The Corner

Economy & Business

One Thing Government Is Great At: Making Improper Payments

This is the time of the year where I wonder why the government continues to pay out billions of dollars in improper payments and does nothing to fix the problem. Seriously, how can we tolerate this? In 2013, improper payments for the highest risk programs totaled $106 billion. In 2015, that number was $137 billion.  

Who is accountable for this government failure? The government has become so big that no one is accountable, oversight is impossible, and no one seems to care at all. Look at the rate of improper payments for the EITC and the school lunch program. From our analysis of the chart:

Some programs, like the Earned Income Tax Credit (EITC), have not only a high improper payment amount but also a relatively high improper payment rate. The $15.6 billion in improper EITC payments represents a substantial portion, 24 percent, of total EITC spending—suggesting that the EITC is particularly prone to waste, fraud, and abuse. As the chart shows, the National School Lunch and School Breakfast programs, Medicare Fee-for-Service, Medicare Advantage (Medicare Part C), and Unemployment Insurance face problems similar to the EITC …

It is worth noting that the federal government’s figures are only estimates, and there is reason to believe the government intentionally underestimates the amount of taxpayer dollars lost to fraud and bureaucratic ineffectiveness. For example, three of the largest programs in terms of improper spending amounts are all related to health care. Medicare Fee-for-Service, Medicare Advantage (Medicare Part C), and Medicaid combined for $86.5 billion in improper payments in fiscal year 2015. However, Malcolm Sparrow of Harvard University, a recognized expert in health care fraud, argues that federal auditors underestimate the volume of improper payments resulting from fraud. He believes fraud could account for as much as 20 percent of federal health spending, which would considerably increase the improper payment figure reported by the government.

These programs should be put on the chopping block if they don’t finally address these problems. 

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

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