Improper federal payments since 2004 now exceed $1 trillion

When the federal government releases its 2015 financial statements on Thursday, they’ll show that the running tally of improper payments made since 2004 has now moved above the $1 trillion mark.

That’s despite several years of concerted efforts to reduce improper payments, including the Do Not Pay initiative. In 2014, agencies made a surprising $125 billion in estimated improper payments, $20 billion higher than earlier projections and the largest amount on record following several consecutive years of declines.

Precise figures for 2015 won’t be released until Thursday afternoon, when the Government Accountability Office publishes its audit report on the government’s consolidated financial statements. But Beryl Davis, GAO’s director for financial management and assurance, told an Association of Government Accountants conference that agencies had again reported a high number of improper payments in 2015, enough to bring the cumulative total to more than $1 trillion since the government first began collecting statistics as part of the 2002 Improper Payments Information Act.

“I think one factor is that we’re doing a better job of estimating what the government’s improper payments are than we’ve done in the past,” she said. “More and more agencies are doing better risk assessments and coming to more accurate conclusions. In some cases when the numbers go up, it’s not a negative. The improper payments were always there, they just weren’t estimated accurately and reported out.”

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The Office of Management and Budget also has begun to require agencies to capture more granular data on their payments, Davis said, leading to more accurate conclusions about the universe of payments that are likely to have been too large or too small.

“They’ve started collecting data this year about various categories, and a lot of them have to do with documentation issues. So it’s possible that a lot of these have actually been proper payments but they’ve been flagged as improper because we can’t track down a contract or other supporting information,” she said. “There’s been a lot more emphasis on looking at improper payments, and if agencies go through the whole cycle of identifying the payments, identifying root causes and implementing corrective actions, hopefully we’re now in the process of actually reducing improper payments.”

The Department of Health and Human Services has historically been responsible for more than half of the government’s improper payments, mostly through its Medicare and Medicaid programs. And HHS’ 2015 financial statements showed a significant increase — from $78.4 billion in 2014 to $89.8 billion in 2015.

Meanwhile, the Treasury Department and the Social Security Administration, which are typically next in line with high levels of improper payments, showed progress. Treasury made an estimated $15.6 billion in improper payments through the Earned Income Tax Credit in 2015 compared to $17.7 billion the year before. And SSA reduced its errant payments from $9.1 billion in 2014 to $7.1 billion last year.

Gloria Jarmon, the HHS deputy inspector general for audits, said it’s important to point out that not all improper payments are due to malfeasance — criminal or otherwise.

“Not all improper payments are fraud, and we often have to explain that to Congress and to others,” she said. “Some of it is missing documentation from the health care provider. It doesn’t mean that the patient didn’t need the wheelchair or the hearing aid or the surgery Medicare paid for. There’s a serious effort ongoing to better define what improper payments mean, because I think the public thinks more improper payments mean more fraud, and that’s not necessarily the case. Medicaid, for example, is turning into a bigger program because of the Affordable Care Act. There’s more money involved so they’ve projected more improper payments. Over time, I think the improper payment numbers are going to go down, but I’d predict that they’re going to go up before they go down.”

And not all improper payments are necessarily overpayments, although though most are. OMB’s breakdowns for 2014 showed $113 billion in overpayments but $11 billion in underpayments.

And with varying degrees of success, agencies manage to recapture overpayments once they’ve been issued. In 2014, HHS recovered $13.4 billion, Treasury recovered $6.3 million and SSA recovered $3.3 billion, according to data on paymentaccuracy.gov.

At HHS, agency officials are also trying to tackle their improper payments problem through a new data analytics section inside the IG’s office. Its job is to sort through petabytes of information and help the agency understand and correct its 12.7 percent error rate in Medicare payments and a 6.7 percent error rate in Medicaid.

“We’re the nerds who think behind the scenes about data governance and data quality,” said Caryl Brzymialkiewicz, the HHG IG’s chief data officer. “One thing we’re doing is using a lot of analytic tools to visualize the data that’s in Excel spreadsheets. Even in the fraud world, nobody understood the data we had until we plotted it on a map. When you can very clearly see that the provider is in California and he’s trying to treat patients in North Carolina, that’s what our investigators call a clue.”

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