comments on how best to determine an error rate for managed
care in Medicaid and SCHIP.
III. Analysis and Response to Public Comments on the Proposed Rule
Public comments on the proposed rule expressed concerns
predominantly with the cost and burden that States would incur and the
potential adverse effect that error rate measurement could have on
beneficiaries' access to care. Although many commenters supported the
general need for program integrity, they offered alternatives that they
believed would better achieve compliance with the IPIA requirements.
Many commenters made the following recommendations to allow us to
achieve compliance with IPIA by other means:
Utilize national sampling using Medicaid Statistical
Information System (MSIS) data.
Pool State-specific data across the years, or accept
larger standard errors to generate a national estimate, particularly
for SCHIP.
Use the Medicaid Eligibility Quality Control (MEQC)
program as a sampling process. States could change their sampling
methodology from case to claim, stratify the claims and sample monthly
to determine eligibility and perform a medical review. Regulations for
MEQC are in place and implementing the additional requirements within
an existing structure would be easier. The MEQC error rates could also
be used to produce a national eligibility error rate to prevent the
redundancy of conducting PERM and MEQC, along with minimizing financial
burdens.
Use existing State methodologies and compare them to the
results of other samples to determine whether they contribute to the
goal of a national program error rate.
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Hire a Federal contractor.
Use gathered information to provide technical assistance
to States to improve program integrity, rather than penalize States.
We considered all of the recommendations and adopted several of the
recommendations. The new approach to error rate measurement will rely
on a Federal contractor to conduct medical and data processing reviews
and produce State-specific and national Medicaid and SCHIP error rates.
The contractor will sample selected States each year to estimate
improper payments in Medicaid and SCHIP and create a national error
rate. We have not made a final determination about how eligibility
errors will be measured. It is likely, however, that States would be
active participants in this process. For example, though several
options remain under consideration, it is possible that the States
sampled for the medical and data processing reviews would be required
to test for eligibility errors in a manner similar to that presented in
the proposed rule.
We did not adopt the other recommendations, either because they
would not achieve compliance with OMB guidance, or because we believed
that they were not the best methods to meet the requirements of OMB
guidance. We did not adopt the first recommendation because there is no
national sampling frame for SCHIP claims, and the MSIS data for
Medicaid are too old to produce meaningful data on which States could
base effective corrective actions. Pooling State-specific data across
the years or accepting larger standard errors to generate a national
estimate would not generate an error rate that was based on an annual
standardized measurement of improper payments and therefore would not
provide a basis on which an annual national error rate that was
compliant with OMB guidance could be calculated. Although accepting
State samples with larger standard errors may produce a national error
rate that was compliant with OMB guidance, those estimates would not
provide the States with sufficient information to identify
vulnerabilities and to implement corrective actions. We also did not
adopt the recommendation to use MEQC as a sampling process because the
MEQC statute does not apply to SCHIP stand-alone programs under Title
XXI. Also, many States have their MEQC programs attached to the section
1115 research and demonstration waivers that, while allowing them the
flexibility to tailor their eligibility oversight efforts, have the
effect of preventing comparability and aggregation for a national rate.
We also did not adopt the recommendation to use existing States'
methodologies to produce a national program error rate. Commenters
stated that, in addition to MEQC, States use the Surveillance and
Utilization Review System (SURS), program integrity, and checks and
balances in the claims processing systems and suggested that the States
submit proof of program savings that equaled a percentage of the
program's current costs. We believe this recommendation would not
result in a standardized approach since the information that States
would submit would be based on varying methodologies and that
submitting cost savings information is not a measurement of improper
payments, as required by IPIA. Also, not all States may apply these
systems to SCHIP. Therefore, this approach may not produce a national
error rate that would meet the confidence and precision requirements
contained in OMB guidance. The proposed rule did not provide for States
to be penalized through this error rate measurement. Finally, we are
always available to provide technical assistance to States.
After consideration of the proposed alternatives, we are adopting
the recommendations to hire a Federal contractor to conduct the medical
and data processing reviews and calculate the State-specific and
national error rates for Medicaid and SCHIP. We also are adopting the
recommendation to sample a subset of States each year. Each State will
have a State-specific error rate which will be the basis for a national
error rate. Adopting these recommendations addresses commenters'
concerns with State cost and burden.
By FY 2008, we hope to be compliant with the IPIA requirements by
producing error rates for both Medicaid and SCHIP FFS, managed care and
eligibility. In FY 2006, we will use a Federal contractor to estimate
improper payments from medical and data processing reviews in the fee-
for-service component of Medicaid and establish a workgroup to make
recommendations on the best approach for reviewing Medicaid and SCHIP
eligibility, within the confines of current statute and with minimal
budgetary impact for purposes of meeting IPIA requirements to measure
improper payments based on payments to ineligibles.
Under the national contracting strategy, a number of States will be
selected for review. In FY 2006, the Federal contractor will group all
States into three equal strata of small, medium and large based on
States' annual FFS Medicaid expenditures from the previous year, and
select a random sample of an estimated 18 States to be reviewed. The
error rates produced by this selection methodology will provide the
State with a State-specific error rate estimated to be within 3 percent
precision at the 95 percent confidence level. For subsequent years, our
sampling methodology will ensure that each State will be selected once,
and only once, every 3 years for each program.
The States selected for review will submit the previous year's
claims data and expenditure data, not otherwise already provided by
CMS, on which the contractor will determine each State's sample size
and the sample size for each stratum. The strata we are considering
are: (1) Hospital services; (2) long term care services; (3) other
independent practitioners and clinics; (4) prescription drugs; (5) home
and community based services; (6) other services and supplies, for
example, labs, x-rays; (7) primary care case management; and (8) denied
claims. These States also will submit quarterly stratified claims data
to the contractor who will pull a statistically valid random sample,
each quarter, by strata and medical and data processing reviews will be
performed. State-specific error rates will be based on the results of
these reviews.
In FY 2006, contingent on available funding, we plan to estimate
improper payments in the FFS component of Medicaid. In FY 2007, we
expect to measure improper payments in both the FFS and managed care
components of Medicaid and SCHIP. We will measure the error rate in
each component (FFS and managed care) separately due to their differing
nature. For example, FFS has a wide variance in payments amounts,
whereas managed care payments do not. We expect to be able to produce
the Medicaid and SCHIP FFS, managed care and eligibility national error
rates for reporting in the FY 2008 PAR to the Congress.
We received a total of 121 comments: 43 from State agencies and 78
from consumer advocacy and other groups. Overall, commenters expressed
concern with the proposed methodology for measuring improper payments,
although many also expressed support for the general need for program
integrity. Areas of greatest concern were burden and cost, the
requirement for States to construct error rates to meet a legal
requirement imposed on Federal agencies, and the impact on
beneficiaries. States did not believe the proposed rule's methodology
would be
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cost-effective or realize savings. Some States and the advocacy groups
were concerned that the proposed methodology would have an adverse
effect on access to care as States increased or imposed new
requirements on applicants for documented proof of eligibility to avoid
errors. Following are the comments on the proposed rule, grouped by
topic, and our responses.
A. Purpose and Basis
Comment: Many commenters expressed concern with the cost and burden
that the proposed rule would have imposed on States, particularly since
they believe the IPIA imposes the requirement to measure improper
payments on Federal agencies rather than the States. States are also
concerned that:
Critical staff would need to be diverted to perform the
reviews;
It would be difficult to implement corrective actions
while measuring error rates at the same time;
The rule places an added burden on States at a time when
some are struggling to maintain and expand coverage to currently
uninsured individuals; and,
Forces States to shift funds from other programs.
Providers need the States to invest additional resources in provider
outreach, education, and resource material that would improve the
entire system, not to shift funds away from activities to calculate
error rates.
The commenters stated that, if States must estimate improper
payments in Medicaid and SCHIP, these activities should be fully
federally funded.
Response: We agree that the IPIA imposes the requirement on Federal
agencies rather than the States to measure improper payments. Although
Medicaid and SCHIP are jointly funded by the Federal and State
governments, the programs are fully administered and operated by the
States. Also, there is wide variation in States' Medicaid and SCHIP
programs due to the flexibility States have in developing the coverage,
benefit, and reimbursement aspects of the programs. As a result, we
must measure improper payments on a State-specific basis in order to
produce a national payment error rate.
Regarding the cost and burden that the proposed rule would have
imposed on States, our adoption of the commenters' recommendation to
engage a Federal contractor to estimate a component of improper
payments significantly reduces the cost and burden and addresses this
concern. States will not pay for the national contractor. In addition,
only those States selected for review each year will provide
information necessary for claims sample selections and reviews, will
provide technical assistance as needed, and will implement and report
on the corrective actions to reduce the error rate. The States will be
reimbursed for these activities at the applicable administrative
Federal match under Medicaid and SCHIP. As part of the rulemaking
process, we have evaluated the burden and impact that these
responsibilities will have on States and determined that there was
significantly less impact on States and providers. We plan to measure
SCHIP FFS, managed care and eligibility in FY 2007, and we acknowledge
that the 10-percent cap on SCHIP administrative expenditures could be a
concern in the future, particularly depending on the nature of reviews
necessary to produce SCHIP eligibility error rates. Though the burden
and cost States would bear for eligibility testing in both Medicaid and
SCHIP fee-for-service and managed care remains uncertain, the
eligibility workgroup will make every effort to minimize both while
establishing a useful and worthwhile methodology.
Finally, due to the minimal additional activity required by the
regulation, we believe that States selected for review should not need
to divert staff from other areas of program activities.
Comment: Some commenters stated that the proposed rule goes beyond
the requirements of law and lacks details needed for States to
determine requirements and resource commitments. A few commenters
recommended that CMS postpone the proposed rule until more details
could be given or revise the regulation to establish key principles to
make the reviews fair and accurate based on public comment.
Response: The Federal contractor's responsibility for medical and
data processing reviews should lift a substantial portion of the burden
from States. Since Medicaid and SCHIP are partnerships between the
Federal and State governments, we will rely on States' assistance
throughout the error measurement process. This interim final rule
provides the opportunity for States and other interested parties to
comment on the States' responsibilities in this revised approach.
Additionally, we will request that some States and/or their
representatives be part of the eligibility workgroup. We look forward
to their input and participation as we continue through the process.
