Policy & oversight
Federal Watchdog Finds Gaps in How the Government Reports Medicare Overpayments as Medicare Advantage Errors Rise
An HHS Office of Inspector General audit released this week found the government did not fully comply with federal improper-payment reporting law for fiscal year 2025, even as estimated Medicare Advantage improper payments climbed by more than 4 billion dollars.
By the Goodsurance editorial teamAugust 1, 2026
Federal law requires the Department of Health and Human Services to rigorously measure and report improper payments across its major programs under the Payment Integrity Information Act of 2019. An audit released by the HHS Office of Inspector General on August 3, 2026, found that HHS met many of those requirements but fell short in certain areas of the reporting process for fiscal year 2025.
CMS had separately published its own fiscal year 2025 improper payment estimates earlier in the year. Medicare Fee-for-Service posted an estimated improper payment rate of 6.55 percent, representing 28.83 billion dollars, down from 7.66 percent and 31.70 billion dollars in fiscal year 2024. The fee-for-service figure has come in below the 10 percent statutory threshold for nine consecutive years.
Medicare Advantage improper payments climbed more than 4 billion dollars in one year while federal auditors found the government's reporting of the problem had gaps.
Medicare Advantage, also called Part C, moved in the opposite direction. Its estimated improper payment rate rose to 6.09 percent, or 23.67 billion dollars, up from 5.61 percent and 19.07 billion dollars in fiscal year 2024, an increase of more than 4 billion dollars in a single year. CMS attributed most Part C improper payments to Medicare Advantage plans submitting patient diagnosis codes not supported by underlying medical records, a recurring concern tied to the risk-adjustment payment system. Medicare Part D also edged higher, to 4.00 percent and 4.23 billion dollars, from 3.70 percent and 3.58 billion dollars.
The OIG examined 10 programs deemed susceptible to significant improper payments and found compliance gaps in certain reporting procedures. Full findings appear in report OAS-26-17-042.
In plain words
A law called the Payment Integrity Information Act requires the government to carefully track payments that should not have been made. A new watchdog report from August 3, 2026, said the health department mostly followed the rules but did not fully comply. Traditional Medicare, fee-for-service, improved. The wrong payment rate fell from about 7.7 percent to about 6.6 percent, or about 28.83 billion dollars. But Medicare Advantage, the private plan option, went the wrong way. The wrong payment rate rose to 6.1 percent, meaning about 23.67 billion dollars went to plans without full medical record support, more than 4 billion dollars above the prior year. The main problem is insurance companies reporting health conditions for patients that their records did not back up. The watchdog also found gaps in how the government tracked and reported all of this.
Understand the basics first
Source: HHS OIG
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