Medicare Improper Payment Rate Statistics 2025

The Centers for Medicare and Medicaid Services estimated a 6.55% improper payment rate for Medicare fee-for-service in fiscal year 2025. That represents $28.83 billion in payments that did not meet program requirements. The rate fell from 7.66% in fiscal year 2024, but the scale remains important for every practice that submits Medicare claims.

An improper payment is not automatically fraud. CMS explains that the category includes overpayments, underpayments, payments supported by insufficient information, and payments affected by a missed administrative step. For a solo physician, that distinction matters. The national figures are a warning about documentation and process reliability, not a claim that a particular practice is billing improperly.

This research brief summarizes current CMS figures and translates them into practical revenue-cycle checks. It is operational information, not legal, coding, or reimbursement advice.

Key Statistics

CMS reported the following fiscal year 2025 estimates in its improper payments fact sheet:

The Medicare fee-for-service rate declined by 1.11 percentage points from 2024 to 2025. CMS reported a 2024 rate of 7.66%, equal to $31.70 billion. The estimated amount therefore fell by $2.87 billion.

Part C moved in the other direction. Its gross error rate rose from 5.61% for fiscal year 2024 to 6.09% for fiscal year 2025. CMS notes that 2025 Part C reporting reflects payment year 2023. The agency also reported a 4.94% net error rate and $19.20 billion in net dollars in error. Gross figures add the absolute values of overpayments and underpayments, while net figures offset one against the other.

These programs use different review methods, so the percentages are not a direct scorecard for one medical practice. They do show why reliable source documentation and claim review matter.

Claim Types

The CMS Comprehensive Error Rate Testing program publishes a claim-type view of the Medicare fee-for-service estimate.

Part B providers had an estimated rate 1.89 percentage points above the fee-for-service average. Durable medical equipment, prosthetics, orthotics, and supplies had the highest listed rate at 24.12%. That was more than three and a half times the overall rate, although the underlying claim groups are not interchangeable.

CMS says the 2025 reporting period covered claims from July 1, 2023, through June 30, 2024. The agency reviews a statistically valid sample rather than every claim. Its CERT methodology describes an annual sample of roughly 37,500 to 50,000 claims.

Reviewers test sampled claims against coverage, coding, and payment rules. A failed review can be categorized as no documentation, insufficient documentation, medical necessity, incorrect coding, or another error. Some findings may later be overturned through appeal.

Practice Meaning

CMS explicitly cautions that improper payment estimates are not fraud estimates. A payment may enter the category because the available record does not prove that requirements were met, even when the service itself was appropriate.

Documentation is a central lesson. CMS reported that 77.17% of 2025 Medicaid improper payments were associated with insufficient documentation. For CHIP, the comparable figure was 56.07%. Those percentages do not describe physician office claims specifically, but they show how missing support can drive payment findings.

A practice should not compare its denial rate directly with a national improper payment rate. A denial rate tracks payer claim outcomes. An improper payment rate is a retrospective government estimate. Our average denial rate research explains the practice-level measure.

Practices should also distinguish an error from a loss. An improper payment can be an overpayment or underpayment. Underpayments matter to a small practice because missed revenue may remain invisible unless remittance and contract terms are reviewed systematically.

A reliable workflow starts before submission. The medical record should support the billed service, diagnosis relationship, medical necessity, and program-specific requirements. Coding should follow the documentation rather than a habitual template.

After submission, separate rejections, denials, record requests, underpayments, and takebacks. Each category needs an owner and next-action date. Combining every exception in one aging report makes preventable problems harder to see.

Useful weekly checks include:

1. Review claims missing notes, orders, signatures, or attachments before transmission.
2. Compare remittance details with the submitted code, units, modifier, and contracted allowance.
3. Track denial and correction reasons by payer, not only unpaid balances.
4. Keep payer requests and appeal deadlines in a dated follow-up queue.
5. Audit a sample of paid claims for documentation support and possible underpayment.
6. Escalate coding and compliance questions to qualified professionals.

Administrative support can maintain queues, collect documents, record payer communications, and prepare exceptions for review. The physician or qualified billing professional should retain responsibility for clinical documentation, coding judgments, and compliance decisions. For more context, see our medical billing statistics.

FAQ

What was the Medicare fee-for-service improper payment rate in 2025?

CMS estimated a 6.55% rate, representing $28.83 billion. That was lower than the 7.66% rate reported for fiscal year 2024.

Does an improper Medicare payment mean fraud occurred?

No. The category can include insufficient documentation, administrative errors, overpayments, underpayments, incorrect coding, or other unmet requirements.

Which fee-for-service claim type had the highest listed rate?

DMEPOS had the highest rate in the CMS table at 24.12%. Part B providers had an 8.44% rate, while hospital IPPS had a 3.15% rate.

Can a solo practice compare its denial rate with this rate?

Not directly. A denial rate measures payer claim outcomes. The CMS rate comes from a statistical review of payments against program requirements.

Methodology and Sources

This article uses fiscal year 2025 figures published by CMS. Figures are shown at the program or claim-type level reported by the agency. Year-over-year changes are calculations from those values. No estimate is presented as a practice-specific benchmark.

• CMS Fiscal Year 2025 Improper Payments Fact Sheet
• CMS Comprehensive Error Rate Testing
• CMS CERT data methodology
• CMS Medicare Part C measurement