The Payment Error Rate Measurement (PERM) program was established to measure and recover improper payments in order to refund the federal and state governments. As the program evolves it continues to encourage administrative efficiencies which will be crucial at a time when states are experiencing tight budgets in conjunction with increasing Medicaid enrollment
The Centers for Medicare and Medicaid Services (CMS) established the PERM program to comply with the Improper Information Act of 2002 (IPIA; Public Law 107-300). CMS utilizes three contractors to perform statistical calculations, medical records collection, and medical/data processing review of selected state Medicaid and SCHIP fee-for-service (FFS) and managed care claims. The incumbent federal contractors are The Lewin Group, Livanta LLC and HealthDataInsights, Inc. CMS phased the program over a three year period and selected states to participate in FY 2006, known as "year one" states. In FY 2006, CMS only reviewed FFS Medicaid claims; however, starting in FY 2007, FFS, managed care, SCHIP and eligibility all became part of the PERM audit. FY 2006 states will re-start the cycle in FY 2009.
Year One States (FY 06): Arkansas, Connecticut, Delaware, Idaho, Illinois, Kansas, Kentucky, Maryland, Michigan, Minnesota, Missouri, New Mexico, North Dakota, Ohio, Oklahoma, Pennsylvania, Virginia, Wisconsin and Wyoming.
Year Two States (FY 07): Alabama, California, Colorado, Georgia, Nebraska, New Hampshire, New Jersey, Massachusetts, New York, North Carolina, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont and West Virginia.
Year Three States (FY 08): Alaska, Arizona, D.C., Florida, Hawaii, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Mississippi, Montana, New York, Nevada, Oregon, South Dakota, Texas, Washington and Wisconsin.
Results from the audit are anticipated two years after the participating year. Final FY 2006 error rates are expected to be reported in the FY 2008 Performance and Accountability Report (PAR). Some states have elected to procure for contractors while others have completed the audit internally. Reports from 2007 indicate that 21 would perform the service internally. According to a report from the National Association of State Medicaid Directors (NASMD) in conjunction with the American Public Human Services Association (APHSA), cost estimates reported from six states range from $195,000 to $990,000 with an average of $477,500. The wide range is potentially the result of the variation in the size of states and their Medicaid program.
Examples of states currently procuring are:
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