The White House Office of Management and Budget declared today that it had made genuine progress in cutting wasteful and improper payments to the tune of $17.6 billion in fiscal year 2011, with significant decreases in payment errors coming from Medicare, Medicaid, Pell Grants, and Food Stamps.
Combined with the improper payment cuts in 2010, administration officials said agencies avoided making over $20 billion in improper payments in the two years since President Obama issued an executive order initiating an aggressive campaign against wasteful payment errors.
OMB Director Jack Lew, in a press briefing today, attributed the progress to “an unparalleled commitment” by the White House, and the use of “forensic technologies” in rooting out sources of improper payments.
“We are seeing real progress cracking down on this waste of taxpayer dollars that has persisted for far too long,” said Lew.
The effort is part of a directive President Obama made with a goal of preventing $50 billion in payment errors by the end of 2012. “This is a good step,” Lew said, “but not the end.
Administration officials described several signs of progress:
The government-wide error rate dropped to 4.7 percent in fiscal 2011, a sharp decrease from the 2010 error rate of 5.3 percent and the 2009 error rate of 5.42 percent.
For the first time in six years, the total amount of improper payments, estimated at $116 billion, has declined from the previous year.
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The government has recaptured over $1.2 billion in overpayments from government contractors last year. When combined with the roughly $700 million in overpayments recaptured in the previous year, the government is very near to achieving the president’s $2 billion mandate.
Daniel I. Werfel, OMB Controller, said during the press briefing that error rates were a better measure of the administration’s progress, than the number of improper payments, since payment volumes change from year to year.
Agency improper payment data is being updated Tuesday afternoon at www.paymentaccuracy.gov.
Department of Health and Human Services Secretary Kathleen Sebelius, who also spoke with reporters today, highlighted several improvements in the government’s Medicare and Medicaid programs:
The Medicare fee-for-service error rate fell from 9.1 percent in 2010 to 8.6 percent in 2011, and is down 2 percentage points from 2009.
The overall error rate for Medicare programs fell from 10.2 percent in 2010 to 8.6 percent in 2011, and is down 3.2 percentage points from 2009.
“Last year our antifraud efforts recovered a record $4 billlion, and extended the life of the trust fund by eight years,” Sebelius said.
She also noted: Medicare fee-for-service avoided about $7 billion in payment errors;
Medicare Part C avoided about $5 billion in payment errors; and Medicare Part D reported a composite error rate for the first time, with an error rate of 3.2 percent, well below the government average, she said.
In addition, the error rate for Medicaid fell to 8.1 percent in 2011 from 9.4 percent in 2010, avoiding about $4 billion in payment errors since 2009.
The Department of Agriculture’s Supplemental Nutrition Assistance Program (formerly referred to as Food Stamps) saw its error rate fall an all-time low, to 3.8 percent this year, avoiding a projected $800 million in payment errors compared to before the President issued his directive.
USDA also reduced the prevalence of trafficking to 1 percent, attributing the decline to the USDA’s work with states, reducing fraud and holding bad actors accountable. In fiscal year 2011, USDA officials said it conducted nearly 5,000 undercover investigations to counter fraud. In fiscal year 2010 alone, state level officials conducted 847,000 fraud investigations, disqualified 44,000 individuals, and recovered $287 million in recipient claims, according to USDA figures.
Education Secretary Arne Duncan, meanwhile, reported the error rate for Pell Grants went down to 2.7 percent (2011), avoiding roughly $300 million in payment errors compared to prior to the President’s directive.
In 2010, the Department of Education implemented a process to allow Federal Student Aid applicants filling out online applications to go to the Internal Revenue Service (IRS) website to retrieve their income information and transfer it directly to their application. This process, Duncan said, reduces errors by making it easier for students and parents to enter the correct tax return information and receive the correct amount of student aid.
Administration officials also announced several measures to reduce improper payments further.
OMB Director Jack Lew issued a memo to agencies today directing them to step up their oversight of contractors and grant recipients in order to eliminate unnecessary risk of waste, fraud and abuse.
Specifically, the guidance directs agencies to strengthen their suspension and debarment procedures – tools that allow the Federal government to stop doing business with bad actors who put taxpayer dollars at risk.
Secretary Sebelius announced that the Department of Health and Human Services will launch four additional pilots to reduce the error rate and cut Medicare and Medicaid waste and fraud. According to HHS, those programs will:
• Let private inspectors catch wasteful spending before it happens by expanding the use of Recovery Audit Contractors. At HHS and other agencies, private recovery audit contractors normally review payments and identify errors after the payments are made. Then, the agency must track down and recover the improper payments. Last year, private companies recovered hundreds of millions of taxpayer dollars by finding improper payments that have already been paid out. The agency will now allow private companies to screen certain hospital payments before they are made, which will prevent improper Medicare payments from happening in the first place.
• Test changes to outdated hospital billing system to help prevent over-billing. Hospitals sometimes perform services as inpatient that Medicare requires to be outpatient. Right now, when those hospitals bill Medicare, HHS does not allow them to re-bill as outpatient. Under this pilot, HHS will allow some claims that are incorrectly made under the inpatient program to be resubmitted under the outpatient program. This mistake-incorrect billing of services-is a leading cause of error in the Medicare program and wastes time and money in appeals.
• Change its process for approving payments for medical equipment with high error rates. One contributor to the Medicare improper payment rate is incorrect reimbursement for medical equipment that is not medically necessary. This change will allow HHS to pilot a new process for reviewing these medical equipment claims before they are made, thus helping to reduce Medicare improper payments.
• Work with States to improve fraud detection. HHS is initiating a pilot project under the Partnership Fund for Program Integrity Innovation to test an automated tool to screen providers for the risk of fraud. Currently, HHS and States lack standardized Medicaid provider data, which hampers detection of potential fraud. If successful, this tool will not only help prevent improper payments by weeding out fraudulent providers, but it will help States focus their resources where fraud is most likely to occur.