Government Misspent $175 Billion in Fiscal 2019, Federal Watchdog Reports

March 3, 2020 Updated: March 3, 2020

The federal government recorded some $175 billion in “improper payments” in fiscal year 2019, according to estimates by the Government Accountability Office (GAO).

The figure includes both money that should not have been spent as well as money that should have been but wasn’t. Overpayments totaled over $79 billion, while underpayments near $13 billion. The rest was marked as “unknown” or “technically improper due to statute or regulation,” GAO said in its annual report (pdf) on the topic released on March 2.

For about 43 percent of the total misspent figure, the stated reason was “insufficient documentation.” That means the agency wasn’t able to document whether the payment was accurate or not.

Other common reasons included “administrative or process error” and “inability to authenticate eligibility,” which means the agency couldn’t tell whether the recipient should have gotten the money or not.

Improper payments have totaled almost $1.7 trillion government-wide since 2003, GAO estimated.

Medicaid, Medicare

Misspending increased in 2019 by about $24 billion from the year before, largely due to better data on improper Medicaid payments.

For the first time, the Department of Health and Human Services (HHS) put in place a system to determine improper Medicaid payments attributed to whether the recipient was eligible to get the payment. HHS only launched the system in 17 states, but was already reporting an increase in improper payments of nearly 60 percent—from about $32 billion in 2018 to more than $57 billion in 2019. That means nearly 15 percent of federal Medicaid dollars was misspent.

HHS reported to GAO that most of the “eligibility errors” were due to “insufficient documentation to verify eligibility” or noncompliance with changes in eligibility requirements.

“Another significant cause … is errors resulting from state noncompliance with provider screening and enrollment requirements,” HHS said.

Medicaid largely funds health care for low-income Americans. It costs about $600 billion a year, with roughly two-thirds paid by the federal government and the rest by states.

Another major source of improper payments was Medicare, which funds health care for seniors and the disabled at a net cost of about $600 billion a year.

HHS reported improper Medicare payments of over $46 billion in 2019, some $2 billion less than the year before. That means about 8 percent of Medicare dollars was misspent.

Incomplete Data

The figures don’t quite reflect the reality, since “the federal government’s ability to understand the full scope of its improper payments is hindered by incomplete, unreliable, or understated agency estimates and risk assessments that may not accurately assess the risk of improper payment,” GAO said.

Some agencies, for example, didn’t report numbers even for some programs that they themselves identified “to be at risk for significant improper payments,” the report said, giving examples of Obamacare’s Premium Tax Credit as well as Temporary Assistance for Needy Families, which costs the federal government about $14 billion a year.

The Defense Department reported improper payments of nearly $8.7 billion. That’s up from less than $1.2 billion the year before, mostly due to new methodology used to detect misspending on salaries and entitlements, the department told GAO.

GAO noted, though, that the department “lacks quality assurance procedures to ensure the completeness and accuracy of the payment populations from which it develops improper payment estimates.” GAO reported the problem already in 2013, but efforts to remedy the situation were still in progress as of June 2019, it said.

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