Improved Methodologies for Reducing Improper Payments Can Save Billions Across the Federal Government

You are here

November 24, 2015
By: 

The federal government provides numerous forms of payment and support to citizens. These include Social Security retirement and disability payments, educational loans and grants, housing vouchers, and veterans’ disability payments— not to mention the enormous variety of health care payments provided annually through multiple federal agencies. These payments account for billions of dollars in federal government spending each year, with each managed through its agency’s unique process for identifying, evaluating and paying beneficiaries. The systems are huge, complex and widely varied, which can create many opportunities for payments to be delivered incorrectly.

Improper payments are those that have been made in an incorrect amount, should not have been made, or were made to the wrong entity or beneficiary. Often the result of inefficiencies or inaccuracies in processing requirements, improper payments are a major contributor to excess benefits costs and, in many cases, these errors can be drastically reduced through an improved methodology that strengthens financial management controls. With improved stewardship of payment funds, agencies can better assist citizens by ensuring that funds are being used effectively.

Improper Payments and the Citizen Experience

It’s also important to consider the impact of improper payments throughout the citizen’s journey. At any point of service where benefits are delivered, there is an opportunity for incorrect expenditures, whether it’s because the person receiving the service is not the intended recipient (perhaps using a fake ID) or because the payment is miscoded. Improper spending depletes the resources of agencies and challenges their ability to deliver the services that citizens need.

This topic spans the federal government. Agencies such as the Department of Education, Housing and Urban Development, Treasury, Agriculture, and Labor all have programs designated as potentially “high-error.” This means they reported $750 million or more in improper payments in a given year, did not report an error amount in the current reporting year but previously reported an error amount over the threshold, or have not yet established a program error rate and have measured components that were above the threshold. The Social Security Administration also has an urgent need to address improper payment issues as the growth of the aging population strains its existing resources.

An Opportunity for Government

There are programs in place that federal agencies have successfully used to minimize improper payments. One methodology used by the Centers for Medicare & Medicaid Services (CMS) to measure improper payments for Medicare has proven highly effective for billing integrity, with an 89.9 percent Medicare fee-for-service compliance rate in 2013 that totaled more than $321 billion in correct payments.

There is tremendous opportunity for other agencies to implement an improper payment methodology similar to CMS’ that could help realize a significant return-on-investment through capitalizing on innovative technology solutions, clinical expertise and effective risk mitigation strategies that are already being delivered in other areas of the federal government.

The quality of the citizen journey and the effectiveness of the government in providing services to its citizens can be vastly improved if improper payments are reduced across all agencies, potentially saving billions without compromising program access for recipients entitled to payment.

Have questions or comments about the ideas proposed in this blog post? Reach out anytime at AnnaSever@maximus.com.

Recent Posts