Comment: A few commenters were highly supportive of the proposed
rule and recommended that any modification to the rule focus on the
measurement of monies lost to fraud and abuse. The commenters
emphasized prevention strategies centered on education, data mining,
prospective flags, as well as recovery of erroneous payments and
cooperation with law enforcement to facilitate criminal prosecution.
Response: We are not adopting this recommendation. We currently
conduct fraud and abuse oversight activities, which include data
analysis through the Medicare-Medicaid data match, to identify
potential fraud and abuse. Other activities, such as education,
prospective flags, recovery of erroneous payments, and cooperation with
law enforcement are currently conducted at the State level. We believe
additional actions are not necessary at this time.
Comment: Several commenters urged CMS to reconsider its proposal
and develop a system under which the error reporting requirements are
clear and identical for all States. They are concerned that differing
State rules for reviews will contribute to the administrative burden
and potential inefficiencies in the system, especially for providers
operating facilities in many States.
Response: We have reconsidered our approach and believe this
strategy will provide more standardized measures across States. The
States' requirements for the medical and data processing reviews are
clearly stated in this regulation text, and the public is afforded the
opportunity through this rule to comment on them.
Any additional State requirements will be described in a proposed
rule with an opportunity for public comment. We invite comments on how
a system that relies, in part, on State measurement could be
standardized across States.
Comment: A few commenters stated that some States should be given
special consideration such as States that have limited or no previous
error rate experience; and CMS should exclude States with SCHIP minimal
allotments, similar to excluding the Territories due to minimal
funding.
Response: State burden and cost are significantly reduced under
this revised strategy, so we believe the basis to consider excluding
States with small SCHIP allotments no longer exists. Therefore, we are
not adopting this recommendation.
Comment: A few States inquired as to: (a) the legal obligation of
States to institute payment error rate measurement; and (b) the
consequences if a State could not comply with the regulatory
requirements.
[[Page 58264]]
Response: Current law at section 1102 of the Act authorizes the
Secretary to establish regulations as may be necessary for the
efficient administration of the Medicaid and SCHIP programs. The
Medicaid statute at section 1902(a)(6) of the Act, and the SCHIP
statute at section 2107(b)(1) of the Act, require States to provide
information necessary for the Secretary to monitor program performance.
Section 1902(a)(27) of the Act requires providers also to submit
information as requested by the Secretary. These statutory provisions
provide the bases for requiring States and providers to submit
information needed to produce Medicaid and SCHIP error rates. Regarding
compliance, the regulations that govern State compliance with Federal
requirements in Medicaid and SCHIP are 42 CFR 430.35 and 457.204,
respectively. Under these regulations, the Administrator has the
discretion to enforce the compliance regulations by withholding Federal
matching funds in whole or in part until a State complies with Federal
requirements.
Comment: Some commenters stated that savings will not be realized
since the cost of conducting error rate measurement will exceed
savings.
Response: The IPIA requires error rate measurement for these
programs and does not include lack of cost savings as a reason for not
measuring improper payments. Since we are estimating improper payments
in a select number of States through a Federal contracting strategy, we
believe the State cost to measure error rates has been drastically
reduced. We will analyze the cost/savings benefits when we have
reliable findings, but we anticipate that savings will be realized over
time through efficiencies gained by experience in estimating error
rates, through disseminating findings from selected States, States'
corrective action measures, and modeling best practices.
Comment: A few commenters recommended that payment error rate
measurement use a claims-based sampling methodology and be administered
electronically, since a paper-based model would prove burdensome to
States and providers and could lead to lower provider response rates.
Response: The proposed rule provided for a claims-based sampling
methodology as does the interim final rule for the medical and data
processing reviews. Since States and providers have different levels of
systems sophistication, the contractor will work with States to
determine the format for States to submit information.
Comment: A number of commenters believe that working with Medicaid
and SCHIP will be more difficult for providers because of increasing
paperwork burdens, higher rates of denied claims, delays in payments,
and sanctions.
Response: The providers who would submit medical documentation to
support the medical reviews are participating providers in Medicaid
and/or SCHIP. We have analyzed the cost and burden on providers as part
of this rule and determined that there will not be a significant cost
or impact. We believe we have further minimized the burden on providers
nationwide by reviewing only a selection of States rather than all
States every year. Also, providers only need to submit medical records
for FFS claims since managed care claims are not subject to medical
reviews.
Comment: Several commenters were concerned that the proposed rule
would place a unique burden on providers who serve a disproportionately
large share of Medicaid and SCHIP enrollees. The negative impact of
additional time and practice cost that would be required of providers
to respond to requests for medical records and error rate measurement
efforts should be considered as the final rule is drafted.
Response: As stated above, we have analyzed the burden on providers
as part of this rule. We believe that utilizing a sample of States will
reduce the burden on providers nationwide since only those Medicaid and
SCHIP providers in States selected for review will submit medical
records and, in each State, only providers whose FFS claims were
selected would need to submit records, as managed care claims are not
subject to medical review.
Comment: A few commenters wanted to know what would be considered
an acceptable State error rate percentage.
Response: Unlike the statute at section 1903(u) of the Act which
sets a 3-percent error rate tolerance for Medicaid eligibility errors
before a disallowance of the Federal share of improper payments can be
imposed, the IPIA and subsequent OMB guidance does not set a State-
specific error rate percentage. IPIA is merely a reporting requirement;
it neither penalizes nor rewards States for acceptable or unacceptable
error rates. However, States would still be required to reimburse CMS
for the Federal portion of all improper payments identified through the
medical and data processing reviews.
Comment: A few commenters suggested that CMS develop an internal
taskforce to review the progress of the States in implementing payment
error rate measurement, including CMS regional office representatives.
The taskforce could seek feedback from stakeholders on the process for
improvements in moving forward.
Response: Since we are engaging a Federal contractor rather than
the States to produce error rates, the recommendation to convene a
taskforce to track States' progress on medical and data processing
reviews no longer applies. However, the eligibility workgroup may
decide to have a taskforce track States' progress on the eligibility
reviews, when implemented.
B. Definitions
Comment: A few commenters recommended replacing the definition of
``total estimated improper payments'' with a definition of ``Federal
estimated improper payments'' that is based on the Federal share of
improper payments, as computed using the appropriate Federal matching
rate for Medicaid or SCHIP.
Response: We agree with the commenter that the IPIA and OMB
guidance refer only to Federal improper payments. We have deleted this
definition from the interim final rule.
C. Claims Universe and Sampling
1. Exclusions From the Universe
a. Denied Claims
Comment: Many commenters objected to the inclusion of denied claims
in the sampling process. They believe that a denied claim is not
included in the IPIA definition of improper payment as defined in the
IPIA or the proposed rule. Some commenters questioned OMB's
interpretation of an improper payment which includes denied claims.
Some commenters stated that denied claims are not improper payments
since payments have not actually been made.
Response: The IPIA defines improper payment as ``any payment that
should not have been made or that was made in an incorrect amount
including overpayments and underpayments.'' OMB guidance M-03-13,
published May 21, 2003, states that ``incorrect amounts are
overpayments and underpayments including inappropriate denials or
payment of service.'' Therefore, we must include denied claims in the
error rate measurement process.
Comment: Some commenters stated it may be difficult for States to
find a standard definition of denied claim and wanted to know whether
the amount of a denied claim should be a zero amount or the amount
billed.
[[Page 58265]]
Response: A denied claim is a claim or line item that was submitted
by a provider for services furnished, was accepted by the claims
processing or payment system, was adjudicated for payment, and was not
approved for payment. The amount of a denied claim when part of the
universe for sampling purposes is zero dollars. The amount of improper
payment, if a claim was denied erroneously, would be the amount that
should have been paid as a result of the review.
Comment: Some commenters asked what documentation supports a denied
claim. States may not have the authority to demand a medical record for
a denied claim.
Response: Documentation to support a denied claim depends on the
reason the claim was denied. For example, if the reason for the denial
was based on the claims processing, a processing review would be done
to verify the denial. If the reason for the denial was medically based,
a medical record would support whether or not the claim was correctly
denied. If the provider does not submit the record or if the submitted
record does not substantiate the service billed, then the denial would
be correct. Since we are utilizing a Federal contractor, States will
not be requesting medical records for denied claims, so this point is
no longer applicable.
Comment: Some commenters asked what would constitute an adjustment
to a denied claim (similar to when a paid claim is adjusted to, for
example, correct the billing amount or coding) and whether it would be
possible to identify these adjustments to claims denied for payment.
Response: Denied claims are not subject to adjustments because,
when a claim is denied for payment, the provider will resubmit a new
claim for payment. The claim resubmitted for payment would not be
associated with the claim that was originally denied. Therefore,
adjustments to denied claims are not included in this interim final
rule.
Comment: Some commenters stated that inclusion of denied claims
will affect the precision levels. Denied claims have a greater chance
of selection since a large portion will reappear in the universe as a
paid claim. They inquired why denied claims will be used to increase
the amount of misspent dollars.
Response: Denied claims include claims accepted by the claims
processing or payment system, adjudicated for payment and not approved
for payment. This definition excludes many or most of the types of
claims that are rejected from the claims payment system, corrected and
resubmitted, and ultimately approved for payment. This reduces the
chance that a claim for a single service would show up in the sample as
both a denial and a paid claim. The inclusion of denials is consistent
with guidance from OMB, which has stated that improper payments include
inappropriate denials of payment or service.
Comment: Some commenters questioned how an error rate would be
determined for a denied claim specifically inquiring as to the nature
of the numerator and denominator.
Response: There are multiple approaches for including denials in
the error rate. If denials are included as a separate stratum, the
``difference'' version of the error rate calculation would be applied.
Errors from denials are included in the total error rate, projected to
the population or universe using the inverse of the sampling frequency.
In the denominator, the non-stochastic (that is, deterministic) value
of all line items paid over the sampling period is included, and
denials enter the denominator as zero.
Comment: Some commenters asked what denial explanation of benefits
will be used to identify denied claims that will be included or
excluded from the universe.
Response: All denied claims are included in the universe.
Therefore, it is not necessary to categorize denials based on the
explanation of benefits.
