The Federal Government’s 100 Billion Dollar Mistake

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  • 09/21/2022

Ever reviewed your budget and tried to figure out how to identify wasteful spending?  Congress reviewed its spending and came with a way to cut back on waste and save taxpayers money by developing a partnership with the private sector to identify and curb waste.  Even though the partnership works, it has been stalled.  Those who benefit from the government wasting money are more interested in protecting the trough of federal largesse than spending your money in a more responsible manner.

Congress has passed several laws to help address wasteful improper payments.  The Office of Management and Budget explains that improper payments happen, “when the funds go to the wrong recipient, the recipient receives the incorrect amount of funds, or the recipient uses the funds in an improper manner.”

According to the Congressional Research Service, one of those laws, the Improper Payments Information Act (IPIA) was designed to get an idea of the scale and scope of the improper payments.  Another law, the Recovery Audit Act, “required agencies that awarded more than $500 million annually in contracts to establish programs to recover overpayments to contractors.”

IPIA revealed that from fiscal year 2004 to fiscal year 2012 improper payments increased from $45 billion to $108 billion.  Congress now had evidence to support what many in the House and Senate suspected, and most voters believed:  the federal government was a lousy guardian of taxpayer dollars.

To address this problem, Congress passed another law, the Improper Payments Elimination and Recovery Act (IPERA) of 2010, which amended IPIA.  IPERA increased “requirements for identifying, estimating, and reporting on programs and activities susceptible to significant improper payments and expanding requirements for recovering overpayments across a broad range of federal programs.”

Additionally, Congress has recognized the importance of working with the private sector to help address the issue of improper payments.  It established a demonstration program that began in 2005 in a few states to have businesses find and fix improper payments on a contingency fee basis for the Medicare program.

The relationship with the federal government and their private sector partners, know as recovery audit contractors (RACs), was so successful that Congress made the arrangement permanent in 2006, and mandated its establishment throughout the nation by 2010.  In 2013, RACs fixed a staggering 1.5 million claims that resulted in a return of an impressive $3.75 billion to the Medicare Trust Fund.

But the program has been significantly side-tracked since late 2013.  This is due largely to policy changes at the Centers for Medicare and Medicaid Services (CMS) which oversees the RAC program.  Those changes are related in part to how hospital stays are calculated, a matter CMS needs to resolve.  Another roadblock to the work being done by RACs is the medical establishment which benefits from federal dollars.  The accountability provided by RACs has made some in the medical establishment, who are used to the status quo, uncomfortable.  They have labored to weaken RACs.

While RACs are hamstrung, taxpayers suffer.  RACs reduced improper payments from 10.8 percent to 8.5 percent from fiscal year 2009 to fiscal year 2012:  after RACs were hindered in their work, improper payments spiked to 12.7 percent in fiscal year 2014. RACs had an accuracy rate of 96%.  They achieved this remarkable success while only being able to review 2 percent of CMS’s claims, and CMS must sign off on the ones they review.  This type of successful stewardship of government programs should be emulated, not undermined.

As the bureaucracy dithers, our ship of state keeps leaking money.  The Government Accountability Office in a March, 2015 report found that the problem of improper payments is massive.  As the Washington Post reported, “the U.S. government forked over an estimated $124.7 billion to ineligible recipients in 2014, representing the first jump in four years. The highest amount for the Obama administration occurred in 2010, with an estimated $125.6 million in losses. Medicare reported the highest number of improper payments last year, with the program accounting for nearly $60 billion in incorrect disbursements. Rounding out the top three were the Earned Income Tax Credit with $17.7 billion in lost revenue and Medicaid at $17.5 billion.”

This is real money that is being wasted on an epic scale by federal bureaucrats as our nation sinks deeper into a debt that is over $18 trillion.  RACs can help recover money that is being wasted.  The bureaucracy and those with an interest in the status quo need to allow the private sector, through RACs, to save the taxpayer from improper payments by the federal government.  The debt clock tells us we are running out of time to get our fiscal house in order.


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