Improper payments in Medicare and Medicaid – overpayments, underpayments, or payments where insufficient information was provided to determine whether a payment was “proper” – remain on the downswing.
Specifically, the estimated improper payment rate for fee-for-service Medicare in Fiscal Year 2025 was 6.55%, or $28.8 billion, according to the U.S. Centers for Medicare & Medicaid Services (CMS). That’s down from 7.66%, or $31.7 billion, for Fiscal Year 2024.
Contextually, the Medicare improper payment rate has fallen below 10% for nine consecutive years.
“While CMS’ improper payment reporting programs are designed to protect the integrity of CMS programs, improper payment measurement is not a measure of fraud, and not all improper payments are attributable to fraud or abuse,” CMS wrote in a Jan. 15 fact sheet. “Rather, it is important to understand that improper payments are payments that do not meet CMS program payment requirements.”
Ambulatory surgery centers (ASCs) aren’t the biggest drivers of improper payments, but they do account for a portion.
According to 2024 Medicare fee-for-service supplemental improper payment data, the improper payment rate for ASCs was 14.7% that year, with a projected improper payment amount of $656.3 million.
Insufficient documentation accounted for 58.8% of improper payments for ASCs during the 2024 reporting period, according to CMS data, while no documentation (34%) and incorrect coding (7.2%) also caused improper payments.
Generally speaking, insufficient documentation is the No. 1 cause of improper payments across all of health care.
“In some programs, improper payments involve a situation where a state or contractor misses an administrative step that had it been properly completed would have resulted in a proper payment,” CMS noted in its fact sheet.
For ASC operators, the updated data reinforce the growing emphasis CMS has placed on documentation accuracy, coding consistency and internal compliance controls, particularly as the agency continues to refine how it measures and recovers improper payments.
This emphasis includes the launch of programs such as the Wasteful and Inappropriate Service Reduction (WISeR) Model.
The Medicaid improper payment rate was also below 10%.
“The Medicaid estimated improper payment rate (comprised of the past three cycles of approximately 17 state per cycle from reviews in 2023, 2024, and 2025) was 6.12%, or $37.39 billion, compared to the FY 2024 reported rate of 5.09%, or $31.10 billion,” CMS wrote in the fact sheet.