Comment: Some commenters asked if eligibility determinations will
need to be conducted on denied claims.
Response: If a claim is denied on the basis that the person is not
eligible, we believe an eligibility review should be done to confirm
the claim was correctly denied. This issue is likely to be considered
by the eligibility workgroup.
b. Medicare Claims and Other Premium Payments
Comment: Some commenters stated that it was not clear if Medicare
crossover claims were included in the proposed rule methodology.
Response: We believe the commenter defines crossover claims as
payment authorization for Medicare coinsurance and deductible amounts.
The proposed rule intended to include Medicare crossover claims in the
reviews since these are considered part of the universe of claims. The
universe includes all claims submitted by providers, insurers, and
managed care organizations for which a decision to pay or deny was made
by Medicaid or SCHIP. Under this interim final rule, these claims would
be included in the universe and subject to sampling and review to the
same extent as any other claim.
Comment: A few commenters stated that Medicare crossover claims
should be excluded because the buy-in claims are paid directly to a
Federal agency and have the unintended outcome of having States
determine the accuracy of Medicare claims, when the primary Medicare
claims are already measured by CMS. The commenters stated these claims
were not tested in the PAM pilots.
Response: The commenter is correct that Medicare Parts A and B
crossover claims were not tested in the PAM pilots. At that time, CMS
and the participating States were still refining the methodology to
estimate error rates. In the FY 2005 pilot (PERM pilot), both Medicare
crossover claims and denied claims were included in the reviews.
Medicare crossover claims are included in the universe for sampling
because they are considered Medicaid payments made to insurers, similar
to Medicaid payments for employee health care premiums. This
methodology measures the accuracy of the Medicaid payment on the claim
rather than the accuracy of the Medicare payment.
Comment: A few commenters stated that buy-in claims should be
excluded from sampling because these payments are made to a Federal
agency and, furthermore, buy-in overpayments or payments made on behalf
of ineligible participants are unrecoverable.
Response: Although the Medicare program is administered by a
Federal agency, it is considered an insurer, as noted above. Moreover,
it is immaterial whether an erroneous payment is recoverable or non-
recoverable.
Comment: A few commenters stated that Parts A and B premiums are
not processed as claims through MMIS and stated they believe that the
sampling was intended to test claims submitted by providers and
processed by the States' MMIS systems. If these claims were included,
they argued other contracts with Federal match, such as
disproportionate payments, rent and salary should be included.
Response: The methodology in the proposed rule would have reviewed
only claims paid to providers, insurers and managed care organizations.
Payments not falling within these categories would be excluded from the
universe. Medicare crossover claims would be included because Medicare
is considered an insurer for this purpose. We acknowledge that most
claims are processed by the States' MMIS systems; however, the proposed
rule did not provide for States to exclude any claims that were not
processed through the
[[Page 58266]]
MMIS. The data processing review in the proposed rule, as well as in
the revised approach discussed in this interim final rule, is intended
to ensure the claim was correctly paid regardless of the system making
the payment.
Comment: A few commenters stated that States may not have the
necessary understanding of Medicare payment policies.
Response: Although we are available to provide technical assistance
to States that do not understand Medicare payment policies, under the
proposed rule, States would not be required to verify the accuracy of
Medicare payments. The States would only verify that the State had paid
its own portion correctly. However, since States are no longer
conducting the medical or data processing reviews, this fact is no
longer relevant.
Comment: A few commenters stated that ``improper payment'' needed
further definition and asked what impact uncollected, incorrect, or
disputed (official complaint on file) premium payments would have on
the error rate (for example, for SCHIP participants who prepay a
monthly premium).
Response: We believe the definition of ``improper payment'' in the
proposed rule as well as this interim final rule is clear. The error
rate methodology in the proposed rule would have required States to
review claims to determine if the payment amount was correct. An
uncollected, incorrect, or disputed premium amount in a sampled claim
would have been determined to be an over-or underpayment in the amount
that was either the participant's liability or the State's liability to
pay, depending on the circumstances of the specific claim being
reviewed.
c. Other Exclusions
Comment: A few commenters asked if FFS or managed care components
with less than 10 percent of program expenditures will be excluded.
Response: For purposes of the pilot programs, we did exclude such
FFS or managed care components from review but we did not anticipate in
the proposed rule or in this interim final rule that components would
be excluded on this basis.
2. Sampling Issues
Comment: Some commenters wanted to know if CMS had adequate staff
to approve States' sample plans in a timely manner and asked that
``timely manner'' be defined.
Response: At this time, States will not need to submit sampling
plans to us for approval under the national contractor approach. Should
the eligibility testing require States to do any sampling, those issues
would be addressed in a subsequent issuance.
Comment: A few commenters expressed concern with the large sample
sizes and asked that we identify the percent of error assumed to
develop the methodology. Commenters suggested that States be allowed to
submit alternative sampling plans that have an equal or better
precision than required.
Response: Under the proposed rule, the Federal contractor would
determine the sample sizes needed to achieve the required precision
levels for Medicaid and for SCHIP, which is an estimate that is within
+/-3 percentage points of the true population payment error rate with
95 percent confidence. When we originally estimated the range of sample
sizes to be between 800 to 1,200 for each program in each State, we did
not assume a particular error rate; rather, we assumed a variance in
payment size. Experience now shows that the 800-1200 sample size
results in States achieving the precision level of +/-3 percent. It is
important to note that the sample sizes could be larger or smaller in
each State or in the SCHIP program. Since States will not need to
submit sampling plans for selecting claims for medical and data
processing reviews or review these claims under the national
contracting strategy, we believe these concerns have been addressed.
Comment: A few commenters suggested that as a way to reduce the
sample size, the Medicaid and SCHIP claims be combined or suggested
that the sample sizes should not be the same for Medicaid and SCHIP.
Response: The Medicaid and SCHIP claims cannot be combined because
the OMB guidance requires a statistically valid error rate that meets
specified confidence and precision levels for each individual program.
The sample sizes for Medicaid and SCHIP will be estimated to achieve +/
-3 percent precision within 95 percent confidence. Although we
estimated the Medicaid and SCHIP sample size to be within the same
range, the actual sample size may or may not be the same. Combining
Medicaid and SCHIP claims or arbitrarily reducing the sample sizes for
either program to calculate error rates would not meet the OMB
requirements.
Comment: Some commenters noted that the sample size required of the
SCHIP program is the same required for the Medicaid program, even
though the SCHIP programs are far smaller. They stated that imposing
such large burdens on SCHIP programs, which have fewer administrative
funds, would necessitate diversion of resources away from areas like
outreach and enrollment processing. These commenters suggested relaxing
sampling and precision estimates for smaller States or programs.
Response: We cannot adopt this recommendation. As noted above,
reducing the State sample sizes to achieve less than 3 percent
precision with a 95 percent confidence level would (1) not provide the
State with sufficient information to determine vulnerabilities and to
initiate corrective action; and (2) not achieve a national error rate
that meets the OMB confidence and precision requirements when rolling
up the State error rates.
Comment: Some commenters stated the stratified sample is a
complicated feature and expressed concern with the cost and resource
burden to pull a large sample for review, particularly for the SCHIP
program, which has limited administrative funding, or for States with
smaller populations.
Response: Stratification of the claims is necessary to improve
precision, reduce sample size, and identify the areas of greatest
vulnerability. We believe it is necessary for each selected State to
submit stratified claims data because the contractor otherwise would
not be able to complete the statistical aspect of the measurement
process in a timely manner. We have reevaluated the burden associated
with States submitting adjudicated and stratified claims data for each
current quarter and estimated the burden to be up to 200 FTE hours per
quarter. Details regarding States' role in eligibility testing will be
described in a subsequent issuance.
Comment: A few commenters suggested reducing the sample size to
minimize the burden on providers.
Response: The sample size is determined by the number of claims
that need to be reviewed to meet our State-specific confidence and
precision levels and cannot be reduced to minimize the burden on
providers. We analyzed the impact on providers as part of the proposed
rule and determined it was not significant. It should be noted that
only providers whose FFS claims were selected would submit medical
records, as managed care claims are not subject to medical review.
Comment: A few commenters stated that it was not clear if the
sample size considers cases where eligibility cannot be verified due to
death or non-cooperation of the client.
Response: The sample sizes in the proposed rule would not have
excluded these cases. Under the pilot projects, we allowed States to
oversample to account for these cases that are dropped from the
[[Page 58267]]
eligibility review if the State could not verify eligibility due to
these reasons. We will ask the eligibility workgroup to consider this
issue for measuring eligibility error rates and will clarify how these
cases will be treated in a subsequent issuance.
Comment: A few commenters believe that monthly samples would be
complicated and were not pulled under the PAM pilots.
Response: Since States will not need to pull monthly samples for
the data processing and medical reviews under the national contractor
approach, we believe this issue is no longer applicable for these
reviews. To the extent that the final eligibility testing methodology
involves State sampling, as stated above, we will address this issue in
a subsequent issuance.
Comment: A few commenters pointed out that the proposed rule did
not mention whether Medicaid FFS claims would be stratified into seven
strata by service, as was done in the PAM pilots.
Response: Under the proposed rule, the intent was to stratify the
Medicaid FFS claims. We are considering the following strata: (1)
Inpatient hospital, (2) long term care, (3) practitioners and clinics,
(4) pharmacy, (5) home and community-based services, (6) other services
and supplies, and (7) fixed payments such as Medicare Parts A and B
premiums, and an eighth stratum for denied claims. This is the
stratification model that is being used for the current PERM pilot. The
methodology under the national contracting strategy described in this
interim final rule would stratify the FFS claims in a similar manner
with variations for SCHIP, as appropriate. However, CMS will direct the
national contractor on all implementation issues.
Comment: A few commenters stated that a dollar weighted sample
would cause an over sampling of high-cost, low-error services like
nursing home and hospital care, rather than lower-cost services that
have historically higher error incidence.
Response: This method improves the precision of the estimate if the
variance of the accuracy rate across strata is proportional to the
Medicaid payment share represented by the stratum. When calculating the
final payment error rate, this oversampling and undersampling by
stratum is taken into account and the sample is reweighted to calculate
an unbiased estimate of the overall payment error rate.
