Medicare & Medicaid Billing Mistakes that Cause Claim Denials 

The Medicare and Medicaid billing process is very complex for healthcare providers because they have to follow many rules and regulations. Oftentimes, small errors can lead to claim denials and, as a result, to revenue losses. Invalid codes, incorrect patient information, and failure to document medical necessity are just a few examples of costly mistakes. Therefore, a biller who works closely with both Medicare and Medicaid should understand what may lead to claim denials or improper service reimbursement.

In this article, we are going to review the most common reasons for medical claim denials, as well as several specific Medicaid and Medicare billing mistakes.

Everything Starts with the Guidelines 

Here’s a quick review of the basics – to get reimbursement for services provided to beneficiaries, healthcare providers must comply with specific guidelines, which outline the rules for Medicaid or Medicare billing and the supporting documentation. 

The Centers for Medicare & Medicaid Services (CMS) provide essential billing information, including CPT/HCPCS codes and guidance on their usage, payment rates, coverage policies, etc. This is a great place to start for anyone who wants to boost their knowledge about the billing regulations of both programs. 

To stay up to date with the latest Medicare billing guidelines, it is recommended to check the Medicare billing manuals, which provide detailed information on the proper process, coding requirements, coverage rules, and payment policies. The full Claims processing manual can be found on the CMS website. 

As for Medicaid, each state agency website can provide different information on billing regulations, as they vary from state to state. For that reason, check the Medicaid Provider Manual on your particular state’s website – you will find essential guidance on Medicaid claims submission, reimbursement, coverage policies, and procedures there. 

Even a Small Mistake Can Cause a Claim Denial 

A successful revenue cycle billing process requires careful attention to each detail, as Medicare and Medicaid set strict reimbursement requirements. Failure to capture every detail and adhere to the guidelines can result in claim denials because the criteria for payment are not met. 

Some of the most common reasons for medical claim denials include: 

• Inaccurate coding: Using the wrong CPT / HCPCS codes or codes that are not supported by the documentation can lead to claim denials. For example, a biller could have used outdated codes or non-specific codes that do not reflect the exact services provided to the patient.
• Incomplete documentation: Providers must prepare complete and accurate documentation for all services provided to receive proper reimbursement. The package of documents depends on the type of service but generally includes patient information, medical history, progress notes, test results, etc. 
• Failure to submit a claim on time: The time frame for claim submission may vary depending on the service type and the patient’s coverage.  
  • Typically, Medicare Part A and B claims should be sent within a year from the date of service 
  • Medicaid ones have a 90-day submission period (however, it is important to check the requirements for each state). 

There are numerous errors that may lead to a denial. However, there are several specific ones that can be crucial for Medicare or Medicaid. 

1. Incorrect PDPM code (or the absence of code in the claim)

One of the most significant Medicare mistakes, as the accuracy of PDPM coding is critical to getting payment. If the PDPM code is lower than it should be (meaning the procedure is “overvalued” by using a code for a lower clinical category classification), the facility will receive less reimbursement or may even get a rejection. On the other hand, when the specified code represents a higher clinical category, Medicare may later conduct an audit and demand the return of the sum of overpayment, which can be a significant financial burden for the provider. 

2. Less than 6-8 DX codes on the claim

The current Medicare billing regulations allow the usage of up to 12 diagnosis codes. Although there is no specific requirement for the number of codes, in practice, a minimum of 6 should be specified, as they allow justification of the medical necessity of the services provided to the patient and identification of comorbidities that may affect the patient’s care plan. Usage of fewer than 6 codes increases the risk of an audit by CMS and may lead to Medicare claim denials. 

3. Duplicate services or claims

Some patients require regular treatment, and the same service may be repeated. However, if the service is billed within the same billing period as the previous claim without documented medical necessity, it may be wrongly considered a duplicate and get rejected by Medicare. The problem may also occur when the billing staff tries to correct a previous error without properly verifying whether the original claim was already processed or paid. One way to handle the issue of duplicate claims is to check whether there is another claim being paid or processed through Medicare IVR. 

4. Failed eligibility

There are strict eligibility and service coverage regulations under the patient’s plan. Failed eligibility checks will undoubtedly lead to invalid or missing authorization and consequent Medicare and Medicaid reimbursement issues. Although the task seems easy, eligibility mistakes happen regularly, as the facility staff may be too preoccupied with many other tasks. One solution to the problem is to use billing software like Approved Admissions, which performs eligibility checks automatically, helping avoid errors and saving time. 

5. Wrong Census

The most common Medicaid denial comes due to the wrong Census. This mostly happens because outdated patient information has been used – incorrect name or name variation, wrong DOB, etc. There can be some specific cases – for example, it often happens that a patient has passed away in the middle of the month, let’s say they were in the facility for 15 days. If the Census program is not updated and we don’t have the discharge date (which is obvious because the patient has passed away) – a facility can bill Medicaid for the full month – 30/31 days instead of 15. Due to this, they might get a denial from Medicaid, saying that the patient is not covered for the full month. Therefore, it is vital to double-check the validity of your patient Census. 

Medicare and Medicaid Dual Eligibility 

Some patients can be eligible for both Medicare and Medicaid (so-called “Dual-eligible beneficiaries”), therefore it is important to understand how these programs overlap with each other, and which one has the priority in terms of coverage. Medicare plays the primary payer role by covering eligible services, whereas Medicaid functions as a financial safeguard, assisting individuals who may face difficulties with the out-of-pocket expenses linked to Medicare or have exhausted their financial resources. 

If you have such a patient admitted to your facility, carefully re-check the billing requirements for duals, as there is a risk of sending the claim to the wrong payer, which will slow down the revenue cycle process and may lead to rejection. More valuable information about dual eligibility billing can be found here. 

Consequences of Inaccurate Coding and Incorrect Billing 

The revenue impact of Medicare and Medicaid claim denials due to incorrect billing can be significant, as they usually result in lost payments. In certain cases, the provider must bear the cost of the treatment, meaning a direct financial impact on the organization. The American Medical Association reports that claim denials cost medical practices 5% of their total revenue on average. 

Rejections also mean increased administrative costs since dealing with them is time-consuming and requires additional effort. Finally, denials lead to reduced patient satisfaction and may affect their loyalty.  

How to Deal with Mistakes in the Claims 

It is essential to deliver an effective billing process, ideally by tracking and reviewing each claim before submission to minimize the risk of errors. Because the biller has a lot of manual work and details to control, it becomes increasingly difficult to keep track of everything, which may cause frequent mistakes. The process can be significantly simplified with progressive billing and automation tools, like Approved Admissions, EDI AutoClaim, or ClaimGENIX, which all automate many tasks and save valuable time, leading to higher efficiency of the billing team and maximized reimbursements. 

However, even if a mistake has been made, there are a few ways to correct it. 

Doublecheck the claim and the guidelines 

Review the Medicaid or Medicare billing guidelines to ensure that the services provided were necessary for the patient. If you spot an error in coding, find the correct code(s) – this will lead to a substantive discussion with the payer’s representative and will help address the mistake quickly and efficiently. 

Contact the insurance.  

File an appeal  

When a claim has been denied, you have the right to file an appeal or request a review on behalf of the healthcare provider. Keep track of your appeal as it is essential to control whether the claim is being reviewed and resolved.