Government made $137 billion in improper payments in 2015, largest figure on record

Federal agencies issued an estimated $136.7 billion in improper payments during fiscal year 2015, the largest annual tally since 2004 when agencies first began reporting data on the subject.

The figure, reported as part of the release of the government’s consolidated annual financial statements Thursday afternoon, was $12 billion higher than the Office of Management and Budget had previously projected for 2015 and raised the cumulative total of improper payments since 2004 above $1 trillion for the first time. More precisely: $1.137 trillion.

As in past years, the Medicare and Medicaid programs were responsible for the lion’s share of the overall total. Increased error rates in Medicaid during 2015 were the main culprit in driving up the governmentwide improper payments figure.

According the Department of Health and Human Services’ separate financial statement, the error rate for Medicaid grew from 6.7 percent in 2014 to 9.8 percent in 2015 as that program continued to accept responsibility for the health care bills of millions of additional patients under the Affordable Care Act.

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And in dollar terms, improper payments for Medicare and Medicaid jumped from $78.4 billion in 2014 to $89.8 billion in 2015. That change alone is responsible for almost all of the governmentwide increase in improper payments compared to 2014, when agencies reported a collective $125 billion.

“The Medicare Fee for Service program continues to account for the largest portion of the government-wide total in FY 2015, whereas Earned Income Tax Credit (EITC) and Medicaid combined account for approximately a third of the government-wide total,” OMB officials wrote in the annual financial statement. “Agencies recovered roughly $20 billion in overpayments through the payment recapture audits and other methods in FY 2015”

2015’s results represented the second consecutive year of record-high improper payment figures and suggested the reversal of a trend that began in 2010, with both error rates and total dollar amounts involved in improper payments declining year-after-year between then and until 2013.

The percentage of government payments later deemed improper peaked at 5.42 percent in 2009. It improved to 3.53 percent by 2013, but Thursday’s report showed the progress had receded — to 4.39 percent.

But improper payments aren’t always a result of fraud or any other kind of wrongdoing, and 2015 marked the first year that  OMB required agencies to break out the root causes of their improper payments to describe why they were determined to be “improper.”

The most common cause, by far, was that the government didn’t have documentation to support the payments it made. That was the case for 33 percent of improper payments in 2015, totaling about $45 billion.

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Another 23 percent of the improper payments happened because agencies couldn’t validate with sufficient certainty that the people they paid were eligible for the programs in question.

That can happen when “no database or other resource exist to help the agency make a determination of eligibility or statutory constraints exist preventing a program from being able to access the information that would help prevent the improper payment,” according to OMB. “This additional detail behind the root causes of improper payments provides more granularity on improper payment estimates and will be used to inform more effective corrective actions and more focused strategies for reducing improper payments.”