Comment: Many commenters recommended that the reviews have a more
balanced approach between FFS and capitated payments. The concern is
that FFS claims will have a higher level of scrutiny than managed care
claims, which unfairly characterizes FFS as more prone to fraud and
error. They expressed concern that higher error rates would inevitably
be detected for fee-for-service claims than for managed care payments,
even though undetected Medicaid payment errors may also occur under
capitated managed care.
Response: Under the proposed rule, the sample is drawn proportional
to the State's spending. For example, if two-thirds of the State's
funds are spent in FFS, then two-thirds of the dollar share of the
Medicaid sample in the State would be FFS claims. In this manner, the
measurement would be more representative of total Medicaid spending and
we believed would produce a more accurate error rate. However, in this
interim final rule, as previously stated, when we begin measuring both
the FFS and managed care components of Medicaid and SCHIP, as we expect
to in FY 2007, we will estimate separate error rates for FFS and
managed care. We will also produce a combined FFS and managed care
error rate for each State for each program in addition to providing a
national error rate for each program.
Comment: Some commenters suggested that CMS should require that
data presented on error rates explain that the errors computed for FFS
claims and capitated payments are not comparable because of measurement
differences and that fewer errors are detected for managed care because
the review is less intensive.
Response: We agree with this comment. However, since States will
not be estimating FFS error rates, the recommendation that we require
States to provide an explanation on the measurement differences is no
longer relevant.
3. Overpayment and Underpayment Errors
Comment: Many commenters stated that adding overpayments and
underpayments together will count unspent dollars as misspent dollars
and recommended an error rate for each type of payment.
Response: The IPIA specifically provided that OMB set
implementation guidelines for Federal agencies. The OMB guidelines
state that the annual estimated amount of erroneous payments is the
gross total of both overpayments and underpayments. In order to be in
compliance with IPIA, we must follow OMB guidelines regarding total
gross overpayments and underpayments to derive error rate estimates.
However, we also intend to report separately the amount of overpayment
and underpayments.
Comment: Some commenters believe that only overpayments are the
appropriate gauge of misspent dollars.
Response: We must estimate improper payments according to the IPIA
and OMB guidelines. OMB guidelines require the inclusion of both
overpayments and underpayments in the error rate estimate. As such, we
must measure and report both overpayments and underpayments.
Comment: A few commenters asked if the sum of both underpaid and
overpaid claims exceeds 2.5 percent or more than $10 million, would
this be considered ``significant'' or must the error rate meet just one
or both of these conditions to be considered ``significant.''
Response: The IPIA states that significant improper payments are
payments that exceed $10 million. OMB guidance defines significant
erroneous payments as annual erroneous payments exceeding both 2.5
percent of program payments and $10 million. However, these thresholds
refer to the national error rate for the program rather than State-
specific error rates. Neither the IPIA nor OMB guidelines set target
State-specific error rates.
4. Adjustment to Claims
Comment: Some commenters stated that the 60-day timeframe to allow
for adjustments to claims is arbitrary and should be extended to 120
calendar days to give providers and the States' payment systems more
time to identify and correct adjudicated claims issues.
Response: The 60-day timeframe was agreed upon by States and CMS
during the development of the review methodology under the PAM pilot
projects as a reasonable timeframe that allows for adjustments while
maintaining a timeline that also allows for completion of the reviews
and to compute and report the error rates in time for inclusion in the
next PAR. If we extend the timeframe to a point beyond 60 days, we
could not be assured that the error rate measurement process would be
completed in time to report the error rate. Therefore, we are not
adopting this recommendation.
Comment: Other commenters stated that identification and review of
adjustments are complicated and increase the complexity of the error
rate measurement process.
Response: Reviewing adjustments to claims provides a more accurate
error rate because adjustments reflect a more accurate final amount
paid.
Comment: A few commenters stated that, in the current Health
Information Portability and Accountability Act (HIPAA) claim format,
information on the allocation of third party liability
[[Page 58268]]
(TPL) amounts is not required at the line level. There is no way to
know if TPL calculations are correct for a specific line if the
provider reported the information in the aggregate and asked whether
this is what is meant by ``line items that are not individually
priced.''
Response: Line items that are not individually priced are generally
bundled into a service. Under the proposed rule, the service is the
sampling unit. States were not required to sample at the line item.
This concept would remain the same under the national contracting
strategy as described in this interim final rule.
5. Other Comments
Comment: A few commenters stated that CMS should ensure that all
payment information from CMS that States depend on to pay providers is
given to States at least 60 days before the expected implementation
date.
Response: We strive to work with States on a myriad of complicated
financial issues and respond to issues in a timely manner. To that
extent, we also make every effort to provide policy guidance to States
in a timely manner but, due to the complexity of issues, we would not
commit the agency to a 60-day timeframe for providing all payment
information.
D. Review Procedures
1. Medical Reviews
Comment: Some commenters stated that requiring a medical review
increases the cost and logistical complexity of the review effort due
to the review time and follow-up necessary to obtain provider records.
Response: Since States are no longer performing the medical reviews
and will not incur the cost of the reviews, we believe this concern has
been addressed.
Comment: A few commenters stated that obtaining records for denied
claims may prove more problematic than for paid claims.
Response: As stated above, since States are not performing the
medical reviews and will not need to obtain records for the reviews, we
believe this concern has been addressed.
Comment: A few commenters stated that providers should not have to
submit records for denied claims since there is no incentive for them
to copy records for services that Medicaid did not reimburse.
Response: If providers chose not to submit medical records for
denied claims, we would consider the State to have properly denied the
claim.
Comment: Some commenters recommended that States be allowed to
contract with external quality review organizations to do the reviews.
Response: Since States will not be conducting the medical and data
processing reviews, they will not need to contract with external
organizations.
Comment: Some commenters stated that projected costs to conduct the
reviews will exceed the $300 per review due to the type and number of
FFS claims to be sampled.
Response: We estimated the costs of review based on information
given by States participating in the PAM pilot projects. However, since
we will engage a contractor to perform the medical and data processing
reviews and States will not incur these costs, this comment is no
longer relevant. Once the details of eligibility testing are finalized,
we will address cost estimates in a subsequent guidance.
Comment: A few commenters stated that requesting, receiving and
performing medical reviews is a time-consuming process. There is not
enough time allocated to completing the review process prior to having
to return the Federal share for overpayments identified within 60 days.
Response: States are no longer being asked to conduct the medical
reviews for purposes of this interim final rule. Therefore, we believe
the concern with concluding the medical reviews timely in relation to
returning recoveries is no longer relevant.
Comment: Some commenters made recommendations that only medically
unnecessary services and services not covered or delivered, as well as
over and underpayments due to improper coding, should be counted as
errors and other error types such as technical errors, such as minor
coding and clerical errors, should be excluded.
Response: It is not clear what the commenters believe to be a minor
coding or clerical error. We believe that if the error has any effect
on the payment, then it must be included in the error rate calculation.
Comment: A few commenters acknowledged that inadequate
documentation is a problem and agreed it should be measured but
recommended that it be measured separately from clearly improper
payments.
Response: We disagree with this comment. If documentation is
inadequate to support the correctness of the claim, we believe it would
be unreasonable to consider these claims as correct. Otherwise, any
claim with inadequate documentation could be deemed correct which would
undermine the purpose and reliability of the improper payment
measurement.
Comment: A few commenters suggested that the method for determining
medical necessity should be clearly stated in regulation, and
recommended using the InterQual level of care criteria or similar
product to reduce error rates and improve relationships with providers.
Response: As stated above, since the States are not performing the
medical reviews, it is no longer necessary to define or clarify review
procedures.
Comment: A few commenters noted that hospitals can be large
organizations where mail with no addressee could take weeks to get to
the appropriate person or could get lost and suggested that there
should be a phone and e-mail address on the notification where receipt
of the request can be confirmed. They also recommended follow-up to no
responses from providers.
Response: We appreciate this suggestion but believe it is no longer
relevant since States will not be conducting the medical reviews.
Comment: Some commenters wanted to know whether the claims for
which providers did not respond should be discarded from the sample and
how they should proceed with providers who are no longer in the program
and refuse to provide medical records.
Response: As stated above, clarification of the review procedures
is not necessary since States are not conducting the medical reviews.
Comment: A few commenters stated that it may be difficult to obtain
records on Medicare cross-over claims and SCHIP claims when Medicaid
has no agreement with the provider.
Response: We agree with the commenter and Medicare crossover claims
will not be subject to medical review. The Medicare crossover claims
will be subject to the data processing review.
Comment: Some commenters suggested that medical records should be
requested only as a last resort since it is labor intensive for
providers. Instead, commenters suggested that information be gleaned
from claims.
Response: We are unclear as to how one would perform a
comprehensive medical review based on the information provided on the
face of the claim. In addition, we analyzed the burden on providers as
part of the proposed rule and determined that there is no major impact
on them to provide medical records.
Comment: A few commenters stated that the current medical review
process accomplished under the Surveillance and Utilization Review
Subsystem (SURS) program is more than adequate.
[[Page 58269]]
Response: We believe this point is not applicable since States will
not be conducting the medical reviews. However, we encourage States to
continue with reviews that uncover payment errors and other program
weaknesses.
2. Data Processing Reviews
Comment: A few commenters stated that most claims are submitted by
electronic media and asked whether the review can be accomplished
through software that duplicates MMIS processing.
Response: Since States will not be conducting the data processing
reviews, we believe this question is no longer relevant.
Comment: A few commenters asked whether the State should review the
capitation fee or the actual claims for SCHIP when it is administered
by a capitated per member per month fee.
Response: Since States will not be conducting the data processing
reviews, we believe this question also is no longer relevant.
Comment: A few commenters commented that the specific review items
for managed care claims, for example, non-covered services, third party
liability, invalid pricing seemed to be inappropriate since the States
would not be reviewing managed care encounters.
Response: Since States will not be conducting the data processing
reviews, we believe this comment is no longer relevant.
3. Eligibility
Comment: Many commenters stated that the eligibility reviews in the
proposed rule are expensive in both funds and staffing needs and
duplicate current efforts under the MEQC program and SCHIP eligibility
audit processes. They recommended that the eligibility reviews be
eliminated or merged with MEQC.
