Programs Driving the Government’s Improper Payment Numbers

Published: January 18, 2017

CMSIRSWaste, Fraud, and Abuse

Programs out of HHS and Treasury make up a large portion of the $144 billion in total improper payments reported in FY2016, a $7 billion increase from FY2015.

Since FY2013, the federal government has increased in improper payment amounts. According to a GAO audit of the federal government’s financial statements, $144 billion in improper payments were found in FY2016 at a rate of 4.67 percent. This is up from the 4.39 percent rate in FY2015 with $137 billion in governmentwide improper payments. An improper payment can either be an underpayment or overpayment by the government to the “wrong person, in the wrong amount, or for the wrong reason,” according to the revamped website.  

The increase from FY2015 to FY2016 is largely credited to Medicare and Medicaid programs under the Centers for Medicare and Medicaid Services (CMS) in the Department of Health and Human Services as well as the Earned Income Tax Credit (EITC) Program under Treasury’s, Internal Revenue Service (IRS).  In fact, overpayments in the Medicare Fee for Service (FFS) program claim the largest chunk in improper payments at approximately $40 billion in FY2016. That program alone makes up about 27 percent of the total amount of improper payments across the government for that fiscal year. Ironically, this number is lower than its $42 billion counterpart in FY2015. The second highest improper payment program is the Medicaid program at approximately $37 billion and the EITC program coming in third place at $17 billion. Medicare Part C overpayments and underpayments are at $11 billion and $5 billion, respectively. Unfortunately, the remaining four of the top five programs for improper payments in FY2016 all saw increases from FY2015 numbers:

Overall, these five programs make up over 75 percent of the total reported improper payment dollars for the entire government in FY2016. What can the IRS and CMS do to correct the enormity of these wrongful payments?

The EITC program is the only one under the IRS to be labeled as “high-risk.” While acknowledging that the Consolidated Appropriations Act of 2016 has provided the agency with additional tools to reduce EITC improper payments, a report released in April 2016 by the Treasury Inspector General for Tax Administration (TIGTA) stated that the IRS continues to be limited in its authority to actually address and correct the erroneous claims its tools identify. The report also cited that the agency’s risk assessment process does not provide a valid assessment of refundable credit improper payments such as those under the Additional Child Tax Credit and the American Opportunity Tax Credit programs and recommended that the IRS ensure the results of these assessments are accurately reflected.   

In a testimony by the Assistant Inspector General for HHS to the Committee on Energy and Commerce, HHS was called on to have strong enrollment safeguards in place to prevent ineligible providers from entering Medicare and Medicaid programs with the help of the Patient Protection and Affordable Care Act (ACA). Additionally, CMS announced late last year that it is preparing to roll out an updated version of its Fraud Prevention System in 2017. The new release will allow investigators to view various pieces of data pulled together in an automated fashion, which is otherwise done on a manual basis.

The GAO also cites the use of data analytics as the federal government’s overarching mechanism to help prevent improper payments in its same report on the government’s finances. For example, under the Do Not Pay Initiative, the Do Not Pay System of Records was established under Treasury. This system seeks to allow agencies to view data and matching services to help identify and even early detect improper payments. Treasury has also started to analyze data across all agencies in order to root out duplicative benefit payments in programs with similar missions.

Looking forward, the Digital Accountability and Transparency Act (DATA Act) will also aide in identifying waste, fraud and abuse in government spending. Since the law requires federal agencies to report spending by providing consistent, readable data in one location, accountability and transparency in government expenditures will be improved. Agencies are required to report spending under the website by May 2017, per the DATA Act’s deadline.