Suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) posted the highest improper payment rate among all Medicare provider types in fiscal 2025, with documentation failures driving the majority of errors that cost the federal program billions of dollars.
The error rate for DMEPOS suppliers reached 24.2%, or nearly four times the overall Medicare fee-for-service improper payment rate of 6.6%, according to the Medicare Payment Advisory Commission’s (MedPAC) June 2026 report to Congress.
The DMEPOS figure far exceeded all Part B providers at 8.4% and inpatient hospital providers at 3.2%.
The findings underscore persistent compliance challenges in the $28.8 billion improper payment problem facing Medicare’s fee-for-service program.
It’s important to note, however, that most cases of improper payments aren’t due to malicious fraud. Rather, they’re due to paperwork mistakes.
Specifically, documentation deficiencies accounted for 68% of all improper payments across Medicare FFS, according to MedPAC’s report. Improper billing was also prevalent in skilled nursing facilities, hospital outpatient departments, inpatient rehabilitation facilities and hospices — all settings where DMEPOS suppliers provide equipment and services.
The Centers for Medicare & Medicaid Services (CMS) has deployed multiple tools to combat the problem, including expanded prior authorization requirements for DMEPOS items that have “frequently been subject to unnecessary utilization,” according to the commission’s June report.
Since 2017, CMS has required face-to-face encounters and written physician orders for 62 procedure codes covering items including pressure-reducing support systems, power wheelchairs and orthotic devices.
The strategy has shown results, according to MedPAC. For instance, payments for orthoses dropped 85% between 2021 and 2024, CMS data show.
CMS has also worked to reduce improper payments by leveraging its Fraud Prevention System to screen claims before payment, identifying suspicious billing patterns through predictive analytics. When the system flags aberrant activity, it generates investigation leads for contractors and adds edits to reject questionable claims.
The improper payment measurements, conducted through the Comprehensive Error Rate Testing program, reviewed roughly 37,500 randomly selected FFS Medicare claims. The review determines whether claims were properly paid based on documentation supporting medical necessity and billing accuracy.
Medicare’s improper payment rate has declined from a peak of 12.7% in fiscal 2012, but total expenditures on improper payments have grown as overall Medicare spending increased.
Again, the $28.8 billion in improper FFS payments for fiscal 2025 represents money paid incorrectly – whether overpayments, underpayments or payments lacking sufficient documentation – but does not necessarily indicate fraud.
While the improper payment sum of $28.8 billion in FFS Medicare is high, it’s almost equally high when looking at Medicare Advantage (MA).
“The Medicare Part C improper-payment measurement (IPM) measures the improper-payment rate in MA by assessing whether diagnosis codes submitted by MA plans for a random sample of enrollees are supported by medical-record documentation,” MedPAC wrote in its report. “Based on a sample of 930 beneficiaries, CMS estimated a 6.1% error rate in Medicare payments to MA plans in payment year 2023, representing $23.7 billion in improper federal payments.”
The overall total for Medicare-related improper payments in FY 2025 was estimated at $56.7 billion, according to MedPAC.
