Improper Payment Progress

Readers of OMBlog are now quite familiar with the Administration’s determined effort to cut the billions of dollars wasted each year in improper payments -- payments made by the government to the wrong person, at the wrong time, or in the wrong amount. These include payments made in error by a government agency sending a benefit check, inadequate documentation by a local provider, or outright fraud by a contractor or other recipient.

As part of the President’s Accountable Government Initiative, we’ve worked hard to bring down the rate of improper payments, recapture misallocated funds, and meet the President’s goal of reducing improper payments by $50 billion by the end of 2012. Yesterday, federal agencies finished their year-end financial statements, and I’m pleased to report that we have made significant progress on these fronts.

For 2010, the government-wide improper payment rate declined to 5.49 percent, a decrease from the 5.65 percent reported in 2009. This means that we prevented an additional $3.8 billion in improper payments from being made in 2010, and are headed in the right direction as we work to meet the President’s goal.

In fact, eight of the 10 high-priority programs (programs which account for the majority of government-wide improper payments) reported lower improper payment rates in 2010 compared to 2009. It’s worth noting that Medicare and Medicaid both achieved lower error rates in 2010, avoiding approximately $8 billion in improper payments if those declines had not been achieved.

Agencies also reported that they recaptured almost $687 million in improper payments in 2010, a significant amount of payment recaptures. This total includes approximately $611 million recaptured through payment recapture audit reviews of agency contract payments – a specialized audit in which auditors are given an incentive to find more misspent money. This was the highest recaptured amount reported in the seven years that agencies have conducted payment recapture audits, and more than doubled from 2009. All told, the $687 million recaptured in 2010 puts us on track to achieve the Administration’s goal of recapturing at least $2 billion between 2010 and 2012.

Now, because many of the targeted programs – such as Unemployment Insurance and Medicaid – are paying out more benefits as the economic downturn creates more demand for these benefits, the total number paid out in improper payments increased to $125 billion last fiscal year even though the overall error rate declined. This is an unfortunate result of the recession and of basic math: the more that is paid out, the more paid out in error even if the overall rate declines.

Looking ahead, we are not stopping in our efforts to reduce improper payments. Today, we are releasing guidance to agencies on steps that they should take to comply with the Presidential memorandum on intensifying and expanding payment recapture audits, and steps on how agencies can begin to implement the new recapture authorities contained within the Improper Payments Elimination and Recovery Act (IPERA). We also are launching a partnership with the Department of Veterans Affairs (VA) to pilot www.VerifyPayment.Gov, a new portal for the new Do Not Pay List that will create a central clearinghouse of information to prevent payments to ineligible recipients.

And because, ultimately, it’s your money at stake, information about agencies’ improper payments will be available later today at www.PaymentAccuracy.gov.

The results today demonstrate that we can cut waste, boost effectiveness, and create a government where tax dollars are respected. As the steps we have taken over the past several months continue to take root, I am confident that with the continued hard work of folks across the federal government and with the leadership of President Obama, we will see continued progress in reducing improper payments and toward a more efficient federal government.