Agencies typically recover only 47 cents of every overpaid dollar.
Of the roughly $4 trillion spent by the government in fiscal 2017, an estimated $141 billion was spent improperly, meaning it was paid out in the wrong amount or to the wrong recipient or it was not properly justified. Some of that was the result of fraud, some simply paperwork errors.
Improper payments are a critical and significant problem, not only because they siphon money from programs serving important national needs, but because, ultimately, they can erode the public’s trust in government.
A positive step toward addressing this problem was taken with the release in March 2018 of the president’s management agenda, which includes “getting payments right” as one of the Trump administration’s cross-agency priority goals. CAP Goal No. 9 takes two approaches to the problem that are sorely needed.
First, it aims to shift agencies’ focus toward prevention so there are fewer improper payments that need to be recovered. Recovering an improper payment is laborious and often inefficient and agencies typically recover only 47 cents of every overpaid dollar, so shifting more toward a prevention posture should yield better overall results.
Secondly, the CAP goal promotes greater partnerships between federal and state agencies. For example, states today can access federal databases administered by the Treasury Department’s Do Not Pay program, which provides data matching and data analytics services to government agencies to prevent and detect systemic improper payments. But there is little, if any, actual data sharing occurring between states and Do Not Pay. The CAP goal tries to accomplish this by encouraging the Do Not Pay program to identify potential state agency partners with which it can share data for screening and verifying recipients of federally funded programs before they are paid. Because states are largely responsible for determining eligibility for federally-funded benefit programs, the CAP goal recognizes that their active involvement will be critical to any success in preventing improper payments.
There have been examples of how focusing on prevention can work using low-cost, high-impact approaches. In New Mexico, for example, managers of the Department of Workforce Solutions realized they were receiving many unemployment insurance claims containing inaccurate information that inflated the benefits they were paying out. They identified three questions in the online application process that elicited the most inaccurate responses. Then they installed simple, low-cost revisions to those portions of the online application process, employing behavioral science techniques and “nudge theory” to encourage more accurate responses. With DWS’s solution in place, claimants were twice as likely to report new earnings, half as likely to commit fraud, and up to 20 percent more likely to find work within the next few months. Other states have experimented with similar tactics to improve accuracy in other types of benefits programs, such as child care and the Supplemental Nutrition Assistance Program.
There is also progress at the federal level in preventing improper payments. The Centers for Medicare & Medicaid Services, for example, employs a data analytics system—the fraud prevention system—that analyzes claims to identify health care providers with suspect billing patterns. Besides identifying targets for fraud investigations, the system also uses automated controls that identify payments associated with potential fraud to deny claims that violate Medicare rules or policies before the claims are paid. As of May 2017, CMS reported that the system denied nearly 324,000 claims, saving more than $20 million in fiscal 2016.
These examples illustrate several key points. First, there is great value in attacking the problem prior to the point of payment. Second, to prevent an improper payment, agencies do not necessarily have to focus on the payment itself—tweaking the claims process or interacting more with beneficiaries, for example, can also lead to measurable results. Third, solutions can take many forms and sizes, so program managers should be imaginative and size the solution appropriately.
The long battle to reduce improper payments is approaching an inflection point, and we hope the coming months and years will see the focus shift to its rightful place: on their prevention.
Dave Mader is the civil government chief strategy officer for Deloitte’s Government and Public Services practice and is a former controller of the Office of Management and Budget. Monte Zaben is a principal at Deloitte & Touche LLP and the leader of Program Integrity services within Deloitte’s Government and Public Services practice.