The Corner

The Federal Government Makes $100 Billion a Year in Improper Welfare Payments

How much money does the federal government send to the wrong recipients? In 2012, over $100 billion. My colleague Jason Fichtner and I produced this chart, which shows the amount and rates of improper payments from federal transfer programs, using the data from the Office of Management and Budget’s “High-Error Programs Report.”

(You can find the data and the analysis for this chart here.)

Medicare fee-for-service, Medicare Advantage, and Medicaid top the chart and combine for $61.9 billion in improper spending, which should surprise no one given their sheer size. But their relatively high rates of errors should especially worry us as the federal government is expanding its reach into the health-care market — does anyone think the Affordable Care Act will be any different from other federal health programs?

Interestingly, though Medicare fee-for-service is the biggest drain in absolute terms — wasting nearly $30 billion in 2012 — it’s far from the worst offender on a dollar-for-dollar basis. The Earned Income Tax Credit is responsible for $12.6 billion in improper payments, almost a quarter of what the program spent in 2012. Pell Grants have the lowest amount of improper payments as a share of program spending, at just 2.5 percent, but the program still manages to waste $800 million a year.

This isn’t new, of course – OMB and GAO have been reporting this numbers for years. But it’s still astonishing that people tolerate such high levels of improper payments. The reality is that federal spending has grown too massive to be adequately overseen, and the resultant waste, fraud, and abuse squanders public resources and undermines trust in government.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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