Medicare Seeks to Cut Frivolous Expenses

Medicare (search) wants to cut the rate of questionable payments by more than half, to 4 percent, by 2008, administrator Mark McClellan (search) says.

"The main objective here is to pay it right," McClellan said Monday, the day Medicare reported that private companies that process health claims from its beneficiaries made nearly $20 billion in erroneous or questionable payments last year, an error rate of 9.3 percent.

That performance was a slight improvement over the previous year.

The error rate measures claims that were paid despite being medically unnecessary, inadequately documented or improperly coded. In some instances, Medicare asked health care providers for medical records to back up their claims and got no response.

The survey does not document instances of alleged fraud, McClellan said.

More extensive payment reviews and other quality controls will help the agency achieve the 4 percent goal, he said.

Medicare, the government health program for older and disabled Americans, contracts with private insurers to pay more than 1 billion claims each year. Monday's report was based on a survey of 160,000 claims, Medicare said.

Last year, Medicare reported the error rate as 5.8 percent, but that figure had been adjusted to factor out a high proportion of claims for which the health care provider did not respond to Medicare's request for documentation.

The unadjusted rate was 9.8 percent, using the same criteria that produced this year's 9.3 percent rate.

Medicare said it abandoned the adjustment because its analysis was larger and more detailed.

Sen. Charles Grassley (search), R-Iowa, who sharply criticized last year's adjustment, said Monday the public is getting a more complete picture in the new report.

Still, Grassley said, "With an improper payment amount of nearly $20 billion and an error rate approaching double digits, there is clearly an unacceptable problem here."

The review found that doctors and other providers were paid $900 million less than they should have received because of errors made by insurers. By contrast, there were $20.8 billion in questionable overpayments, Medicare said.