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$28.8 Billion in Medicare Improper Payments: The Accountability Crisis Behind ‘Errors’
When the Centers for Medicare & Medicaid Services (CMS) reports that Medicare made $28.8 billion in improper payments during fiscal year 2025, officials are quick to call them “administrative errors” or “insufficient documentation.” But when nearly $57 billion in combined Medicare improper payments occurs in a single year, the line between “errors” and systemic accountability failures becomes dangerously blurred.
The Numbers: Breaking Down Medicare’s $57 Billion Problem
The fiscal year 2025 CMS report reveals concerning figures across all Medicare programs:
Medicare Fee-for-Service: $28.83 billion (6.55% improper payment rate)
Medicare Part C (Medicare Advantage): $23.67 billion (6.09% rate) – increased from $19.07 billion in FY 2024
Medicare Part D (Prescription Drugs): $4.23 billion (4.00% rate)
Combined Total: $56.73 billion in Medicare improper payments
Add Medicaid ($37.39 billion) and CHIP ($1.37 billion), and the total across all CMS programs reaches approximately $95.49 billion in a single fiscal year.
What Are “Improper Payments”?
CMS defines improper payments as those failing to meet program requirements, including:
- Overpayments – Money paid that shouldn’t have been
- Underpayments – Providers receiving less than entitled
- Insufficient documentation – Payments made without adequate proof
- Administrative errors – Missing paperwork or incorrect coding
The critical distinction: improper payments are not the same as fraud. However, this creates a dangerous gray area where fraud can hide undetected.
Why “Just Errors” Is a Dangerous Narrative
1. Documentation Gaps Hide Fraud
According to CMS, approximately 64% of traditional Medicare improper payments and 77% of Medicaid improper payments stem from insufficient documentation. Without proper records, it’s impossible to distinguish honest mistakes from deliberate fraud.
2. Lack of Verification Creates Vulnerability
When healthcare providers or Medicare Advantage Organizations fail to substantiate diagnosis codes, the system operates on trust rather than verification, a fundamental failure of stewardship over taxpayer dollars.
3. The Scale Suggests Systemic Issues
When improper payments consistently reach tens of billions annually, calling them “administrative errors” minimizes what is clearly a structural problem requiring urgent reform.
Medicare Advantage’s Growing Problem
The increase in Medicare Advantage improper payments from $19.07 billion to $23.67 billion deserves special attention. The primary issue? Organizations’ documentation failed to substantiate diagnosis codes submitted for payment.
This is concerning because:
- Diagnosis codes drive payment – Plans receive higher payments for sicker patients
- Financial incentive exists – More diagnoses mean more revenue
- Studies suggest upcoding – Some estimates show the federal government pays 20% more for Medicare Advantage enrollees than similar beneficiaries in traditional Medicare
The Real-World Impact
These aren’t just numbers. Improper payments affect real people:
For Medicare Beneficiaries:
- Reduced funds for legitimate healthcare services
- Potential higher premiums and out-of-pocket costs
- Risk of unnecessary treatments when fraud is involved
For Healthcare Providers:
- Honest providers compete against fraudulent operators
- Increased administrative burden
- Resources diverted from patient care to compliance
For Taxpayers:
- Billions in tax dollars misallocated
- Reduced confidence in Medicare’s sustainability
- Increased scrutiny and potential program cuts
Moving Beyond “Errors” to Real Accountability
What CMS Should Do:
- Strengthen documentation requirements with real-time verification
- Increase audit frequency for high-risk providers
- Implement technology that flags suspicious billing before payment
- Publish transparent data on providers with highest improper payment rates
What Patients Can Do:
- Review Medicare Summary Notices for services you didn’t receive
- Report suspicious activity to 1-800-MEDICARE
- Ask questions about diagnoses added to your record
- Keep detailed records of healthcare visits
The Bottom Line
When Medicare reports $28.8 billion in improper payments for traditional Medicare alone or $57 billion across all Medicare programs this isn’t just paperwork. It represents a fundamental breakdown in the systems designed to protect one of America’s most vital programs.
