Policy

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

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We seem to have misplaced about $48 billion. Sorry about that.

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.