5 Years of Over $100 Billion in Improper Payments
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The Fiscal Times
July 10, 2014

For members of Congress, it is the legislative version of Tee-ball: government witnesses lined up, called to explain wasteful federal spending. And lots of it. The official hearing title: “Examining Solutions to Close the $106 Billion Improper Payments Gap.”

“Excuse me for getting a little bit intense about this,” said Republican Congressman John Mica, waiving a piece of paper in the air. 

In Washington speak, Mica’s House Oversight and Government Reform Subcommittee on Government Operations convened the hearing to investigate progress, or lack thereof, in implementing the Improper Payments Elimination and Recovery Act of 2012. 

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Some of the agency witnesses tried to convince the committee that at least modest progress is being made, but the GOP members weren’t buying it.

“They are astounding figures,” said Mica in an interview with The Fiscal Times. “You could balance the federal budget just by correcting some of these very significant amounts of money that are going out the door unchecked.”

Improper payments include overpayments to people or vendors, spending without sufficient documentation, or simply, checks sent to the wrong people (or even dead people). According to the GAO, the five programs with the highest dollar amounts accounted for nearly 90 percent of the payments. And Fiscal Year 2013 isn’t an anomaly. “It’s been over $100 billion for the last five years in a row,” said Mica.

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Payments by CMS, the Center for Medicare and Medicaid Services, make up $60 billion of the improper payments.

“It’s an amount of money the American people can’t even begin to understand. Nobody can really understand what it would be like to stack up all those bills,” said Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) in his opening remarks. “CMS and Medicare have, in fact, built a system that is rampant with fraud.”  

“Just by sheer numbers, the CMS and the healthcare overpayments are just outrageous,” said Mica. “Nearly two-thirds of improper payments are coming out of the healthcare system.” 

Agencies in the direct line of fire, facing scrutiny over their inability to track and halt millions of dollars in improper payments, were chiefly the Internal Revenue Service, the Department of Health and Human Services, and the Department of Defense.

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Beth Cobert, deputy director for management at the White House Office of Management and Budget, was among those who testified and made the case things were, albeit slowly, getting better. 

“We are proud to report that since 2009, the administration, working together with the Congress, has significantly reduced improper payments,” Cobert testified. “We have strengthened accountability and transparency - saving the American people money while improving the fiscal responsibility of Federal programs. While we are pleased with this progress, we are very much aware that we have a lot more work to do in this area.” 

Her bottom line: “As a result of this concerted effort, the government-wide improper payment rate has dropped steadily for four consecutive years, from 5.42 percent in FY 2009 to 3.53 percent in FY 2013 when factoring in DOD commercial payments.”

The subcommittee vice-chair, North Carolina Republican Rep. Mark Meadows, took issue with the word “progress,” saying the only reason the improper payments percentage decreased was that overall federal spending increased.

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Challenging OMB’s narrative, Meadows pointed out that the total absolute dollar number is the same as it was in 2009: $106 billion. “You can talk percentages,” said Meadows. “It sounds a whole lot better than reality.” 

There was no OMB rebuttal. The exchange ended with Cobert taking a gulp of water.

Chairman Issa encouraged those testifying to explain how they might use modern technology to work smarter, not harder. It’s a path forward that might make sense, especially when considering just a few examples of the most outrageous bogus payments.

The subcommittee recently suggested a way for the IRS to reduce expenditures on conference spending alone by 87 percent, from $37.6 million to $4.9 million. CMS paid incarcerated individuals, who are generally not eligible for health care benefits, some $33 million between 2009 and 2011. Or, take one Florida woman, a mother of three with a 6th grade education, who managed to scam the government out of millions through identity theft. She was only caught when she took to her Facebook page, calling herself the “queen of IRS tax fraud.” 

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“Fighting refund fraud,” said IRS Commissioner John Koskinen in his statement, “is an ongoing battle for the IRS.” Despite its 2014 budget of $11.29 billion, the IRS says combatting fraud is difficult, in part, because of inadequate funding. 

“The late President Reagan would be doing back flips in his California grave,” Mica told Koskinen, referring to a 25 percent error rate in the Earned Income Tax Credit program the former president championed. “I want you to check the tomb when you go out there.” 

Jokes aside, even those facing considerable skepticism from the lawmakers called the afternoon spent on Capitol Hill worthwhile.

Beryl Davis, director of financial management and assurance at the Government Accountability Office remains hopeful. “The hearing was helpful in the sense that it brings the issue to light,” Davis said in an interview with The Fiscal Times following the hearing. “Communicating these issues more publicly can help identify the problems.” 

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The biggest problem is perhaps that there are still more questions than answers. 

“The government is unable to determine the full extent of the improper payments or have any reasonable assurance that they are properly identified,” said Davis. “That’s the real issue.” 

Congressman Mica suggests there’s more to come—a lot more. “We haven’t gotten into all of the fraud and abuse, these are just improper payments,” said Mica. “But when you start adding that in too, you are looking at whopping numbers of misapplied dollars in healthcare, which is one of the biggest strains on the federal budget.”

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Reilly Dowd is a senior writer at The Fiscal Times. Based in Washington, D.C., she covers national politics, economic policy, technology, and elections. She has previously worked at Al Jazeera America, SnagFilms, ABC News, CNN and in the Obama White House.