The Government’s $125 Billion Slap in the Face to Taxpayers

Mar 18 2015

Despite the Obama administration’s attempts to curb the billions of improper payments federal agencies dole out each year, the problem is actually getting worse.

In 2014 alone, agencies paid a whopping $125 billion in improper or erroneous benefit payments through some of the largest government programs like Medicare, Medicaid and Social Security. That’s the most ever recorded — and a $19 billion increase from the previous year, according to a new report from the Government Accountability Office. For context, the steep defense budget cuts known as sequestration are projected to reduce spending by roughly $100 billion a year from fiscal 2012 through 2021.

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The GAO’s tally accounted for erroneous payments across 124 programs under 22 federal agencies. However, just three programs — Medicare, Medicaid and the Earned Income Tax Credit — accounted for more than $80.9 billion of the total.

Auditors blamed these three programs for the uptick in improper payments overall. All three experienced an increased error rate from the year before. Across the government, the errors amounted to 4.5 percent of program outlays, up from 4 percent in fiscal 2013.

Together, Medicare and Medicaid paid out $77.4 billion in improper payments, a 20.4 percent increase over 2013. The programs combined represent about 62 percent of total improper payments government-wide.

The auditors explained that the increase was driven by errors in Medicare’s Fee-for-Service program, which pays doctors for each service they provide. Problematic payments from Medicare alone climbed from $36 billion in 2013 to $45.7 billion last year. The error rate for the Medicare program was 12.7 percent. 

Likewise, Medicaid jumped from $14.4 billion in 2013 to nearly $17.5 billion last year.

The GAO defines improper payments as payments that “should not have been made or were made for the incorrect amount.” Some of this includes fraud, while others include under and overpayments made by the government.

In 2013, about $97 billion of total improper payments were overpayments, while $9 billion were underpayments, according to data from

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Last year’s uptick in improper payments comes despite the federal government’s attempts to rein in the problem. In 2010, Congress required all federal agencies’ inspector generals to track whether they were making progress.

From then until last year, agencies had made steady progress on trimming down erroneous payments. However, the number shot back up in 2014.

"While progress has been made over the years, the time has come for a more aggressive strategy to reduce the levels of improper payments we currently are seeing," David Mader, controller at the Office of Management and Budget said during a hearing on the GAO’s report on Monday.

Other programs that receive dishonorable mention for handing out billions in improper payments last year include Medicare Advantage, which paid out $12.2 billion, federal unemployment insurance, which paid out $5.6 billion, and Supplementary Social Security, which doled out $5.1 billion in improper payments.

“If we're going to get a better handle on our debt and deficit — and, frankly, improve Americans' impression of how we take care of their money — we need to sharpen our pencils and stop making the kind of expensive, avoidable mistakes that lead to wasteful spending and make our agencies and programs vulnerable to fraud and abuse," Sen. Tom Carper, (D-DE) said at the hearing.

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