Push to Lower Improper Payments Continues

Published: July 27, 2017

BudgetWaste, Fraud, and Abuse

The House Budget Committee’s FY 2018 resolution contains requirements to reduce improper payments significantly over the next ten years.

Last week the House Budget Committee passed their FY 2018 budget resolution which contained language similar to that of the FY 2018 President’s Budget Request to dramatically lower federal improper payments by 2027.

The House budget resolution proposes “the establishment of an independent commission to find tangible solutions to reduce government-wide improper payments. The new commission would be charged with finding tangible ways to reduce government-wide improper payments by 50% within the next five years. It would also be required to develop a tighter system of agency oversight to ensure agencies comply with commission recommendations and achieve the reduction goal over time.”

Total federal improper payments rose to $144B in FY 2016 according to data released on paymentaccuracy.gov.  The improper payment rate rose from 4.4% of program outlays in FY 2015 to 4.7% in FY 2016, amounting to nearly a $7.5B increase over FY 2015 levels.

Total improper payments and payment rates declined from FY 2010 to FY 2013, but have risen steadily each year since.

The federal government defines an improper payment as any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. Improper payments include overpayments or underpayments that are made to eligible recipients, payments made to ineligible recipients, payments made for ineligible goods or services, and payments for goods or services not received.

The Medicare Fee for Service (FFS) program accounts for the largest portion of improper payments at $41B for FY 2016, followed by Medicaid at $36B in improper payments for the same time period.

Most improper payments are due to administrative or process errors made by the federal agency, state or local agency, or other party.  These types of errors are caused by incorrect data entry, classifying, or processing of applications or payments. The second most frequent cause of improper payments is insufficient documentation to determine if the payment is actually improper.  This occurs when there is a lack of supporting documentation necessary to verify the accuracy of a payment identified in the improper payment testing sample. For example, a program does not have documentation to support a beneficiary's eligibility for a benefit.

Congress has passed legislation to address the problem of improper payments, including the “Improper Payment

Information Act of 2002” and the “Improper Payments Elimination and Recovery Act of 2010.” Unfortunately, federal agencies still struggle with improper payments and implementing solutions to fix the problem. 

The FY 2018 President’s Budget proposes specific goals for lowering improper payments over the next ten years. 

The budget request proposes a cumulative reduction in improper payments of $139M by FY 2027, starting with a modest decrease of $719M in FY 2019 and building to a decrease of $56B in FY 2027.

Rep. Gerry Connolly (D-Va.), the ranking member of the House Oversight and Government Reform Subcommittee on Government Operations, has long been a supporter of reducing improper payments. He told an audience at an ACT-IAC Fraud and Abuse Forum last week that technology will help combat waste, fraud and abuse. “You have to invest in the enterprise, not disinvest. You’re going to have to make huge upgrades in new technology. You’re going to have to hire skilled people with technology backgrounds, [and] with legal backgrounds.”