Improper payments—payments that should not have been made or were made in the incorrect amount—have consistently been a government-wide issue despite efforts to identify their root causes and reduce them. In fact, the government still doesn’t fully understand the size of federal improper payments, partly because it doesn’t have complete, reliable, or accurate estimates.
Federal agencies made an estimated $281 billion in improper payments in FY 2021—up from about $206 billion for FY 2020. And this estimate is likely understated since it doesn’t include improper payments related to COVID-19 funding (such as the Small Business Administration’s Paycheck Protection).
In fact, cumulative federal improper payment estimates have totaled about $2.2 trillion since FY 2003.
Cumulative Federal Improper Payment Estimates, FYs 2003–2021
There are a number of steps that Congress and federal agencies could take to help reduce federal improper payments and save taxpayer funds.
- Medicare could improve communication around its prior authorization program. This program requires that beneficiaries get approval before receiving certain items like powered wheelchairs—and it could reduce expenses and improper payments.
- Medicaid could improve oversight to ensure that claims aren’t paid to ineligible medical providers, including those who have suspended or revoked medical licenses.
- The Internal Revenue Service could take steps to review more W-2s before issuing tax refunds to reduce the risk of tax refund fraud.
- Many agencies were able to distribute funds quickly when the COVID-19 pandemic began, but the tradeoff was that they did not have systems in place to prevent and identify payment errors and fraud. Congress could help improve how federal funds are monitored to ensure that, in future emergencies, agencies can act quickly with proper payment safeguards in place.
- Congress could help agencies identify susceptible programs, develop reliable methods for estimating improper payments, and implement effective corrective actions.