Response: As previously stated, we cannot eliminate the eligibility
reviews because the IPIA includes payments to ineligibles in defining
improper payments. We have previously addressed the reasons why we
chose not to merge the reviews with MEQC. When we convene the
eligibility workgroup, we will ask for recommendations about how to
estimate eligibility errors while minimizing burden, cost, and
duplication with MEQC.
Comment: Many commenters had suggestions and recommendations on the
eligibility review process and procedures, such as retaining the
administrative period, allowing for technical errors, using the same
rules as the application process, such as self-declaration, and
excluding Supplemental Security Income (SSI) cases.
Response: We are not adopting these suggestions in this interim
final rule since we have not yet finalized a method for eligibility
reviews and plan not to conduct eligibility reviews in Medicaid and
SCHIP in FY 2006. We will consider these recommendations as CMS and the
workgroup determine the best method to measure eligibility errors and
will address these suggestions and the requirements for eligibility
reviews in a later issuance.
Comment: Most commenters stated that the proposed eligibility
reviews have flaws that would produce overestimates of Medicaid
eligibility errors. The eligibility review should be further clarified.
Response: As stated above, we are not adopting these suggestions in
this interim final rule time since we have not yet finalized a method
for eligibility reviews and will not conduct eligibility reviews in FY
2006. We will convene a workgroup to consider the best approach to
eligibility reviews under the IPIA. We invite public comments on this
issue.
Comment: Most commenters stated that payment errors should not be
determined for a beneficiary who is certified on the basis of
presumptive eligibility for Medicaid or SCHIP during the period of
presumptive eligibility, so long as the presumptive eligibility
determination has been conducted properly.
Response: Under the proposed rule, cases of presumptive eligibility
under Federal law would have been excluded from review. We believe that
the intent of the Congress is to hold States harmless for the limited
time that presumptive eligibility is in effect for pregnant women and
children under sections 1920, 1920A and 1920B of the Act. Since we have
not determined how best to conduct the eligibility reviews at this
time, we cannot state for certain that these cases will be excluded
when we implement the reviews but we will raise this concern to the
eligibility workgroup for their consideration and will address this
issue in a subsequent issuance.
Comment: Many commenters suggested that if the review found a
person to be ineligible under the Medicaid or SCHIP eligibility
category in which they were enrolled, the review should have assessed
whether the person was eligible under another Medicaid or SCHIP
eligibility category. If a person was eligible under another category,
then no overpayment would have occurred.
Response: The eligibility reviews in the proposed rule were
intended to look at eligibility under the Medicaid program, not just
the category of coverage within the Medicaid program. The same concept
holds true for SCHIP. As such, no overpayment would have occurred if
the review determined that the person was eligible for the program and
that the beneficiary was eligible to receive the service under that
program. We will apply this same concept when we implement eligibility
reviews. However, since we have been and will continue to be estimating
error rates for Medicaid and SCHIP separately, if a person was
ineligible for one program or ineligible for a service under the
program, the claim would have been in error regardless of whether the
person was eligible for the other program or that the service was
covered under the other program. In other words, if a person is
determined ineligible for Medicaid or for a Medicaid service,
eligibility for SCHIP is not relevant to whether or not an improper
payment for Medicaid was made for the person.
Comment: Some commenters stated that beneficiaries, whose
eligibility is based on information provided by another program,
including Food Stamps, Temporary Assistance for Needy Families, or
Medicare low-income drug benefit, should be exempt similar to the
proposed rule's exemption of SSI beneficiaries.
Response: We do not agree with this comment. We believe that, in
measuring improper payments, the State should be accountable for all
Medicaid eligibility determinations regardless of which State agency is
making the determination or regardless of which State agency provides
the information. While the eligibility reviews would not have required
the State to verify, for example, TANF eligibility, the information
obtained by the TANF agency on which a Medicaid eligibility
determination was made should be verified if there is no evidence that
the TANF agency verified the information as part of its eligibility
determination. The proposed rule did not exempt SSI cases from the
eligibility reviews (see proposed Sec. 431.982(a)(2)(iv), 69 FR
52631).
Comment: A few commenters asked how the eligibility reviews would
coordinate with the medical and data processing reviews.
Response: Under the proposed rule, all three reviews would have
been conducted on each FFS claim (there would not have been a medical
review on managed care claims). We expect the
[[Page 58270]]
eligibility reviews will be coordinated with the medical and data
processing reviews being done in those States selected for review so
that an error rate for Medicaid and SCHIP FFS, managed care and
eligibility can be concurrently calculated for each State under review.
We will address this issue in a later issuance.
Comment: Many commenters stated that determining eligibility at the
time of service is stringent and raises difficulties and significant
barriers for States in verifying eligibility for a time so far in the
past and pointed out that corrective actions would be meaningless.
Response: We agree with this comment. We have not determined at
this time how eligibility reviews will be conducted under IPIA. We
invite public comment on this issue and will respond in a subsequent
issuance.
Comment: Some commenters stated that State remedies to improve
error rates, such as more frequent redeterminations, will exacerbate
involuntary disenrollment and churning without providing any meaningful
fiscal impact.
Response: We do not agree with this comment. States should strive
to improve the accuracy of their eligibility determinations as part of
their prudent fiscal management responsibilities regardless of whether
or not we are specifically measuring eligibility errors. As such,
States can improve their eligibility processes in many ways beyond more
frequent eligibility determinations without necessarily creating an
adverse effect on program enrollment.
Comment: A few commenters argued that error rates would be skewed
upward by children who are ineligible at a particular point in time but
who are eligible over the course of a year.
Response: We believe this comment means to be asking about the
issue of continuous eligibility and its impact on improper payment
measurement. The eligibility workgroup will be addressing the issues of
defining the universe, sampling techniques and other review variables
regarding an eligibility error rate.
Comment: A few commenters argued that SCHIP participants who are
eligible for Medicaid and vice versa should not be cited as totally
ineligible and only the difference in the error amount between the two
programs should be cited as an error for a service obtainable through
both programs.
Response: We disagree with this comment because the IPIA requires
estimates of improper payments for each program. As such, the rule
provides for separate measurements of improper payments in Medicaid and
SCHIP and would have cited the improper payment amount for the claim
being reviewed.
Comment: A few commenters stated that some States will face
difficulties with respect to coordination among agencies, record
retention, and storage.
Response: We agree that the proposed rule presented States with
many challenges for measuring improper payments in their programs. We
believe adopting the recommendation to engage a Federal contractor to
conduct medical reviews addresses many of the commenters' concerns and
alleviates, to the extent reasonably possible, challenges that States
would have faced.
Comment: A few commenters wanted to know how the MEQC findings
would coordinate with the deadlines for reports to OMB for the
following year, and any possible corrective action plans between
agencies.
Response: The provisions of MEQC were not coordinated with or
affected by the proposed rule. Based on the recommendations of the
eligibility workgroup, we will address any coordination between MEQC
and the eligibility reviews under IPIA in a subsequent issuance.
Finally, we believe that States should have the flexibility to
coordinate corrective action plans among their agencies as appropriate.
Comment: Most of the commenters expressed concern that if the
proposed rule were implemented, the regulations could harm the coverage
and well-being of low-income children, families, seniors, and people
with disabilities in Medicaid and SCHIP by encouraging restrictive
policies that could have made it harder for low-income beneficiaries to
enroll and stay enrolled in Medicaid and SCHIP.
Response: Neither the proposed nor this interim final rule requires
States to reduce or terminate a beneficiary's program benefits in any
way or require States to impose more restrictive requirements that
would create barriers to the programs. The eligibility workgroup will
take into consideration the possible impact that any proposed
recommendations for eligibility error rate measurement may have on
beneficiaries, including this concern.
Comment: Many commenters were concerned that the restrictive
policies that would require more participation by the recipients to
prove eligibility, for example, providing documentation or attending
interviews, would threaten enrollment simplification and access for
beneficiaries and individuals who might have been eligible for Medicaid
or SCHIP and could also increase the ``churning'' of recipients in and
out of Medicaid or SCHIP coverage in cases where beneficiaries failed
to complete the redetermination process, which would disrupt the
patient-provider relationship, leading to higher health care costs and
increasing the potential for quality concerns.
Response: The eligibility workgroup will take into consideration
the possible impact that any proposed recommendations for eligibility
error rate measurement may have on beneficiaries, including this
concern.
Comment: Many commenters stated that the eligibility review, which
would have required the beneficiary to be eligible on the date of
service and provided no administrative period to allow for report of
changes in beneficiary status, would have created a significant burden
for beneficiaries of these programs and would likely have resulted in
disenrollment of many eligible individuals and families.
Response: We disagree with this comment. The eligibility review is
to verify eligibility at the time of service to determine whether the
claim was correctly paid. The review would ask for the recipient's
cooperation only if eligibility could not be verified through the case
record review or through other sources. Recipients have a
responsibility to cooperate in the eligibility determination process,
whether at application, during redetermination or through a quality
control review. Recipient cooperation during a MEQC review is
longstanding. Also, the proposed rule would not have required States to
terminate program eligibility as a result of the reviews. As such, we
do not agree that the review would have created a significant burden
for beneficiaries or resulted in disenrollment. When we determine the
type of eligibility reviews for Medicaid and SCHIP to be implemented
under IPIA, we will address this issue.
Comment: Many commenters expressed concern that the regulation
would have barred reviewers from counting the ``administrative period''
which is currently used in MEQC to account for the time permitted for a
person to submit changes in eligibility information and for the time
for the State to process these data.
Response: We will consider this comment in the context of the
workgroup in determining the best approach to eligibility reviews under
the IPIA and we will address it in a subsequent document.
Comment: Many commenters noted that if eligibility reviews remained
in PERM, CMS and the States would need to develop a system to review
for errors in denials of eligibility or recertification,
[[Page 58271]]
in order to comply with the IPIA. They argued that the OMB guidance for
IPIA stated that payment error estimates should include estimates of
inappropriate denials of services; PERM included no efforts to measure
erroneous denials of eligibility or to measure progress in serving
eligible people.
