Cutting $20 Billion in Improper Payments in Two Years

As many of you know, each year the federal government wastes billions of American taxpayers’ dollars in improper payments to individuals, organizations, and contractors.  These are payments made by the government to the wrong person, in the wrong amount, or for the wrong reason. Unfortunately, these “improper payments” have been happening in the Federal government for far too long, and it is just plain wrong. At a time when our most critical social and economic assistance programs face increasingly tight budgets, we cannot afford, nor will we tolerate, such errors. Sending payments to convicted felons or dead people can’t be tolerated as business as usual.

As part of the Administration’s Campaign to Cut Waste, we’ve worked hard to bring down the rate of improper payments, recapture misallocated funds, and meet the President’s goal of reducing improper payments by $50 billion by the end of 2012. Today, federal agencies are completing their year-end financial statements, and I’m pleased to report that we have made significant progress on these fronts.

Today, we can announce that the Administration is on track to meet or exceed these goals. In FY 2011, Federal agencies cut wasteful improper payments by nearly $18 billion dollars and recaptured $1.2 billion in erroneous payments. When combined with results from last year, we have prevented over $20 billion in error and recaptured over $1.9 billion, putting us on pace to meet the President’s goal.

The FY 2011, the government-wide improper payment rate decreased to 4.7 percent, a sharp decrease from the 2010 error rate of 5.3 percent. We saw error rate reductions in almost every major program with a history of significant errors – Medicare, Medicaid, SNAP or Food Stamps, Rental Housing, Earned Income Tax Credit, Pell Grants, and Supplemental Security Income.

When the President took office in 2009, payment error rates were on the rise. That’s why the President has been aggressive in going after improper payments and wasteful government spending since taking office.  He laid out a comprehensive strategy through an Executive Order issued in November 2009, intensified and expanded the use of specialized payment recapture audits in a March 2010 memorandum, ordered the creation of a “Do Not Pay List” in June 2010, and signed into law the Improper Payments Elimination and Recovery Act (IPERA), which provides agencies with additional tools and incentives to reduce and recapture improper payments. Last year, the President announced that by the end of 2012, the Administration would avoid $50 billion in improper payments, cut Medicare errors in half, and recapture $2 billion in overpayments to contractors. 

Now, the progress we made this year is a good step, but it is not the end. There is still hard work to do to meet the targets the President set out for the end of next year. We will continue to work day and night to prevent taxpayer dollars from being wasted in payments to the wrong people or in the wrong amount. 

Nine months ago, the President proposed in his 2012 Budget even more aggressive tools that will help drive down this waste. If Congress passes these proposals, they will result in more than $160 billion in savings to the Federal Government over the next decade. Because we can’t wait for Congress to act, agencies are continuing to identify innovative solutions to addressing improper payments, and today Secretary Sebelius is announcing that the Department of Health and Human Services (HHS) will launch three pilots to cut Medicare waste, while the Partnership Fund for Program Integrity Innovation also  announced a pilot for working with States to cut Medicaid waste. 

Because it is your money at stake, you can keep tabs on our progress at PaymentAccuracy.gov, the improper payments dashboard. We are not letting up. 

Danny Werfel is Controller of the Office of Federal Financial Management.