MA

Federal Improper Payments Increased to Nearly $172 Billion in FY 2019

Published: November 21, 2019

Waste, Fraud, and Abuse

Total federal improper payments grew to nearly $172 billion in FY 2019 according to data recently released on paymentaccuracy.gov. The improper payment rate also increased from 4.6% of program outlays in FY 2018 to 5% in FY 2019, amounting to a $21 billion increase over FY 2018 levels.

Improper payments (IP) are defined as payments made by the government to the wrong person, in the wrong amount, or for the wrong reason. Improper payments include both overpayments and underpayments. Although improper payments do not directly translate to fraud or monetary loss, they need to be addressed and reduced to protect the integrity of taxpayer and federal funds.

In an effort to reduce IP in federal programs, Congress has passed several pieces of legislation since 2002.  The Improper Payments Elimination and Recovery Act of 2010 (IPERA) expanded core principles of the 2002 Improper Payments Act in the areas of agency IP identification, compliance and reporting requirements.  

Unfortunately, total improper payments and payment rates have been increasing since FY 2017.

The increase in FY 2019 improper payments is mostly attributable to the Medicaid program where improper payments jumped from $36.3 billion in FY 2018 to $57.4 billion in FY 2019, equating to an improper payment rate increase of 9.8% to 14.9% of program outlays.  Total program outlays also increased from $370.4 billion to $385 billion in the same time period.

Distribution of improper payments by agency is charted below:

HHS continues to show the highest amount of improper payments rate at $106.7 billion, equating to 9.7% of total program outlays for FY 2019.

In FY 2019, Medcaid outpaced the Medicare FFS program for the largest improper payment totals at $57.4 billion and a rate of 14.9% of total program outlays. The Medicare FFS program shows the second largest improper payment amount at $28.9 with a 7.3% improper payment rate. However, the Medicare FFS program has shown progress increasing program integrity and reducing improper payments since FY 2014 with a $16.8 billion drop in improper payments and a 5.4% decrease in improper payment rates since that year. 

Main causes for improper payments for FY 2019 are shown below:

Most improper payments are due to 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.

The second most frequent cause of improper payments is 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.

Although improper payment amounts rose from FY 2018 to FY 2019, if Medicaid is eliminated from FY 2018 and FY 2019 improper payment amounts, total IP would have been $114.4 billion FY 2018 and $114.5 billion in FY 2019, which is essentially flat. Targeted action to reduce improper payments in the Medicaid program would likely reduced the government-wide improper payment totals and rates.  Medicaid remains on GAO’s high risk list and the subject of numerous GAO reports advising better oversight of payments and increased program integrity.

The Trump administration has made combating waste, fraud and abuse in federal programs a high priority.  The administration and federal agencies continue to explore new and innovative ways to address the problem, leading to contractor opportunities in the areas of prescreening, big data, analytics, recapture audits, ID authentication, data warehousing, data authentication, predictive modeling, forensic accounting, and fraud case management.