Whoops! Medicare Makes $48 Billion in "Improper" Payments

Your waste, fraud, and abuse factoid of the day: The federal government spent just a hair over $500 billion on Medicare payments in 2010—and nearly 10 percent of that spending was improper for some reason, including fraud, according to a new report by the Government Accountability Office.

Medicare, which the GAO notes is already on an “unsustainable” long-run path, shelled out an estimated $48 billion in "improper payments" last year—and, the report says, those in charge of the program aren’t doing nearly enough to avoid making similar payment mistakes in the future. In fact, the $48 billion figure is probably low, because it doesn’t include any improper payments from the Medicare Part D prescription drug benefit.

Even still, it’s enough for the government watchdog to warn that Medicare suffers from “pervasive internal control deficiencies.” Consequently, the GAO has dubbed Medicare a “high risk” program “because its complexity and susceptibility to improper payments, combined with its size, have led to serious management challenges.”

It’s not clear how much of the problem is related to fraud and how much is related to internal factors, and some Republicans seem upset about the lack of clarity on that front. The inability to tell which is which is a sign of how little oversight there is in the program’s payment system, but I’m not sure there’s much comfort to be had here either way: A system that loses tens of billions of dollars each year to sloppy, incompetent management is arguably even worse than one that’s been willfully defrauded by clever schemers. It’s one thing to lose a truckload of taxpayer money when someone is making a concerted effort to bilk you out of it. It’s another thing entirely to lose it because you were so inept that you couldn’t keep track of it.

This is the sort of thing to remember when single-payer supporters talk up Medicare-For-All. Yes, Medicare remains popular, but it’s incredibly wasteful and has severe, ongoing management problems. As GAO notes, this isn’t the first time tens of billions in waste has been found in the system; when the program was examined in 2007, GAO found similarly problematic spending patterns, and recommended changes accordingly. But Medicare’s administrators have failed to effectively follow up on the bulk of the oversight office’s suggestions since then. Expand Medicare, especially to the point where it has a monopoly or near-monopoly, and you’re only going to expand this sort of waste and mismanagement.

That’s obviously not to say that private insurers have no waste, no mismanagement. But they differ from Medicare in two important ways: First, they can go out of business. If they consistently lose money due to incompetence, it won’t take long before they shut down. Second, those dealing with private insurers can leave for competitors if poor management forces prices up too high. Now, competition in the health insurance is far from perfect, and occurs mostly at the employer level. But as anyone who’s ever had to switch plans after their employer went to a new insurance provider knows, it does exist, and employers do make changes when they think they can get a better deal from another provider. But Medicare doesn’t have that sort of competition, and and it continues to run on the taxpayer’s dime regardless of how poorly managed it is—all of which helps explain why it wastes so much money on mismanagement and how it ended up on the unsustainable, fiscally ruinous course it’s on now.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • ||

    You guys are working up a post on Vinson's ruling that his order voiding ObamaCare means what it says, that the government is prohibited from implementing ObamaCare, and that he is willing to stay it only for seven days while DOJ seeks expedited review by SCOTUS, right?

  • Hugh Akston||

    Anyone who focuses on eliminating marginal expenses like $48 billion in waste and fraud instead of advocating higher taxes to cover these minor expenses is Not Serious.

  • ||

    I wouldn't take that 10% figure too literally, as a sizable chunk of it probably refers to purely technical disputes around the insanely complicated billing and coding rules.

    To Medicare, if you bill $10.00 for a procedure that you should have only billed $9.95 on, the entire $10.00 is "overbilled", not the actual nickel that is in fact the overbilling.

  • ||

    I work in the Home Medical Equipment industry. Yes, the rules and requirements are absolutely absurd. BTW, Medicare reimbursement for the HME industry has been dropping steadily while the compliance burden has grown astronomically. HME does not have the pull the AMA has over lawmakers.

    Commercial payers like blue cross have less onerous compliance rules, yet they don't appear to headed for fiscal collapse.

  • ||

    what's the recovery rate?

  • max hats||

    ur a retarded lol

  • creech||

    Incentivize Medicare patients by rewarding them with 25% of any fraud they uncover on their bills. Similar incentive to the in-house billing examiners...or maybe put them on straight commission!

  • ||

    Stop thinking like a fucking capitalist! You're going to tear a hole in the space-time continuum...

  • ||

    Think of this every time you hear the statistics that Medicare spends less on administration, and when you think about how the recent health care law penalizes companies for checking into fraud.

  • ||

    That is serious money. Congress can barely come up with $61 billion in cuts this year, and even that the Democrats are balking at.

  • sevo||

    Vinson issues a stay for seven days, tells the admin to get moving:
    http://hotair.com/archives/201.....even-days/

  • Jared||

    Yes, but remember that Medicare also saved a lot of money by not spending money to oversight. You know, some of those "wasteful and unnecessary administrative activities" that private payers engage in, like double-checking paperwork and reviewing contracts. (My sarcastic response.)

  • Jared||

    [Typo in the comment above: I meant "on oversight" not "to oversight."]

  • db||

    Probably shouldn't be using the word "factoid" when you mean something that's actually true.

  • db||

    an estimated $48 billion in "improper payments" last year—and, the report says, those in charge of the program aren’t doing nearly enough to avoid making similar payment mistakes in the future.

    I'm guessing that it'll cost at least $480 million to create a new agency to address this misspent funding.

  • ||

    So the liberals who are offended at private insurance companies spending 10% in administrative costs are equally outraged at this, right?

  • Juice||

    Second, those dealing with private insurers can leave for competitors if poor management forces prices up too high.

    Um. No.

    You do realize that there is very little, if any, competition in today's health insurance "market" right?

  • Jerk Jerkerson||

    Factoid doesn't mean what you think it means

  • adam||

    As someone who deals with government auditors all the time, I can tell you that "improper payment" does not mean there's any fraud, waste or abuse involved. Most "improper payments" are the result of some minor and non-material defect in paperwork. Government auditors are also well-known for the their extrapolation techniques- they'll audit a small sample and assume without any further analysis that whatever problems they find apply in the same proportion across the set. GAO, IGs and the like love to play gotcha.

  • sevo||

    "Government auditors are also well-known for the their extrapolation techniques- they'll audit a small sample and assume without any further analysis that whatever problems they find apply in the same proportion across the set. GAO, IGs and the like love to play gotcha."
    Anyone who has had the pleasure of dealing with an IRS audit knows this is true. Finding of 10% error in a specific instance means 10% across the board, unless *you* prove otherwise.

  • cynical||

    "It’s one thing to lose a truckload of taxpayer money when someone is making a concerted effort to bilk you out of it. It’s another thing entirely to lose it because you were so inept that you couldn’t keep track of it."

    Sort of like our contracts in Iraq. I wonder how much that set us back?

  • ||

    Considerably, this post is really the sweetest on this notable topic. I harmonise with your conclusions and will thirstily look forward to your incoming updates. Saying thanks will not just be sufficient, for the phenomenal clarity in your writing. I will directly grab your rss feed to stay informed of any updates. Admirable work and much success in your business dealings!? Please excuse my poor English as it is not my first tongue.

    www.apple.com/ipod/start

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Video Game Nation: How gaming is making America freer – and more fun.
  • Matt Welch: How the left turned against free speech.
  • Nothing Left to Cut? Congress can’t live within their means.
  • And much more.

SUBSCRIBE

advertisement