When we entrust our tax dollars with Congress to divvy up, part of that understanding is that they will go towards programs and services that benefit society and make us better off. It seems logical to assume that contributions we make are properly allocated, and for the most part, this is the case. But with such a large and ever-growing conglomeration of programs and services, things can get a little murky and we are left with wasted tax dollars going towards improper payments. President Obama has characterized them as “payments made in the wrong amount, to the wrong person, or for the wrong reason” as a result of documentation and administrative errors, authentication errors, and verification errors by the agency.
Recognizing this problem, Congress in 2002, passed the Improper Payment Information Act (IPIA). Eight years later the issue was raised again, and Congress passed the Improper Payments Elimination and Recovery Act (IPERA) to amend the earlier law. IPERA went a step beyond simply identifying programs susceptible to improper payments and set up regulatory mechanisms. IPERA requires an agency Inspector General to review compliance reports and recommend actions an agency must take if they are found to be non-compliant. The act was designed to create a check on government agencies and their payouts, to ensure that these payments are as accurate as possible. Two years later, Congress passed another law addressing improper payments—the Improper Payments Elimination and Recovery Improvement Act (IPERIA) of 2012. This law established the Do Not Pay Initiative and focused, overall, on improving agency estimation of improper payments.
In 2010, improper payments totaled $121 billion, and after the implementation of IPERA, there was an immediate decrease. For a few years the downward trend continued, but in 2013 the numbers began to inch their way back up. Reductions in improper payment backslid so far they eventually surpassed the 2010 amount that sparked the original calls for reform.
Improper payments are monitored in annual compliance reports through the Government Accountability Office (GAO), which serves as a watchdog over the US government’s financial status. The GAO monitors federal spending and works to ensure payments are issued in their proper amounts to the correct recipients. In the GAO’s recent report for fiscal year (FY) 2015, $136.7 billion was revealed to be improper payments.
Every year, the GAO also puts together a high-risk list, shedding light on agencies and programs with particularly high rates and susceptibilities to waste, mismanagement, and fraud. Some high-risk programs include Medicaid with a 9.8% Improper Payment (IP) rate, resulting in $29.1 billion in improper payments, and the National School Lunch Program, with a 15.7% IP rate and $1.8 billion in improper payments. The 16 high-risk programs account for almost $127 billion in taxpayer dollars that were not supposed to be paid out. To put this number in perspective, earlier this year the Congressional Budget Office (CBO) estimated an increase in the federal deficit of $105 billion from the recorded FY 2015 report.
The report also revealed two programs—both part of Department of Veteran Affairs (VA)–with IP rates of over 50%. The VA Community Care, a program designed to provide care to veterans in non-VA hospitals when their local VA hospital cannot provide the care needed, has a 54.77% IP rate. The Purchased Long Term Services and Support, which provides geriatric care to veterans, was revealed to have an astonishing 59% IP rate. The compliance rate set by the Improper Payments Elimination and Recovery Act (IPERA) was 10%. These two programs have resulted in over $3 billion in improper payments.
Overall, in FY 2014, the VA reported $1.6 billion in improper payments. Just one fiscal year later $5 billion was reported, and over half of this increase came from the VA Community Care and Purchased Long Term Services and Support programs alone. Furthermore, in 2014, both of these programs reported IP rates less than target rate of 10%. So what sparked this increase? In the 2015 compliance report released by the VA, these increases were attributed to further improvements in estimates and the identification of invalid contracts. Regardless, the identification of improper payment rates of this magnitude signals that major reforms are needed in these programs.
Compared to larger programs with higher improper payment amounts, $3 billion may not seem like a pressing issue—but a program where over 50% of their payments are not supposed to be allocated is a big deal. Further, during this year’s appropriations process, the Senate Appropriation Committee approved a Military Construction and Veterans Affairs bill that will provide $83 billion in funding for FY 2017; a $3.1 billion increase from this year’s budget. The House Appropriations Committee approved a similar spending bill, with a $2.6 billion increase from last year. If increases in the budget of the VA are necessary, cutting improper payments in these two programs could help bridge the funding gap internally.
While there have been significant strides in reducing improper payments, it is clear that more work is needed. Improper payment amounts may seem minor at the program level, but together they represent over $100 billion in wasteful and unnecessary spending. Programs like the Do Not Pay initiative and the CBO already exist to combat this and there is bipartisan support—IPERA passed unanimously in the House and the Senate. However, it’s necessary that additional steps are taken towards incentivizing agencies to stop improper payments themselves–rather than waiting for recommendations in an audit report. Taxpayers need to hold their elected representatives accountable for making a good-faith effort to follow through and ensure our tax dollars are properly spent.