Newly released federal data reveals the scale of incorrect payments within the nation’s major public health programs, with both progress and persistent challenges highlighted in the latest annual review.
The Centers for Medicare & Medicaid Services (CMS) has published its Fiscal Year 2025 improper payment estimates, reporting tens of billions in payments that failed to meet precise program rules. Officials stress that the vast majority of these errors are not due to fraud but rather to administrative mistakes, missing paperwork, or technical filing issues.
“Our responsibility is to safeguard these programs for the long term,” a CMS statement noted, clarifying that “improper payment” is a broad term. It can mean an overpayment, an underpayment, or simply a payment where reviewers lacked enough documentation to judge its accuracy.
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The Numbers: A Mixed Picture
The report card shows significant variation across programs:
- Traditional Medicare (Fee-for-Service): Saw its error rate drop to 6.55% ($28.83 billion), marking the ninth straight year it has remained below a key 10% compliance threshold. This continues a positive trend from the previous year’s 7.66% rate.
- Medicare Advantage (Part C): Experienced an increase, with an estimated 6.09% error rate ($23.67 billion), up from 5.61% last year. CMS states most errors here stem from insurers failing to fully document patient diagnoses used to calculate payments.
- Medicare Prescription Drug Coverage (Part D): Errors rose slightly to 4.00% ($4.23 billion) from 3.70%.
- Medicaid & CHIP: Both programs for low-income families and children saw notable increases. Medicaid’s error rate is estimated at 6.12% ($37.39 billion), while the Children’s Health Insurance Program (CHIP) rate is 7.05% ($1.37 billion). CMS directly links these rises to states resuming normal eligibility checks after pandemic-era flexibilities were lifted. Over three-quarters of Medicaid errors were due to “insufficient documentation.”
- Affordable Care Act Premium Tax Credits: The error rate for these advance payments was low at 0.89% ($657 million) and improved from last year. Nearly half of the errors were due to manual data entry mistakes, like typos in names or birth dates.
Context and Causes
The report underscores that error measurement is a core accountability tool. By law, an improper payment is considered “significant” if it exceeds $10 million and 1.5% of a program’s total outlays, or simply tops $100 million.
The primary cause of errors across the board was a lack of proper documentation—a state, hospital, doctor, or health plan did not provide enough paperwork for auditors to verify a payment was correct. This is generally an administrative failure, not evidence of criminal fraud or abuse.
A portion of errors, particularly in Medicaid and the ACA marketplace, are classified as “technically improper.” This means the correct person received the correct amount of money, but a step in the payment process did not follow a specific technical rule.
The full data is contained in the HHS Agency Financial Report for FY 2025. Detailed explanations of how CMS measures payment accuracy are available on the agency’s website.