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“Improper payments” occur when:
Although not all improper payments are fraud, and not all improper payments represent a loss to the government, all improper payments degrade the integrity of government programs and compromise citizens’ trust in government. In fiscal year (FY) 2012, federal agencies reported a government-wide improper payment rate of 4.35%, a sharp decrease from the high-water mark of 5.42% reported in FY 2009. Improper payments totaled approximately $108 billion in FY 2012.
Under the direction of the Office of Management and Budget (OMB), agencies have identified the programs that are susceptible to significant improper payments, and measured, or are putting in place measurement plans, to determine the estimated amount of improper payments. By identifying and measuring the problem, and determining the root causes of error, the government is able to focus its resources so that corrective action plans can be thoughtfully developed and successfully carried out.
An improper payment can happen for a number of reasons. Knowing the causes of program error is essential. By understanding the causes of improper payments, agencies can better implement policies and procedures to reduce errors without negatively impacting the people who should be receiving payments from the government.
While improper payments can have many causes, the federal government has categorized root causes of error into three categories for reporting purposes. The three categories are:
The agency administering the program lacks supporting documentation necessary to verify the accuracy of the recipient’s claim for federal benefits. Errors in this category may be caused by incorrect inputting, classifying, or processing of applications or payments by a federal agency, state agency, or third party who is not the beneficiary.
The agency administering the program is unable to confirm that the recipient meets all of the requirements for receiving payment; the verifying information does not exist or is not accessible. Errors in this category may, for example, be caused by providing a service that was not medically necessary given a patient’s condition, such as providing a power wheelchair to a patient that does not need a wheelchair.
Errors caused by the failure to verify recipient information, including earnings, income, assets, or work status, even though verifying information does exist and is accessible. These errors could also be due to beneficiaries failing to report correct information to an agency, such as an unemployment insurance beneficiary failing to notify the agency when he has returned to work and is no longer eligible for unemployment insurance payments.
No. Contrary to common perception, not all improper payments are fraud (i.e., an intentional misuse of funds). In fact, the vast majority of improper payments are due to unintentional errors. For example, an error may occur because a program does not have documentation to support a beneficiary’s eligibility for a benefit, or an eligible beneficiary receives a payment that is too high—or too low—due to a data entry mistake.
Also, many of the overpayments are payments that may have been proper, but were labeled improper due to a lack of documentation confirming payment accuracy. We believe that if agencies had this documentation, it would show that many of these overpayments were actually proper and the amount of improper payments actually lost by the government would be even lower than the estimated net loss discussed above.
No. Another prevalent misunderstanding is that all improper payments are a loss to the government, but that is not always the case. For example, although most of the $108 billion in improper payments was caused by overpayments (payments that are higher than they should have been), a significant chunk of that total amount was caused by underpayments (payments that are lower than they should have been). The difference between these two amounts (that is, overpayments minus underpayments) equals the net amount of payments that improperly went out the door.
Also, many of the overpayments are payments that may have been proper, but were labeled improper due to a lack of documentation confirming payment accuracy. We believe that if agencies had this documentation, it would show that many of these overpayments were actually proper and the amount of improper payments actually lost by the government would be even lower than the estimated net loss discussed above.
Yes. In general, state-administered programs are partially or fully funded by the Federal government, but each state sets its own guidelines regarding eligibility and services. Just like federally-administered programs, state-administered programs also make improper payments. For example, state-administered programs are responsible for about a third of the billions of dollars in improper payments made by high-error programs.
High-error state-administered programs include:
High-error federally-administered programs include:
In total, the government has so far avoided over $47 billion in improper payments over the past three years, almost hitting the President’s ambitious goal of avoiding $50 billion in improper payments by the end of FY 2012. Notably, when Department of Defense commercial payments are factored in, the total for improper payments avoided over the three years jumps to nearly $70 billion, and the government-wide error rate falls to 3.7 percent. While including these new amounts can make year-to-year comparisons more complex, it is a more comprehensive snapshot of today’s government-wide error rate.
The Administration surpassed, by more than double, the President’s goal of recapturing for America’s taxpayers $2 billion in overpayments to contractors by the end of FY 2012. Federal agencies recaptured a record $4.4 billion in overpayments to contractors over the last three years, due in large part to the success of the Medicare Fee-for-Service Recovery Audit Contractor program.