Response: Current Federal regulations require States to review a
sample of Medicaid denials and terminations under MEQC which helps
protect beneficiaries against erroneous denials and terminations of
Medicaid. SCHIP agencies can institute a similar review. OMB guidance
did not include erroneous denials of eligibility as eligibility
decisions do not always drive Medicaid or SCHIP payment. However, we
will revisit this concern with the eligibility workgroup and will
address it in a subsequent issuance.
E. Reporting and Recordkeeping
Comment: A few commenters stated that medical records do not lend
themselves to replication for record retention, for example, x-rays,
and asked if scanning is allowed for any and all records.
Response: Those States selected for reviews will submit information
that the contractor will scan and retain. Therefore, States will not be
required to retain this information for purposes of error rate
measurements under the OMB guidance. The collection of this information
is permitted (subject to privacy restrictions) under the HIPAA
provisions and our regulations at 45 CFR Part 164.
Comment: In commenting on retaining records for Federal re-review
or audits, a few commenters asked whether there will be some level of
tolerance that will keep Federal re-reviews and audits from occurring.
The commenters stated that it is becoming difficult to accommodate the
various audits from internal and external sources.
Response: The proposed rule would have required States to retain
records for Federal re-review and future audits on the basis that the
States were conducting the reviews and calculating the State-specific
error rates. However, since the records to support the medical
determinations and the calculation of the State-specific error rates
and the national error rate will be retained by the national
contractor, the Federal re-reviews (for example, OIG review) will be
conducted at the national contractor location(s).
Comment: A few commenters asked that the final rule verify the
assumption that the States' electronic files and records meet the
requirements of the rule regarding supporting the testing and
statistical calculation of the Medicaid and SCHIP error rates.
Response: We would be unable to verify any assumption that States'
documentation retained for purposes of supporting the error rate is
adequate since we would have no control over what documentation the
States retained and if States retained all documentation in good and
full form for the required period of time. We are proposing that under
our Federal contractor's methodology insufficient documentation to
support a determination that the claim was correctly paid would be
considered an error for the purposes of the IPIA.
F. Recoveries
Comment: A few commenters stated that the Federal share of any
overpayment be returned within 60 days of the actual recovery of the
payment, rather than identification of the payment, and that the States
should decide whether pursuing recovery is cost effective since
pursuing recoveries against providers on a claim-by-claim basis is
administratively burdensome.
Response: As stated earlier, the requirement to return the Federal
share of erroneous payments within 60 days of identification is
longstanding in statute and regulation and does not allow for only
cost-effective recoveries. The provisions of the recovery regulation
were open to public comment at the time of its publication. It is
outside the scope and intent of this regulation to amend provisions of
separate, existing regulations.
Comment: A few commenters asked how the recovery is affected by the
MEQC statute under which improper payments based on eligibility errors
are recouped, particularly if a State is conducting MEQC pilots or has
its MEQC program attached to its research and demonstration waiver
under section 1115 of the Act.
Response: Improper payments based on eligibility determinations are
subject to recovery under section 1903(u) of the Act which governs the
MEQC program. Thus, these payments are not subject to recovery under
section 1903(d)(2) of the Act.
Comment: A few commenters asked how erroneous eligibility
determinations, though exempt from Medicaid overpayments, will be
reported.
Response: The proposed rule did not exempt the reporting of
erroneous eligibility determinations or overpayments on this basis. The
proposed rule merely stated that section 1903(u) of the Act governs the
recovery of overpayments based on eligibility errors. As stated in this
interim final rule, we will determine the eligibility review process
with the assistance of the workgroup and will respond to the reporting
of improper eligibility determinations under the IPIA in a later
document.
Comment: A few commenters recommended that CMS consider that
overpayments may be part of fraud investigations and the Medicaid Fraud
and Control Unit (MFCU) may not want State intervention in an active
investigation.
Response: Because the proposed rule has been substantially altered
through the use of a Federal contractor, State intervention in an
active CMS fraud investigation is no longer a relevant issue.
Conversely, the Federal contractor will not know which claims in the
sample are under State fraud investigation nor would the contractor be
working directly with the MFCUs during the course of the medical and
data processing reviews.
Comment: A few commenters stated that, since States return the
Federal share of overpayments, States should receive additional funds
for underpayments.
Response: We agree with the commenters. States that make
adjustments for underpayments would draw down the appropriate Federal
matching funds.
Comment: A few commenters suggested that measuring improper
payments in Medicaid and SCHIP should include adequate safeguards to
prevent against repayments of Federal funds when genuine errors do not
exist, for example, an incorrect date of service that, if corrected,
would not affect the amount of payment.
Response: The recoveries provision in the proposed rule was a
cross-reference to existing State requirements to refund the Federal
share of payments when an overpayment occurred. It is outside the scope
of this rule to make exceptions or changes to another regulation.
Therefore, we are not adopting this recommendation in the interim final
rule.
Comment: A few commenters recommended that States be required only
to return the Federal share of any payments after all the overpayments
and underpayments are taken into consideration.
Response: The proposed rule was not intended to make exceptions or
changes to another regulation. Therefore, we are not adopting this
recommendation.
Comment: A few commenters recommended that small overpayments
[[Page 58272]]
that resulted in an expanded investigation would reap more Federal
share of funds returned. Therefore, the commenters recommend that
overpayments should be returned as one large payment rather than two
separate payments.
Response: We are unable to adopt this recommendation because it
would violate the current requirement that States return the Federal
share within 60 days of identification of an overpayment.
G. Appeals
Comment: A few commenters stated that the proposed rule is devoid
of any discussion of provider notification and appeal rights when an
error has been determined, nor does it provide an opportunity to appeal
or indicate how the process would use the existing notification and
appeals process for both beneficiaries and providers.
Response: Appeals procedures are not modified by this rule and
therefore have not been addressed. To summarize, if the State
retrospectively denied the claim, the provider could appeal the denial
under the existing State appeal process. If the provider won the
appeal, we would back the error out of the error rate calculation,
either at the time of the error rate calculation or, for claims
reviewed towards the end of the year, subsequent to the error rate
calculation.
Regarding beneficiaries, we do not make payments to beneficiaries
except in limited circumstances permitted by CMS regulation or policy,
so we do not anticipate that they will be impacted by this rule. Also,
States must, under current regulations at Sec. 435.916, redetermine
Medicaid eligibility prior to terminating program benefits. Therefore,
the State cannot terminate program benefits based on any eligibility
errors found through these reviews without first doing a
redetermination. If the redetermination concludes the person is no
longer eligible, the normal beneficiary appeals process would occur at
that time. Similarly, the SCHIP program provides for beneficiaries to
appeal any proposed termination action.
IV. Provisions of the Interim Final Rule
[If you choose to comment on issues in this section, please include
the caption ``PROVISIONS of the INTERIM FINAL RULE'' at the beginning
of your comments.]
The IPIA requires the Secretary to annually review all programs and
activities that are susceptible to significant improper payments,
estimate the amount of improper payments, and report those estimates to
the Congress. OMB has identified Medicaid and SCHIP as programs at risk
for significant improper payments. Because of the wide variation in
States' Medicaid and SCHIP programs due to the flexibility States have
in developing coverage, eligibility determination policies, benefit,
and reimbursement aspects of the programs, we rely on State-specific
information to develop State-level estimates.
Based on comments and recommendations received on the August 27,
2004 proposed rule, we will adopt the recommendation to use a Federal
contractor to estimate medical and data processing error rates for
Medicaid and SCHIP based on reviews of adjudicated claims. By FY 2008,
we expect to be compliant with the IPIA requirements. In FY 2006, we
will use a Federal contractor to estimate improper payments from
medical and data processing reviews in the fee-for-service component of
Medicaid and establish a workgroup to make recommendations on the best
approach for reviewing Medicaid and SCHIP eligibility within the
confines of current statute and with minimal budgetary impact for
purposes of meeting IPIA requirements to measure improper payments
based on payments to ineligibles.
Under the national contracting strategy, a number of States will be
selected for review. Our sampling methodology will ensure that each
State will be selected once, and only once, every 3 years for each
program. The error rates produced by this selection methodology will
provide the State with a State-specific error rate estimated to be
within 3 percent precision at the 95 percent confidence level.
The contractor will select a number of States to be reviewed.
States selected for review will submit the previous year's claims data
and expenditures, not already otherwise provided by CMS, after which
the contractor will determine each State's sample size and the sample
size for each stratum. These States also will submit quarterly
adjudicated and stratified claims data to the contractors who will pull
a statistically valid random sample, each quarter, by stratum. Based on
previous estimates, the average sample size per State is expected to be
1,000 claims (based on a previous estimate of range of 800 to 1,200
claims per State).
The contractor will conduct medical and data processing reviews.
Initially, the eligibility reviews will not be conducted. We will
convene a workgroup that will consider the best approach to measure
improper payments based on eligibility errors within the confines of
current law and with minimal budgetary impact. It is possible that
States will be required to conduct at least part of the eligibility
tests, should the workgroup recommend it. Any additional requirements
placed on States will be detailed in a subsequent issuance.
This interim final rule sets forth the State requirements to
provide information to us for purposes of estimating medical and data
processing improper payments in Medicaid and SCHIP. Section 1102 of the
Act authorizes the Secretary to establish regulations as may be
necessary for the efficient administration of the Medicaid and SCHIP
programs. Medicaid law at section 1902(a)(6) of the Act and SCHIP law
at section 2107(b)(1) of the Act require States to provide information
necessary for the Secretary to monitor program performance. Through
these statutory provisions, this interim final rule with comment period
requires only those States selected for review to provide the
contractor with the following information needed to monitor program
performance by submitting, at a minimum, the following information:
The previous year's claim data and expenditures, not
already otherwise provided by CMS from which the contractor will
stratify claims and determine sample sizes.
Quarterly adjudicated and stratified claims data from the
review year that are needed to select a random sample of claims for
review in each State.
All medical policies in effect and quarterly medical
policy revisions needed to review claims.
Systems manuals needed for data processing reviews.
Current provider contact information; verified and/or
updated as necessary to have providers submit medical records needed
for medical reviews.
Repricing of claims the contractor determines to be in
error.
Claims that were included in the sample, but the
adjudication decision changed due to the provider appealing the
determination and the State overturning the original decision.
An annual report on corrective actions to reduce the error
rate.
