Legislation such as the Improper Payments Information Act (IPIA P.L. 107-300) and Executive Order 13520 sought to address improper payments in government-funded programs. IPIA directed federal agencies to report on the number of improper payments occurring and outline what actions are being taken to reduce them. Order 13520 worked to identify high-priority programs and increase transparency. Agencies were required to submit projected reduction estimates and details on how they would work to achieve them. Despite these pieces of legislation, government-funded programs continue to lose billions of dollars due to payments made in error.

According to the GAO, federal entities estimated about $141 billion in improper payments in 2017. The Congressional Research Service (CRS) also reported and discovered that the 20 high-priority programs identified due to Order 13520, accounted for 96% of the $141 billion. In the years to come, the CRS predicts that these programs will account for 90% of all improper payments.

Statute Compliance Issues

The GAO has repeatedly touched on the following four compliance issues in their improper payment reporting:

  • Federal entities struggle to collect accurate eligibility data.

  • Agencies lack reliable methods for identifying improper payments.

  • Entities fail to direct resources at compliance measures mandated by law.

  • Agencies go through the motions and see the compliance measures as a way to keep oversight at bay.

Surprisingly, while agencies struggle to comply with statues to report on improper payments, none of them require that agencies reduce payments made in error. Therefore, improper payment rates continue to climb and agencies engage in costly measures to report.

The CRS report stated, “nearly half of the high-priority programs have shown no improvement. Specifically, the error rates for seven programs have increased since they first began reporting data, and the error rate for one program has remained unchanged. Moreover, while the error rates for twelve programs have decreased, the decline has been less than 10% for five programs. In some cases, program error rates have not improved.”

Improper Payments Reduced With Quality Data

In order to reduce improper payments, the federal government will need to make a concentrated effort of identifying the root causes for these payments among high priority programs while also implementing technology solutions.

CMS is one agency in particular that has implemented innovative processes, such as its Fraud Prevention System, to address improper payments within its programs. Following the compliance directives established in the Improper Payments Elimination and Recovery Act of 2010 (H.R. 3393), last year CMS reported its lowest improper payment rate in eight years.

The agency’s Fraud Prevention System is an IT solution that utilizes data analytics to identify when mistakes or intentional behavior may lead to improper payments or indicate fraud. CMS believes that the system will yield a 20% savings increase.

According to the agency, “CMS employs multi-faceted efforts to target the root causes of improper payments, with an emphasis on prevention-oriented activities. Actions to prevent and reduce improper payments include: policy clarifications and simplifications; prior authorization initiatives that ensure applicable coverage, payment, and coding rules are met before services are rendered; a targeted probe and educate medical review strategy that focuses on outlier providers, limits the number of medical records requested, and puts emphasis on education and assistance in correcting claims errors; and provider education on Medicare policy.”

Legislation has helped to bring the problem of improper payments into focus for agencies and government officials. Unfortunately, the measures directed by the legislation are costly and primarily revolve around compliance and reporting as opposed to reducing improper payments. In order to stop improper payment rates from rising further, agencies must look to innovate data solutions in order to identify and prevent fraud, waste, and abuse.