Federal agencies set new record of $125 billion in improper payments after years of declines

Federal agencies set a new record for improper payments last year, shelling out $125 billion in questionable benefits after years of declines.

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The payments included tax credits for families that didn't qualify, Medicare payments for treatments that might not have been necessary, and unemployment benefits for people who were actually working.

Improper payments increased by $19 billion over the previous year, according to a report by the Government Accountability Office, the investigative arm of Congress. In addition to fraud, the errors included overpayments and underpayments, as well as payments made without proper documentation.

While the errors were spread among 22 federal agencies, three programs stood out: Medicare, Medicaid and the Earned Income Tax Credit. Together, the three programs accounted for more than $93 billion in improper payments.

"This taxpayer money was not spent securing our borders, it was not spent on national defense, and it was not spent contributing to a safety net for those in need," said Sen. Ron Johnson, R-Wis., chairman of the Senate Committee on Homeland Security and Governmental Affairs. "This is a problem that is going to get worse year after year if we do not get a handle on it now."

Johnson's committee held a hearing Monday on reducing improper payments.

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Federal agencies are required to estimate the amount of improper payments each year as part of a government-wide effort to tackle the issue.

The increase in improper payments comes after three years of steady declines. The level previously peaked at $121 billion in 2010 before dropping to $106 billion for the 2013 budget year.

The Obama administration says reducing improper payments is a priority.

"While progress has been made over the years, the time has come for a more aggressive strategy to reduce the levels of improper payments we currently are seeing," said David Mader, the controller at President Barack Obama's budget office.

Mader outlined several proposals in Obama's proposed budget for next year. They include programs to reduce fraud and abuse in Medicare and Medicaid, as well as budget increases at the IRS to combat tax fraud.

Medicare's payments to doctors and hospitals had the most improper payments, at $46 billion. The report said many were caused by insufficient documentation for home health claims and errors on medical necessity forms for hospital patients.

The Earned Income Tax Credit provides payments to low-income families through the tax code. The program had nearly $18 billion in improper payments, for an error rate of more than 27 percent. The report cited problems verifying incomes before the payments were issued.

"If we're going to get a better handle on our debt and deficit — and, frankly, improve Americans' impression of how we take care of their money — we need to sharpen our pencils and stop making the kind of expensive, avoidable mistakes that lead to wasteful spending and make our agencies and programs vulnerable to fraud and abuse," said Sen. Tom Carper, D-Del.

Other programs with improper payments:

— Medicaid, the health insurance program for the poor: $17.5 billion.

— Medicare Advantage, which allows older Americans to get their Medicare benefits through private health plans: $12.2 billion.

— Unemployment insurance: $5.6 billion.

— Supplemental Security Income, a disability program for the poor: $5 billion.

— Social Security: $3 billion.

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