Other information that the Secretary determines is
necessary for, among other purposes, estimating improper payments and
determining error rates in Medicaid and SCHIP.
States selected for review also will provide technical assistance
as needed to allow the contractor to fully and effectively perform all
functions necessary to produce the program error rates.
[[Page 58273]]
In addition, regulations at Sec. 430.35 and Sec. 457.204 govern
State compliance with Federal requirements in Medicaid and SCHIP,
either because the State plan does not comply with Federal requirements
or because the State is not complying in practice. Under these
regulations, the Administrator notifies a State that it is in
noncompliance with a particular regulation and that no further payments
will be made to the State or that only partial payments will be made,
that is, in areas not affected by the noncompliance, until the
Administrator is satisfied that the State has come into compliance. The
Administrator has the discretion to enforce these regulations in
instances when States do not cooperate in a timely and efficient manner
with us in producing Medicaid and SCHIP program error rates for IPIA
purposes. Finally, section 1902(a)(27) of the Act requires providers to
retain records necessary to disclose the extent of services provided to
individuals receiving assistance and furnish the Secretary with
information regarding any payments claimed by the provider for
furnishing the services as the Secretary may request.
This interim final rule with comment period does not require States
to estimate the annual total improper medical and data processing
payments and produce payment error rates in Medicaid and SCHIP using
the methodology described in the proposed rule. The provisions of this
interim final rule with comment period will be set forth in 42 CFR part
431, subpart Q and in part 457, subpart G, as in the proposed rule,
with the following changes:
Section 431.950 in the proposed rule would have required States to
estimate improper payments and produce payment error rates in Medicaid
and SCHIP. This section will be revised by the interim final rule with
comment period to state that the purpose of the rule is to require
States to submit information necessary to enable the Secretary to
produce a national improper payment error rate for the Medicaid and
SCHIP programs. This interim final rule includes the types of
information that States would need to submit in order for CMS to
estimate improper payments in Medicaid fee-for-service (FFS) beginning
in FY 2006 by conducting medical and data processing reviews on claims
made in the FFS setting. CMS will address estimating improper payments
for Medicaid managed care and eligibility and SCHIP FFS, managed care
and eligibility at a later time.
Section 431.954(a) in the proposed rule set forth the statutory
basis for the Secretary's general rulemaking authority and the States'
obligation to provide information for monitoring program performance.
This section will be revised to add the statutory reference of section
1902(a)(27) of the Act, which requires providers to retain and provide
medical records necessary to disclose the extent of services provided
to individuals receiving assistance and any payments claimed by the
provider for furnishing the services as the Secretary may request.
Section 431.954(b) in the proposed rule would have set forth the
scope of the statutory provisions as requiring States to annually
estimate total Medicaid and SCHIP improper payments in their States and
submit to the Secretary the payment error rates. This section will be
revised by the interim final rule with comment period to set forth the
types of information that the States and providers are required to
submit to the Secretary for the purposes of estimating improper
payments in Medicaid and SCHIP.
Section 431.958 which, in the proposed rule, would have set forth
the definitions and use of terms, will be revised by the interim final
rule to strike all definitions except the following definitions:
improper payment; payment; and payment error rate.
Section 431.962 in the proposed rule would have set forth the State
plan requirements for providing and submitting to the Secretary
estimates of the payment error rates for Medicaid and SCHIP. This
section is removed in the interim final rule because States are no
longer required to submit estimates of the payment error rates for
Medicaid and SCHIP. However, existing Medicaid and SCHIP regulations
require: (1) State plans to include assurance that the State collects
data, maintains records and furnishes reports to the Secretary (see
Sec. 457.720 for SCHIP and Sec. 431.16 and Sec. 431.17 for Medicaid;
and, (2) that the SCHIP and Medicaid programs must include methods of
administration that the Secretary finds necessary for the proper and
efficient operation of the program (see Sec. 457.910 for SCHIP and
Sec. 431.15 and Sec. 435.903 for Medicaid). Therefore, to avoid
States incurring additional cost and burden, we believe it is not
necessary to require States to submit new State plan material requiring
submission of information to the Secretary since we believe these
requirements are covered under these current regulations and are
included in this interim final rule.
Section 431.970 in the proposed rule would have set forth the
requirement that States provide annually to the Secretary payment error
rates for both Medicaid and SCHIP. That section is replaced by a new
Sec. 431.970 in this interim final rule with comment period to specify
the information that States would be required to provide to the
Secretary that is necessary for, among other purposes, estimating
improper payments and determining error rates in Medicaid and SCHIP and
for submitting a corrective action report for purposes of reducing the
error rate.
Sections 431.974, 437.978, 437.982, 431.986, and 431.990, which
prescribe the basic elements of PERM and set forth the methodology by
which States would sample and review claims, report the error rates,
and retain records are removed.
Section 431.1002 in the proposed rule reiterates for the reader's
convenience current regulations at Sec. 433.312 that requires States
to return the Federal share of overpayments identified through the
State reviews. This section is revised in the interim final rule with
comment period to remove the phrase ``in the sampled claims reviewed
for data processing and medical necessity'' and to cross-reference the
existing regulatory requirement for States to return the Federal share
of overpayments within 60 days of identification. This section is for
the reader's convenience only and is not intended to revise the
existing regulatory requirement at Sec. 433.312.
Section 457.720 is revised to include the same requirements in this
section that are included in Sec. 431.970.
V. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 30-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Therefore, we are soliciting public comment on each of these issues
for the following sections of this document that
[[Page 58274]]
contain information collection requirements:
Section 431.970 of this document contains information collection
requirements. This section sets forth requirements for States to
provide information to us for purposes of estimating medical and data
processing improper payments in Medicaid and SCHIP. Only those States
selected for review will be required to provide the contractor, at a
minimum, with the following information needed to monitor program
performance:
The previous year's claim data and annual expenditures,
not already otherwise provided by CMS, from which the contractor will
stratify claims and determine sample sizes.
Quarterly adjudicated and stratified claims data from the
review year that are needed to select a random sample of claims for
review in each State.
All medical policies in effect and quarterly medical
policy revisions needed to review claims.
Systems manuals needed for data processing reviews.
Current provider contact information; verified and/or
updated as necessary to have providers submit medical records needed
for medical reviews.
Repricing of claims the contractor determines to be in
error.
Claims that were included in the sample, but the
adjudication decision changed due to the provider appealing the
determination and the State overturning the original decision.
An annual report on corrective actions to reduce the error
rate.
Other information that the Secretary determines is
necessary for, among other purposes, estimating improper payments and
determining error rates in Medicaid and SCHIP.
The burden associated with this requirement is the time and effort
necessary for States to collect this information and provide it to the
Federal contractor. The number of respondents is estimated to be up to
36 States (up to 18 Medicaid and up to 18 SCHIP States). The annualized
number of hours that may be required to respond to the requests for
information equals 58,680 hours (1630 hours per State per program).
As required by section 3504(h) of the Paperwork Reduction Act of
1995, we have submitted a copy of this document to the Office of
Management and Budget (OMB) for its review of these information
collection requirements.
A notice of this proposed collection was previously published in
the Federal Register for public comment on July 22, 2005 (70 FR 42324).
That document was available for public inspection at the Office of the
Federal Register beginning on July 15, 2005 and comments were requested
by August 15, 2005 (30 days from date of public display). The shortened
timeframe for public comment is essential so that CMS can proceed with
data collection from States and providers by October 2005 to meet the
deadlines for reporting national Medicaid error rate to Congress.
If you comment on these information collection and recordkeeping
requirements, please mail copies directly to the following:
Centers for Medicare & Medicaid Services, Office of Strategic
Operations and Regulatory Affairs, Regulations Development Group, Attn:
William Parham Room C4-26-05, 7500 Security Boulevard, Baltimore, MD
21244-1850; and
Office of Information and Regulatory Affairs, Office of Management
and Budget, Room 10235, New Executive Office Building, Washington, DC
20503, Attn: Katherine Astrich, CMS Desk Officer, CMS-6026-IFC,
KAstrich@omb.eop.gov. Fax (202) 395-6974.
VI. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
VII. Regulatory Impact Statement
[If you choose to comment on issues in this section, please include
the caption ``REGULATORY IMPACT STATEMENT'' at the beginning of your
comments.]
A. Overall Impact
We have examined the impact of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
Executive Order 12866 (as amended by Executive Order 13258, which
merely reassigns responsibility of duties) directs agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
We estimate that it will cost up to $11.16 million in Federal funds for
a Federal contractor to estimate Medicaid FFS error rates in up to 18
States. Contingent on available funds, we plan to implement reviews to
produce a Medicaid FFS error rate to be reported in the FY 2007 PAR.
We estimated it would cost $620,000 per State per program based on
a cost of $360 per claim multiplied by an average of 1,000 claims plus
$260,000 for travel and other administrative expenses. Based on
$620,000 per State to estimate error rates in Medicaid and $620,000 per
State to estimate error rates in SCHIP, error rate estimates for up to
18 States would cost a total of up to $22.3 million (up to $11.16
million in each program).
Since we have not determined the type of eligibility review that
will be done to gather eligibility error rates under IPIA, we cannot
state for certain what State and Federal costs will be added to the
approximate $22.3 million Federal amount. We have determined that the
interim final rule with comment period will not exceed the annual $100
million threshold impact criterion and an impact analysis is not
required under E.O. 12866.
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
jurisdictions. Most hospitals and most other providers and suppliers
are small entities, either by nonprofit status or by having revenues of
$6 million to $29 million in any 1 year. A request for medical
documentation to substantiate a claims payment is not a burden to
individual providers nor is the request outside the customary and usual
business practice of a Medicaid and/or SCHIP provider. Not all States
will be reviewed every year so it is highly unlikely for a provider to
be selected more than once, per program per year to provide supporting
documentation. In addition, the information should be readily available
and the response should take minimal time and cost since the response
requires gathering the documents and either copy and mail them, send by
facsimile or transmit electronically. Therefore, the request for
medical documentation from providers is within the customary and usual
[[Page 58275]]
business practice of a provider who accepts payment from an insurance
provider whether it is a private organization, Medicare, Medicaid or
SCHIP and should not have a significant impact on the provider's
operations. Individuals and States are not included in the definition
of a small entity. Therefore, an impact analysis is not required under
the RFA.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Core-Based
Statistical Area and has fewer than 100 beds.
