Agencies make headway in reducing improper payments

Federal agencies have cut $7.8 billion from improper payments, reducing the total of payments made in error or to the wrong persons by 17 percent last year. The Health and Human Services Department, which accounts for the largest amount of improper payments, produced the most significant drop, according to the Office of Management and Budget.

HHS slashed improper Medicare payments by 44 percent by taking aggressive steps to ensure that the necessary documentation was in place to support payment claims, OMB said in a report released today.

Improper payments fell to a total $37.3 billion in fiscal 2005 from $45.1 billion in 2004. Agencies have committed to future-year targets for continued reduction of improper paymets through process and internal control improvements and reduced spending.

“We are extremely proud of federal agencies for taking critical steps to help ensure that taxpayer dollars are spent wisely and efficiently,” said Linda Combs, OMB controller and head of OMB’s Office of Federal Financial Management, in releasing the report.

The government considers payments improper if they are transacted without proper documentation, are sent to the wrong recipient, are made for the incorrect amount or used in an improper manner.

Much of the success this past year can be attributed to the President’s Management Agenda initiative to eliminate improper payments, which provided an accountability framework for ensuring that agencies institute necessary financial management improvements and corrections to accomplish payment accuracy, the report said.

OMB also released its latest scorecard for agency progress in accomplishing the President’s Management Agenda. The Agriculture Department achieved the lowest error rate—6 percent—in the history of its Food Stamp program by simplifying program administration and working with states to ensure that they implement more quality controls, the report said.

Technology plays a critical role in reducing improper payments, whether it's something as simple as not allowing a flawed transaction or as complex as data analysis to identify trends, said Rep. Todd Platts (R-Pa.), chairman of the House Government Reform Management Subcommittee.

“The use of technology reduces the risk of human error, and it provides an audit trail. If you look at the programs that have improved, they've done it through the effective use of technology,” he said.

The Food Stamp program uses electronic benefits transfer, and data-matching has helped both the Housing and Urban Development and Labor departments to reduce error rates, he said.

HHS will next apply the same strategies it did for the fee-for-service Medicare claims to Medicare managed care and prescription drug plans, Medicaid and the State Children’s Health Insurance Program, said HHS secretary Michael Leavitt.

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