The majority of the overcharges involve claims from facilities that provide specialized care for more intensive services than actually were provided, The Wall Street Journal reported.
In other cases, the skilled nursing homes charged for treatments that were inappropriate, said the report by the inspector general of the Health and Human Services Department.
The report cited documents showing Medicare was billed for work such as speech therapy and occupational therapy for patients who couldn't benefit from it.
The HHS inspector general has been studying Medicare billings for several years to rein in costs. The federal government paid $32.2 billion to 15,000 skilled nursing facilities during the 2012 fiscal year.
The report was based on an audit of billings from 2009.
Changes recommended by the report include changing the methods used by the government to determine how much therapy is needed, increasing and expanding review of claims from nursing homes and strengthening the monitoring of facilities found to have billed for inappropriate expenses.
The American Health Care Association, a nursing home trade group, reserved comment on the report "pending review of the document," spokesman Greg Crist said.