Time to Eliminate Improper Payments

Trying to cut government spending is the easiest and toughest thing to do.  Many good government groups and internal watchdogs have submitted ideas on how and where to cut spending but members of Congress refuse to seriously cut spending.  On February 7, 2012, the Government Accountability Office (GAO) released a report, “Improper Payments:  Moving Forward with Governmentwide Reduction Strategies,” which identifies $115 billion in improper payments by the federal government. This comes on the heels of many ideas to cut spending such as  The National Commission on Fiscal Responsibility and Reform, the Congressional Budget Office’s “Reducing the Deficit: Spending and Revenue Options.” In addition President Obama’s fiscal year (FY) 2012 budget included his Fiscal Year 2012 Terminations, Reductions, and Savings list which outlines $33 billion in potential spending cuts.  Obama’s 2013 budget should have a similar list.

GAO has a long history of exposing waste, fraud, and abuse so their latest report on improper payments should come as no surprise.  According to the report, “The $115.3 billion estimate was attributable to 79 programs spread among 17 agencies. Ten programs accounted for about $107 billion or 93 percent of the total estimated improper payments agencies reported for fiscal year 2011…The federal government continues to face challenges in determining the full extent of improper payments…Internal control weaknesses continue to exist, heightening the risk of improper payments.”

The GAO lists the most vulnerable programs and, to nobody’s surprise, Medicare and Medicaid are at the top of the list with $29 billion and $22 billion respectively in improper payments.  The highest percentage of improper payments are from disaster assistance loans and the school breakfast program with error percentage rates of 28 percent and 25 percent respectively.  After the shenanigans of the cleanup and government assistance for Hurricane Katrina, it is not a stretch to see why disaster loans are at the top of that list.  The government is so eager to send out money that oversight is not a priority.

The reasons are what you may also suspect.  According to GAO, “Beginning in fiscal year 2011, according to OMB’s guidance, agencies were required to classify the root causes of estimated improper payments into three general categories for reporting purposes: (1) documentation and administrative errors, (2) authentication and medical necessity errors, and (3) verification errors.”  To combat improper payments the Improper Payments Information Act of 2002 (IPIA) was established and last year was the first year for the implementation of the Improper Payments Elimination and Recovery Act of 2010 (IPERA).

According to GAO, “IPIA requires executive branch agencies to annually review all programs and activities to identify those that are susceptible to significant improper payments, estimate the annual amount of improper payments for such programs and activities, and report these estimates along with actions taken to reduce improper payments for programs with estimates that exceed $10 million. IPERA, enacted July 22, 2010, amended IPIA by expanding on the previous requirements for identifying, estimating, and reporting on programs and activities susceptible to significant improper payments and expanding requirements for recovering overpayments across a broad range of federal programs.”

In order to eliminate improper payments, the GAO suggests: upfront eligibility validation through data sharing; predictive analytic technologies; training programs for providers, staff, and beneficiaries; timely resolution of audit findings; and program design review and refinement.

Reducing and eliminating improper payments is the first easy step in cutting spending.  With the vast technology at the disposal of the government there is no reason why more can’t be done to combat this problem.  There also needs to be repercussions for defrauding the government.  The only real incentive for people to stop defrauding the government is harsh penalties and the inability to collect more money.