Not all improper payments are fraud, but the system’s inability to verify payments properly creates exactly the environment where fraud can flourish undetected. When we’re talking about tens of billions meant to care for our seniors, we can’t afford to shrug off “errors” as acceptable losses.
It’s time to stop calling this an “error problem” and start treating it as the accountability crisis it truly is.
References
- Centers for Medicare & Medicaid Services. (2026, January 15). Fiscal Year 2025 Improper Payments Fact Sheet. https://www.cms.gov/newsroom/fact-sheets/fiscal-year-2025-improper-payments-fact-sheet
- Fierce Healthcare. (2026, January 16). CMS estimates Medicare made $28.8B in improper payments in FY2025. https://www.fiercehealthcare.com/regulatory/cms-estimates-medicare-made-288b-improper-payments-fy2025
- Florida Hospital News. (2026, January 15). CMS: Fiscal Year 2025 Improper Payments Fact Sheet. https://southfloridahospitalnews.com/cms-fiscal-year-2025-improper-payments-fact-sheet/
- MyChesCo. (2026, January 15). CMS Reports Billions in Improper Payments, But Says Most Are Paperwork Errors. https://www.mychesco.com/a/news/national/cms-reports-billions-in-improper-payments-but-says-most-are-paperwork-errors/
- Kaiser Family Foundation. (2025, August 9). Medicare Program Integrity and Efforts to Root Out Improper Payments, Fraud, Waste and Abuse. https://www.kff.org/medicare/medicare-program-integrity-and-efforts-to-root-out-improper-payments-fraud-waste-and-abuse/
- U.S. Government Accountability Office. (2025, June 26). Medicaid Managed Care: Improper Payment Estimate (GAO-25-107770). https://www.gao.gov/products/gao-25-107770
- Georgetown University Center for Children and Families. (2025, January 10). The Truth about Fraud Against Medicaid. https://ccf.georgetown.edu/2025/01/10/the-truth-about-fraud-against-medicaid/
Disclaimer
This blog is for informational purposes only and does not constitute medical, legal, or financial advice. The information is based on publicly available government data as of January 2026. Reading this article does not create a patient-provider relationship with Priority Medical Group. For questions about your Medicare coverage or to report fraud, contact Medicare at 1-800-MEDICARE or consult qualified professionals. For Priority Medical Group services, visit pmgcare.com.
FAQ:
| 1. What’s the difference between improper payments and Medicare fraud? | Improper payments are any payments not meeting Medicare requirements, including errors or missing documentation. Fraud is the intentional submission of false information. All fraud creates improper payments, but not all improper payments involve fraud; the key difference is intent. |
| 2. How much money does Medicare lose to fraud versus errors? | There’s no exact breakdown because CMS doesn’t classify improper payments as fraud measurements. The $28.8 billion includes both, with most attributed to insufficient documentation making it difficult to determine which involve intentional fraud. |
| 3.Can Medicare recover improper payments? | Yes. CMS and the HHS Office of Inspector General work to identify and recover overpayments through audits. Between October 2021 and February 2025, they completed 899 audits and identified over $33 million in overpayments, recovering nearly $23 million. |
| 4. Why are Medicare Advantage improper payments increasing? | They increased from $19.07 billion to $23.67 billion primarily because Organizations failed to substantiate diagnosis codes. Since plans receive higher payments for sicker patients, there’s financial incentive to report additional conditions. |
| 5. How do improper payments affect my Medicare benefits? | They divert resources from legitimate healthcare, potentially affecting long-term sustainability and contributing to higher premiums, increased cost-sharing, or reduced benefits. If fraud is involved, you might receive unnecessary or harmful treatments. |
| 6. What should I do if I suspect Medicare fraud? | Call 1-800-MEDICARE (1-800-633-4227), contact the HHS Office of Inspector General at 1-800-HHS-TIPS (1-800-447-8477), or file online at https://oig.hhs.gov/fraud/report-fraud . Keep detailed records of all communications. |
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