Estimating Payment Error for Medicare Acute Care Inpatient Services

CMS recently assumed responsibility for estimating the Medicare fee-for-service (FFS) error rate from the Office of the Inspector General (OIG). Here, the method used to calculate national, by State, and by error type, estimates for the inpatient acute care portion of this rate is presented. For fiscal years (FYs) 1998 and 2000 discharges, national estimates for the net error rate were 2.6 and 2.8 percent, respectively, about $2 billion annually. Wide variation in State rates illustrates that estimates to the State level are essential for targeting and monitoring interventions to reduce improper Medicare inpatient acute care reimbursements.