Senior Policy Analyst
The Centers for Medicare & Medicaid Services (CMS) has released its 2020 Estimated Payment Error Rate Measurement (PERM) rate — which measures “improper” payments in Medicaid and the Children’s Health Insurance Program (CHIP) — but policymakers shouldn’t use it to justify imposing additional, burdensome verification and paperwork requirements or to distract from the larger problem of eligible people losing coverage and access to care. That’s because, despite how some program critics have represented them, these rates measure state procedural mistakes; they don’t necessarily mean a beneficiary did anything wrong or was ineligible for Medicaid.
The data that CMS released are based on audits of whether states are implementing their Medicaid and CHIP programs in accordance with federal and state policies. The PERM program estimates payment error rates in three areas: fee-for-service payments, managed care payments, and eligibility.
The overall PERM rate this year was 21.36 percent. While it’s higher than last year’s 14.9 percent, that’s mostly because CMS measured eligibility payment errors for more states, not because errors increased.
Neither the increase in, nor the level of, the PERM rate means that large numbers of ineligible people are getting coverage through Medicaid.
A finding of an improper payment doesn’t mean the payment was made to an ineligible person or for a service that shouldn’t have been provided. While PERM audits may find some incorrect eligibility determinations, most eligibility errors reflect paperwork problems or other procedural mistakes that can easily occur when eligible people enroll. In fact, the CMS report notes, “Medicaid and CHIP eligibility improper payments are mostly due to insufficient documentation to affirmatively verify eligibility or non-compliance with eligibility redetermination requirements,” rather than a finding of ineligibility. Many Medicaid errors also occur when states enroll providers — or providers bill for services — without following all relevant federal and state procedures.
For example, all of the following procedural mistakes would count toward the error rate, even though they wouldn’t result in ineligible people getting coverage:
States can also be found in error when their actions are based on a misunderstanding of policy, or even when CMS changes its interpretation of federal policy. That happened last year in Idaho. Based on past CMS guidance, Idaho automatically renewed beneficiaries who had previously attested that they had no income and for whom electronic data sources also show no income. But during last year’s PERM audit, CMS informed Idaho that its process didn’t comply with federal requirements and that all such renewals would count toward its PERM rate.
Idaho’s experience also illustrates the harm when states are pushed to impose new and burdensome verification requirements. Because of CMS’ feedback, Idaho has changed its verification process, requiring additional documentation from beneficiaries before renewing their coverage. These changes have caused beneficiaries, including eligible children with complex health care needs, to lose coverage and forgo needed medical care while trying to re-enroll in Medicaid.
Before COVID-19, Medicaid enrollment had been declining, and uninsurance had risen for both children and adults — trends the Trump Administration helped drive with its push to increase verification and paperwork requirements. Instead of maintaining this harmful approach, the Biden Administration should recognize that program integrity also requires making sure that eligible people can get and stay covered and should work with states to streamline eligibility and enrollment processes while maintaining accuracy.