Key Issues > Reducing Government-wide Improper Payments
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Reducing Government-wide Improper Payments

An improper payment is any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements. Reducing improper payments—such as payments to ineligible recipients or duplicate payments—is critical to safeguarding federal funds, but the federal government has consistently been unable to determine the full extent of improper payments and whether its actions to reduce them are appropriate. 

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Improper payments have consistently been a government-wide issue despite efforts to identify their root causes and reduce them. Examples of past improper payments include:

  • the Department of Health and Human Services’ Medicare Fee-for-Service program paid claims for  medically unnecessary services and claims that had insufficient documentation, meaning that their eligibility could not be verified.
  • the Department of Health and Human Services’ Medicaid program paid claims to ineligible medical providers, including those who had suspended or revoked medical licenses or invalid addresses, those who were identified as deceased in federal death files, or those who were excluded from federal health care programs.
  • the Department of the Treasury’s Earned Income Tax Credit program made payments to potentially ineligible recipients due to its inability to verify wage information on early tax filers because of computer systems issues and because some employers filed W-2s on paper or after the filing deadline.

The government’s ability to understand the size of the problem is hindered by incomplete, unreliable, or understated estimates; inaccurate improper payment risk assessments; and noncompliance with criteria listed in federal law. GAO has reported improper payments as a material weakness in internal control in its reports on the U.S. government’s consolidated financial statements.

Since 2003—when certain agencies were required by statute to begin reporting improper payments—cumulative improper payment estimates have totaled about $1.4 trillion. For fiscal year 2017, federal entities estimated about $141 billion in improper payments—composed of estimates for 90 programs across 21 agencies. This total was down from about $144 billion for fiscal year 2016, but up from about $137 billion for fiscal year 2015.

Medicare programs, Medicaid, and the Earned Income Tax Credit account for about 74 percent of this total. The total of the reported estimates for the three Medicare programs—Medicare Fee-for-Service (Parts A and B), Medicare Advantage (Part C), and Medicare Prescription Drug (Part D)—was $51.9 billion for fiscal year 2017, down from $59.7 billion for fiscal year 2016. This reduction was primarily attributable to a reduction in estimated improper payments for the Medicare Fee-for-Service program for fiscal year 2017, driven by a reduction in estimated improper payments for home health and inpatient rehabilitation facility claims. Federal spending for Medicare programs and Medicaid is expected to significantly increase, so it is especially critical to take appropriate measures to reduce improper payments in these programs.

Figure: Improper Payment Estimates Were Concentrated in Three Areas for Fiscal Year 2017
Improper Payment Estimates Were Concentrated in Three Areas for Fiscal Year 2017

Continued agency attention is needed to (1) identify susceptible programs, (2) develop reliable methodologies for estimating improper payments, (3) report as required by statute, and (4) implement effective corrective actions based on root cause analysis. Absent such continued efforts, the federal government cannot be assured that taxpayer funds are adequately safeguarded.

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Comptroller General Testifies to U.S. Senate on Improper Payments and the Tax Gap
  • portrait of Beryl Davis
    • Beryl Davis
    • Director, Financial Management and Assurance
    • davisbh@gao.gov
    • (202) 512-2623