U.S Department of the Interior epub Report to Congressional Requesters: Medicaid

The purpose of the CMS PERM program is to produce a national-level improper payment error rate for Medicaid. CMS developed PERM in order to comply with the requirements of IPIA, which was amended by IPERA. PERM uses a 17-state, 3-year rotation for measuring Medicaid improper payments. Medicaid improper payments are estimated on a federal fiscal year basis through the PERM process. The estimate measures three component error rates: (1) fee-for-service (FFS), (2) managed care, and (3) eligibility. FFS is a traditional method of paying for medical services under which providers are paid for each service rendered. Each selected FFS claim is subjected to a data processing review. The majority of FFS claims also undergo a medical review. Managed care is a system where the state contracts with health plans to deliver health services through a specified network of doctors and hospitals. Managed care claims are subject only to a data processing review. Eligibility refers to meeting the state’s categorical and financial criteria for receipt of benefits under the Medicaid program.