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Medicare Fee-for-Service

Department of Health and Human Services

Medicare fee-for-service (FFS) is a program that provides hospital insurance (Part A) and supplementary medical insurance (Part B) to eligible citizens.  Part A is usually provided automatically to persons 65 and over who have worked long enough to qualify for Social Security benefits; it pays for hospital, skilled nursing facility, home health, and hospice care.  Part B is voluntary coverage, which pays for physician, outpatient hospital, home health, laboratory tests, durable medical equipment, designated therapy, outpatient prescription drugs, and other services not covered by Part A.  Medicare processes over one billion fee-for-service claims a year.

Agency Accountable Official: Ellen Murray, Assistant Secretary for Financial Resources

Program Accountable Official: Peter Budetti, Deputy Administrator for Program Integrity, Centers for Medicare and Medicaid Services



Total Payments (Outlays)more info


Improper Paymentsmore info


Improper Payment Ratemore info


5.4% Improper Payment Rate Target more info

All amounts are in billions of dollars

Tabular view for Projected improper payments Tabular View   


Note: Beginning with the FY 2011 Agency Financial Report (AFR), HHS refined its error rate estimation methodology to reflect activity related to the receipt of additional documentation and the outcome of appeal decisions that routinely occur after the cut-off date for the published AFR. The refined estimation methodology is based on analyses of actual appeal results and the submission of late documentation received after the cut-off date for FY 2009 and FY 2010 claims. HHS developed an estimate for FY 2011 modeled after the FY 2010 actual results. Therefore, the error rate results and targets for all years presented in the chart have been adjusted to reflect this revised estimation methodology. Without this adjustment, the FY 2011 error rate would have been 9.9 percent or $33.3 billion and the FY 2010 rate, as reported in the FY 2010 AFR, was 10.5 percent or $34.4 billion. These improvements provide a more accurate estimate of improper payments in the Medicare FFS program.

Program Comments

The Department of Health and Human Services (HHS) is committed to reducing the percentage of improper payments made under the Medicare fee-for-service program.  This was the first full year that HHS implemented a number of changes in the improper payment measurement methodology that impacted the error rate.

Based on both the recommendations contained in recent Office of Inspector General (OIG) audit reports and those of HHS’s advisory medical staff, HHS modified the medical review process late in FY 2009.  Approximately 82,000 claims were reviewed for the 2010 reporting period.  The error rate is 10.5% or $34.3 billion in estimated improper payments.  The HHS did not meet its error rate target of 9.5% (gross) for 2010. The primary causes of improper payments were medically unnecessary services and insufficient documentation errors. Read More...