13 States Currently Exceed the OBBBA’s New Medicaid PERM Eligibility Error Rate Threshold, OBBBA Likely to Increase Error Rates Initially

The Medicaid Payment Error Rate Measurement (PERM) program is the federal quality-control system that measures improper payments in Medicaid and CHIP. Under the PERM methodology, CMS measures fee-for-service (FFS) claims, managed care payments, and eligibility determinations across a rotating cycle of 17 states per year, meaning each state is reviewed once every three years. Improper payment includes any payment that does not meet program requirements, including payments for which documentation was insufficient to confirm eligibility and reimbursement. In FY 2025, 77.2% of Medicaid improper payments resulted from insufficient documentation (missing paperwork or incomplete records) rather than payments to ineligible individuals or fraudulent claims. The national rolling PERM rate for Medicaid was 6.12% ($37.39 billion) in FY 2025, up from 5.09% ($31.10 billion) in FY 2024. The increase was driven by states returning to normal eligibility operations following the COVID-19 pandemic unwinding. See the full analysis below.