77% of Medicaid’s $37 Billion in Improper Payments Tied to Paperwork Gaps Rather Than Fraud in Fiscal 2025

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The distinction matters for the roughly 85 million people who rely on Medicaid. An improper payment is not the same as a stolen dollar. In most cases flagged in fiscal 2025, the problem was insufficient documentation, such as no record that an enrollee’s eligibility, including income, had been verified.

That gap between improper and fraudulent payments shapes how lawmakers, states and the public talk about Medicaid spending.

The CRS report, titled Medicaid Program Integrity: Background and Resources, says CMS estimates that most improper payments, 77% in fiscal 2025, resulted from insufficient documentation rather than fraud or abuse. CRS gave an example: failing to submit documentation for a Medicaid enrollee who is eligible for the medical service.

The CMS improper payments fact sheet for that year gives the precise figure as 77.17% and describes those errors as “generally not indicative of fraud or abuse.” The agency also says improper payment measurement is not a measure of fraud and that not all improper payments are attributable to fraud or abuse.

CRS defines an improper payment as any payment that should not have been made or that was made in an incorrect amount, including overpayments and underpayments. Under CMS’s approach, a payment can be counted as improper even when the person was eligible and the care was needed, if the required documentation could not be produced.

The report is also clear about what remains unknown. “The total amount of Medicaid fraud is unknown,” CRS wrote. State Medicaid Fraud Control Units reported nearly $2 billion in criminal and civil recoveries in fiscal 2025, according to the HHS Office of Inspector General.

CMS measures improper payments through its Payment Error Rate Measurement program, known as PERM. The agency reviews about 17 states each year, so every state is reviewed once every three years. The national rate combines the three most recent review cycles.

The estimate has three parts: fee-for-service payments, managed care payments and eligibility determinations. For fiscal 2025, the CMS PERM findings page lists a fee-for-service error rate of 4.60%, a managed care rate of 0.00% and an eligibility rate of 4.42%.

The overall rate has fallen sharply in recent years. It was 21.69% in fiscal 2021, 15.62% in 2022 and 8.58% in 2023, before dropping to 5.09% in 2024. The fiscal 2025 rate of 6.12% marked an increase from the year before.

CMS says the increase reflects the effects of unwinding flexibilities granted to states during the COVID-19 public health emergency. Eligibility redeterminations and provider revalidation requirements resumed in April 2023, and because the rate blends three review cycles, those effects now appear in the estimate. One common error type CMS lists is no record of the required verification of a person’s eligibility factors, such as income.

The Children’s Health Insurance Program showed a similar pattern. Its improper payment rate rose to 7.05%, or about $1.37 billion, with 56.07% tied to insufficient documentation, according to CMS.

For Medicaid households, the findings show how routine paperwork feeds into the program’s error rate. Renewal forms, income records, and address updates all affect whether a state can show that a person’s eligibility was properly checked.

PERM reviews focus on state and provider records, but enrollees can still protect their own coverage by responding to renewal notices on time, keeping copies of pay stubs and other income records, and updating contact information with their state Medicaid office.

Those steps may become more important. Several states are preparing new verification requirements, and MedicalDaily recently reported that six states will require medical proof for Medicaid work exemptions beginning in January.

Becker’s Hospital Review reported the CRS findings under a headline saying 77% of Medicaid improper payments were tied to paperwork, not fraud.

None of this means fraud is absent from Medicaid. Fraud control units continue to bring criminal and civil cases, and CMS runs separate program integrity efforts. The CRS report treats fraud, which federal rules define as intentional deception or misrepresentation, as distinct from improper payments.

The difference has practical consequences for policy. Treating every improper payment as fraud could push states toward stricter enrollment rules that may cause eligible people to lose coverage over paperwork. Treating improper payments as harmless could leave documentation gaps unaddressed, since those payments still did not meet program rules.

Important limits remain. The PERM estimate is based on a sample, so it carries statistical uncertainty. It cannot measure fraud directly, and the CRS report does not estimate how much fraud exists.

Most of the money labeled improper in fiscal 2025 reflects missing or insufficient records rather than proven fraud. Enrollees who keep their information current and respond to renewal notices on time are best positioned to avoid coverage gaps.

What did the CRS report find? The Congressional Research Service cited CMS estimates that 77% of Medicaid improper payments in fiscal 2025 resulted from insufficient documentation rather than fraud or abuse.

How large were Medicaid improper payments in fiscal 2025? CMS estimated a 6.12% improper payment rate, or about $37.39 billion.

Does an improper payment mean fraud? No. CMS says improper payment measurement is not a measure of fraud. A payment can be improper because required documentation was missing, even if the person was eligible.

Why did the rate rise from 2024? CMS links the increase to the unwinding of pandemic-era flexibilities, as eligibility redeterminations and provider revalidation requirements resumed in April 2023.

How much Medicaid fraud is there? CRS says the total amount of Medicaid fraud is unknown. State fraud control units reported nearly $2 billion in recoveries in fiscal 2025.

How is the error rate measured? CMS uses the Payment Error Rate Measurement program, which reviews about 17 states each year across fee-for-service, managed care and eligibility.

What can Medicaid enrollees do? Respond to renewal notices on time, keep copies of income records and update contact information with the state Medicaid office.