NCPA - National Center for Policy Analysis

Billions Spent on Incorrect Federal Payments Each Year

January 17, 2014

Federal agencies spent more than half a trillion dollars over the last decade on improper payments, says the Fiscal Times.

Each year, federal agencies pay out more than $100 billion dollars that should never have been paid in the first place. These improper payments can be due to fraud or error on the part of the agency or the recipient.

  • An Office of Management and Budget (OMB) study looked at 13 high-error federal programs and found that, in 2012 alone, those programs made $101.3 billion in improper payments. That figure is $16 billion more than the 2013 budget sequester spending cut.
  • Over the last two years, the federal government recaptured only $2 billion of these improper payments back, according to former OMB Controller Daniel I. Werfel.

Who were some of the worst offenders?

  • Leading the government in improper payments over the last year was the Department of Health and Human Services whose own estimates found that $55.9 billion in funds were paid improperly.
  • The Centers for Medicare and Medicaid Services (CMS) paid $33.2 billion as a result of fraud or mistake as part of Medicare's Fee for Service program.
  • 9.5 percent of Medicare Part C payments were improper, resulting in a loss of $6.9 billion, while Medicare Part D lost $1.4 billion through these incorrect payments.
  • Medicaid lost $13.5 billion last year -- a 5.8 percent improper payment rate.

CMS spokesman Tony Salters said that CMS takes a random sample of payments and identifies the improper payments within that sample. Of those identified in the random sample, he said, the agency gets most of the money back. However, CMS does not go after the improper payments that are outside of the sample selection.

Improper payments are not limited to the health care realm. The most recent data on the IRS comes from 2012 when the agency paid out $12.6 billion in improper payments due to a 22.7 percent error rate in Earned Income Tax Credit program. Last year, the Department of Labor Unemployment Insurance program paid $6.2 billion improperly -- a 9.32 percent error rate.

Source: Rob Garver, "Feds Blow $100 Billion Annually on Incorrect Payments," Fiscal Times, January 15, 2014.


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