31 Dec ADDRESSING IMPROPER PAYMENTS WITH A DATA-DRIVEN SOLUTION
The reported government-wide improper payment rate of 3.97% in 2024 represents the lowest level in over a decade. But below the surface lies a complex reality that exposes systemic flaws in how improper payments are measured and controlled. These numbers, far from representing legitimate progress, underscore the important need for significant reform and solutions.
The Improper Payment Rate
Improper payment rates are often used as a headline metric to signal success or failure. Yet these rates, calculated as a percentage of total spending, tell only part of the story. A declining rate does not always mean less improper payments; it could simply reflect an increase in spending that outpaces the growth of improper payments. As an example, out of the 46 federal programs with consistent data for 2023 and 2024, only about half announced a reduction in improper payment rates. That being said, the picture changes when looking at the actual dollar amounts: two-thirds of these programs documented increased improper payment totals. Some programs spent more but managed to mask these increases with lower rates, while others spent less and still saw improper payments rise. This disconnect highlights the limitations of relying on percentages alone.
Medicaid’s Billion Dollar Problem
Medicaid’s improper payment rate shows these challenges well. In 2023, the program reported a rate of 8.6%, a figure already considered to be underestimated because of the relaxed eligibility requirements during the COVID-19 pandemic. These policies temporarily reduced analysis, skewing the numbers.
By 2024, Medicaid’s improper payment rate dropped dramatically to 5.09%. However, this reduction had less to do with actual improvements and more with the methodology used by the DHHS. Medicaid measures its improper payment rate using a rolling three-year average, meaning the impacts of temporary COVID-19 policies will continue to distort the numbers until at least 2025.
Addressing Medicaid’s Improper Payments
To protect Medicaid from improper payments, several legislative initiatives have been made. While these steps have helped detect and report improper payments, they have done little to reduce them. As a result, agencies expend significant resources on reporting requirements that do little to address the root causes of improper payments. This process-driven mindset diverts attention from proactive, data-driven solutions that could make a real difference. Moreover, the consequences of improper payments extend beyond mere financial loss. They hinder access to quality care for beneficiaries, diverting resources from legitimate medical services and interventions. Individuals may encounter barriers to receiving necessary treatments, while providers face increased scrutiny and regulatory burdens. Moreover, the broader healthcare system bears the brunt of these inefficiencies, grappling with rising costs and diminished effectiveness.
One of the most effective data-driven solutions for combating Medicaid’s improper payments has emerged from the private sector. Syrtis Solutions ( Syrtis) has introduced a technology-based solution to aid the program in identifying third party liability (TPL) before medical and pharmacy claims are paid improperly. Syrtis discovered that Medicaid’s conventional TPL discovery processes’ are primarily retrospective and fail to capture 13.4% of individuals who have unreported primary commercial coverage. Because of this, Medicaid loses billions in improper claims payments; consequently, inefficient post-payment recovery processes are used to recoup the improper payments. To make matters worse, these post-payment recovery efforts only recover less than $0.20 on the dollar. With the aid of Syrtis Solutions and their proprietary ePrescribing data, Medicaid plans are now able to cost avoid pharmacy and medical claims on the front end and significantly reduce improper payments.
A Smarter Way Forward
Improper payments are costing Medicaid and other programs billions of dollars each year. By utilizing data-driven solutions, federal government programs can move from compliance-focused reporting processes to proactive strategies that actually improve efficiency and integrity. This approach will help streamline operations, ensure accountability, and strengthen public trust in the government’s ability to safeguard taxpayer funds.