These entities may incur costs due to collecting and submitting
medical records to the contractor to support medical reviews but, like
any other Medicaid and/or SCHIP provider, we estimate these costs would
not be outside the usual and customary business practice nor do we
anticipate that a great number, if any, small rural hospitals would be
asked for medical records. As stated above, not all States will be
reviewed every year so it is highly unlikely for a provider to be
selected more than once, per program per year to provide supporting
documentation. Therefore, an impact analysis is not required under
section 1102(b) of the Social Security Act.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in expenditure in any 1 year by State,
local, or tribal governments, in the aggregate, or by the private
sector, of $110 million. In the proposed rule, we estimated that the
total computable cost will range from $1 million to $2 million (total
computable) for States to measure Medicaid and SCHIP error rates.
States commenting on the proposed rule estimated the costs to be
higher, and a few States estimated the costs at three times that
amount. In this interim final rule with comment period, we are not
requiring States to measure the error rates but rather are using a
national contractor. This rule is not imposing a cost on States to
produce the error rates but rather requires States and providers to
submit information already on hand to the contractor so that activities
needed to estimate the error rates can be performed. Since the
information is on hand and States and providers are not being required
to develop new materials, the costs associated with submitting
information are for copying and mailing the information although States
and providers have the option to send the information electronically.
Finally, States will be required to develop, submit and implement
corrective action plans designed to reduce the error rates, if
necessary.
Under the proposed rule the costs could have been as high as $6
million total computable by States' estimation to conduct reviews and
calculate States' error rates. This interim final rule with comment
period eliminates all but two of the State requirements contained in
the proposed rule. As the interim final rule with comment period
drastically reduces the costs and burden to States, we do not
anticipate State costs to exceed $110 million.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a rule that imposes substantial
direct requirement costs on State and local governments, preempts State
law, or otherwise has Federalism implications. The proposed rule, which
would have imposed significantly more cost burden on States than this
interim final rule with comment period, had an estimated costs of $1
million to $2 million per State. As the remaining costs will be
significantly lower than these, we assert this regulation will not have
a substantial impact on State or local governments.
The cost and burden associated with submitting this information is
the time and cost to copy and mail the information or, at State option,
submit the information electronically.
B. Anticipated Effects
The interim final rule with comment period is intended to measure
errors in Medicaid and SCHIP. States would implement corrective actions
to reduce the error rate, thereby producing savings. However, these
savings cannot be estimated until after the corrective actions have
been monitored and determined to be effective, which can take several
years.
C. Alternatives Considered
We considered the alternatives recommended by the public commenting
on the proposed rule and adopted the recommendations for a Federal
contractor to review a subset of States. We considered the other
alternatives to be not viable or were not the best approach to meet the
requirements of the law. If sufficient data are available to estimate
these impacts in the final rule, it will be included there. In
constructing the methodology to measure Medicaid and SCHIP error rates,
we considered other alternatives. We considered different sampling
methods in an effort to meet both the requirements in OMB guidance and
our goal of being able to compare error rates from year to year while
providing States with advance knowledge of when they would be selected
for review. We considered random sampling, rotational sampling,
sampling on a stratified probability proportional to size and randomly
selecting States based on probability proportional to size. We
concluded that statistically valid (random) sampling and a stratified
or random probability proportional to size basis would meet OMB
guidelines but would not provide States with the desired predictability
of selection.
In FY 2006, the Federal contractor will group all States into three
equal strata of small, medium and large based on States' annual FFS
Medicaid expenditures from the previous year, and select a random
sample of an estimated 18 States to be reviewed. The error rates
produced by this selection methodology will provide the State with a
State-specific error rate estimated to be within 3 percent precision at
the 95 percent confidence level. For subsequent years, our sampling
methodology will ensure that each State will be selected once, and only
once, every 3 years for each program.
Regarding the eligibility reviews, because the majority of the cost
and burden are attributable to verifying eligibility, we considered
limiting the reviews to confirming that persons were actually enrolled
in the program at the time of service. We considered augmenting this
review with strengthening the current MEQC eligibility oversight
activities. However, we determined that an eligibility workgroup should
be convened to make recommendations on the best approach to Medicaid
and SCHIP eligibility reviews. We plan to have recommendations from the
workgroup in FY 2006 so that eligibility reviews can commence in FY
2007 for error rate reporting in the FY 2008 PAR.
D. Conclusion
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
List of Subjects
42 CFR Part 431
Grant programs-health, Health facilities, Medicaid, Privacy,
Reporting and recordkeeping requirements.
[[Page 58276]]
42 CFR Part 457
Administrative practice and procedure, Grant programs-health,
Health insurance, Reporting and recordkeeping requirements.
0
For the reasons set forth in the preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 431--STATE ORGANIZATION AND GENERAL ADMINSTRATION
0
1. The authority citation for part 431 continues to read as follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
0
2. Part 431 is amended by adding new subpart Q to read as set forth
below:
Subpart Q--Requirements for Estimating Improper Payments in
Medicaid and SCHIP
Sec.
431.950 Purpose.
431.954 Basis and scope.
431.958 Definitions and use of terms.
431.970 Information submission requirements.
431.1002 Recoveries.
Subpart Q--Requirements for Estimating Improper Payments in
Medicaid and SCHIP
Sec. 431.950 Purpose.
This subpart requires States to submit information necessary to
enable the Secretary to produce a national improper payment estimate
for Medicaid and the State Children's Health Insurance Program (SCHIP).
Sec. 431.954 Basis and scope.
(a) Basis. The statutory bases for this subpart are sections 1102,
1902(a)(6), and 2107(b)(1) of the Act, which contain the Secretary's
general rulemaking authority and obligate States to provide
information, as the Secretary may require, to monitor program
performance. In addition, this rule supports the Improper Payments
Information Act of 2002, (Pub. L. 107-300) which requires Federal
agencies to annually review and identify those programs and activities
that may be susceptible to significant erroneous payments, estimate the
amount of improper payments, and report those estimates to the Congress
and, submit a report on actions the agency is taking to reduce
erroneous payments. Section 1902(a)(27) of the Act requires providers
to retain records necessary to disclose the extent of services provided
to individuals receiving assistance and furnish the Secretary with
information regarding any payments claimed by the provider for
furnishing services, as the Secretary may request.
(b) Scope. This subpart requires States under the statutory
provisions in paragraph (a) of this section to submit Medicaid and
SCHIP expenditures and claims data, medical policies, data processing
manuals and other information as necessary for, among other purposes,
estimating improper payments in Medicaid and SCHIP. This subpart also
requires States to submit corrective action reports as prescribed by
the Secretary for purposes of reducing their payment error rates. This
subpart also requires providers to submit medical records and other
information necessary to disclose the extent of services provided to
individuals receiving assistance and furnish the information regarding
any payments claimed by the provider for furnishing the services, to
the Secretary as requested.
Sec. 431.958 Definitions and use of terms.
As used in this subpart, the following definitions apply:
Improper payment means any payment that should not have been made
or that was made in an incorrect amount (including overpayments and
underpayments) under statutory, contractual, administrative, or other
legally applicable requirements; and includes any payment to an
ineligible recipient, any duplicate payment, any payment for services
not received, any payment incorrectly denied and any payment that does
not account for credits or applicable discounts.
Payment means any payment to a provider, insurer, or managed care
organization for a Medicaid or SCHIP recipient for which there is
Medicaid or SCHIP Federal financial participation. It may also mean a
direct payment to a Medicaid or SCHIP recipient in limited
circumstances permitted by CMS regulation or policy.
Payment error rate means an annual estimate of improper payments
made under Medicaid and SCHIP equal to the sum of the overpayments
(including payments to ineligible recipients) and underpayments, that
is, the absolute value, expressed as a percentage of total payments
made over the sampling period.
Sec. 431.970 Information submission requirements.
States must submit information to the Secretary for, among other
purposes, estimating improper payments in Medicaid and SCHIP, that
include but are not limited to--
(a) Claims data and annual expenditures from previous year;
(b) Quarterly, stratified adjudicated claims data from the review
year;
(c) All medical and other policies in effect and quarterly updates
as needed to perform claims reviews;
(d) Data processing systems manuals;
(e) Current provider contact information that is verified and/or
updated to contain current provider contact information;
(f) Repricing information for claims that are determined to be
improperly paid;
(g) Other information that the Secretary determines is necessary
for, among other purposes, estimating improper payments and determining
error rates in Medicaid and SCHIP, and
(h) A corrective action report as prescribed by the Secretary for
purposes of reducing the payment error rate.
Sec. 431.1002 Recoveries.
States must return to CMS the Federal share of overpayments
identified within 60 days in accordance with section 1903(d)(2) of the
Act and related regulations at part 433, subpart F of this chapter.
Payments based on erroneous Medicaid eligibility determinations are
exempt from this provision because they are addressed under section
1903(u) of the Act and related regulations at part 431, subpart P of
this chapter.
SUBCHAPTER D--STATE CHILDREN'S HEALTH INSURANCE PROGRAM
PART 457--ALLOTMENTS AND GRANTS TO STATES
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3. The authority citation for part 457 continues to read as follows:
Authority: Section 1102 of the Social Security Act (42 U.S.C.
1302).
Subpart G--Strategic Planning, Reporting, and Evaluation
0
4. Section 457.720 is revised to read as follows:
Sec. 457.720 State plan requirement: State assurance regarding data
collection, records, and report.
A State plan must include an assurance that the State collects
data, maintains records, and furnishes reports to the Secretary, at the
times and in the standardized format the Secretary may require to
enable the Secretary to monitor State program administration and
compliance and to evaluate and compare the effectiveness of State plans
under title XXI. This includes collection of data and reporting as
required under Sec. 431.970 of this chapter.
[[Page 58277]]
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)
(Catalog of Federal Domestic Assistance Program No. 93.767, State
Children's Health Insurance Program)
Dated: August 16, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
Approved: August 22, 2005.
Michael O. Leavitt,
Secretary.
[FR Doc. 05-19910 Filed 9-30-05; 11:03 am]
BILLING CODE 4120-01-P