Improper PaymentsEdit

Improper payments are a recurring drain on public budgets, arising when a government program disburses funds to someone who is not entitled to them or pays the wrong amount. They result from a mix of factors: simple administrative mistakes, flawed data or matching processes, and, in some cases, deliberate fraud. The issue is not merely a technicality of accounting; it touches core questions of accountability, the efficient use of taxpayer dollars, and the proper scope of government programs. A pragmatic approach to improper payments emphasizes strengthening controls, improving verification, and focusing resources on the largest, most vulnerable programs where savings are possible without compromising access to essential benefits.

The topic sits at the intersection of budget discipline, program design, and public trust. While there is broad bipartisan interest in reducing improper payments, there is also ongoing debate about how to balance aggressive fraud prevention with ensuring timely, fair access to benefits. Critics from various perspectives contend with the practical tradeoffs involved in tightening controls, protecting civil liberties, and avoiding unintended consequences for eligible recipients. Proponents argue that eliminating waste strengthens the overall health of public programs and improves accountability for lawmakers, administrators, and taxpayers alike.

Background

Improper payments occur when a payment is issued that should not have been issued, or when the amount is incorrect. The concept is used in many government programs to measure and report losses due to errors or fraud, and it is a central part of program integrity efforts. The statutory framework for measuring and reducing improper payments has evolved over time, with successive laws requiring broader reporting, more rigorous corrective actions, and tighter controls.

The modern framework began with the Improper Payments Information Act of 2002 (Improper Payments Information Act of 2002), which established a government-wide approach to estimating improper payments and setting improvement targets. This was later refined by the Improper Payments Elimination and Recovery Act (Improper Payments Elimination and Recovery Act of 2010), which emphasized reduction targets and accountability for agencies. In 2019, the Payment Integrity Information Act of 2019 (Payment Integrity Information Act of 2019) updated and strengthened the regime, reinforcing data sharing, risk assessment, and the measurement framework. The Office of Management and Budget (Office of Management and Budget) oversees the coordination of these efforts across agencies, while the U.S. Government Accountability Office conducts independent audits and assessments to identify weaknesses and opportunities for improvement.

The largest and most visible improper payments tend to arise in programs that involve complex eligibility rules, large volumes of transactions, or high healthcare costs. In the United States, the most significant share comes from health programs such as Medicare and Medicaid, which together handle hundreds of billions of dollars in payments each year. Other sizable sources include SNAP (Supplemental Nutrition Assistance Program), Unemployment Insurance, and various Social Security Administration programs. Agencies are expected to publish annual estimates and to pursue corrective actions designed to reduce the improper payment rate over time.

Scope and major programs

Medicare and Medicaid: These programs constitute the largest portion of improper payments due to the complexity of medical billing, eligibility rules, and the volume of claims processed. The challenge is not only detecting fraud but also addressing mistakes in coding, billing, and data mismatches that can overpay providers or beneficiaries.
SNAP and other nutrition programs: These programs face improper payments stemming from eligibility determinations, misreporting of income or household circumstances, and improper issuances.
Unemployment Insurance: The program sees improper payments from inaccurate benefit calculations, fraud, and administrative processing errors.
SSA programs and other entitlement programs: As with large public programs, improper payments arise from a combination of errors, misreporting, and, to a smaller extent, fraud.

Across these areas, the emphasis is on identifying high-risk areas, tightening verification processes, and ensuring that legitimate beneficiaries receive timely support while ineligible recipients are prevented from receiving funds. For readers seeking broader context, see Medicare and Medicaid for program-specific structures, and Data matching for the technical methods used to verify eligibility.

Measurement, reporting, and administration

Improper payments are typically measured as a share of total program outlays or as an amount of mistaken payments identified in a given period. Agencies are required to estimate the extent of improper payments, implement corrective actions, and publicly report progress. The measurement process often involves:

Risk-based sampling and testing of payments
Automated matching against internal and external data sources (for example, cross-checks with tax data or other agency records)
Documentation of corrective actions and milestones
Independent oversight by entities such as the GAO

Data sharing among agencies is a core tool to improve accuracy. For instance, cross-agency verification with the Internal Revenue Service or other data repositories can help confirm eligibility and payment amounts. At the same time, there is ongoing tension between tightening controls and preserving timely access to benefits, particularly in programs that serve vulnerable populations.

Causes and categories

Fraud: Intentional misrepresentation or deception to obtain a payment. Fraud controls focus on detection, deterrence, and robust enforcement.
Administrative errors: Mistakes in processing claims, misinterpretation of rules, or data entry errors that lead to overpayments or underpayments.
Data and eligibility errors: Inaccurate or outdated information, failed identity verification, or misclassification of beneficiary status.
Policy-driven improper payments: Some payments are improper not because of mismanagement but because policy design yields payments that are technically incorrect relative to the rules in place at the time. In such cases, the solution may require policy reform rather than only tighter screening.
Program integrity challenges in health care: Billing complexity, upcoding, duplicate payments, and improper payments linked to provider practices are particularly salient in health programs.

Policy approaches and debates

From a broader governance perspective, reducing improper payments is about preserving program integrity while maintaining access to essential benefits. The policy toolbox includes:

Strengthening eligibility verification: More robust pre-screening and automated checks to catch obvious ineligibilities before payments are issued.
Expanding data sharing: Secure data exchanges across agencies (and with private sector partners where appropriate) to verify identities, incomes, and eligibility criteria.
Leveraging technology and analytics: Predictive analytics, anomaly detection, and real-time monitoring to identify likely improper payments before they occur or are detected quickly after issuance.
Simplifying and clarifying program rules: Reducing complexity in eligibility criteria can help reduce inadvertent errors and disputes over entitlement.
Targeted enforcement and penalties: Focusing enforcement resources on the highest-risk areas, while preserving access for eligible participants.
Balancing accuracy with access: Ensuring that anti-fraud measures do not create undue barriers to benefits or lead to unjust denials, especially for low-income or disadvantaged populations.

A right-leaning perspective commonly emphasizes accountability and efficiency: taxpayers should not bear the burden of preventable waste, and program rules should be designed to minimize error without unnecessarily expanding bureaucracy or restricting legitimate benefits. Proponents often argue that targeted enforcement, better verification, and smarter data use protect the program’s solvency and credibility. Critics from other viewpoints may warn that aggressive anti-fraud measures can injure eligible recipients or disproportionately affect certain communities; these concerns are typically framed in terms of fairness, civil liberties, and the administrative burden of compliance. Supporters counter that effective integrity work is a prerequisite for preserving the social safety net’s legitimacy and long-term sustainability.

Controversies and debates

Measurement accuracy vs. policy change: Critics argue that improper payment estimates can be distorted by policy decisions (for example, expansions in eligibility) or accounting conventions. Proponents say that even with policy-driven shifts, the underlying risk of waste remains a valid target for reform.
Equity and access concerns: Some observers contend that aggressive fraud prevention and data-sharing requirements may inadvertently hinder legitimate recipients, especially in under-resourced communities or among populations with historically limited access to verification systems. The counterview emphasizes that well-designed controls can reduce waste without compromising access, provided safeguards exist.
Civil liberties and privacy: The push for more data sharing and automated checks raises questions about privacy, consent, and the potential for false positives. Advocates for robust program integrity argue that privacy protections can be maintained through transparency, oversight, and proportionate safeguards, while still delivering results.
The scope of government and the role of policy design: A recurring theme is whether the focus should be primarily on enforcement and detection, or on reforming program design to reduce the likelihood of improper payments at the outset. The balance between simplification, automation, and targeted verification reflects deeper debates about how to structure public programs for efficiency and fairness.