Congress Can Save Taxpayers Billions By Using Data Science to Stop Improper Payments

By Maggi Molina and Dan Lips

Congress faces major challenges in 2020—including the Coronavirus pandemic and addressing its significant disruptions to our way of life. With the Congressional Budget Office already forecasting trillion dollar federal deficits through 2030, lawmakers may have less flexibility to authorize new spending to address these problems.

One way for Congress to improve the government’s balance sheet would be to stop federal agencies from making improper payments. “Improper payments” doesn’t sound that bad — perhaps you used Paypal instead of Venmo — but they are essentially illegal payments. These are payments that should not have been made or that were made in incorrect amounts.

The Government Accountability Office (GAO) recently reported that federal agencies made $175 Billion in improper payments in 2019. Of those, $75 Billion (or 42 percent) were reported as a “monetary loss, an amount that should not have been paid and in theory should or could be recovered.” More than two-thirds of the improper payments were concentrated in three programs: Medicaid, Medicare, and the Earned Income Tax Credit. 

GAO warned that the problem could be even bigger: “The federal government’s ability to understand the full scope of its improper payments is hindered by incomplete, unreliable, or understated agency estimates,” among other issues. Indeed, a number of agencies do not accurately report this information.

Ten years ago, Congress passed the bipartisan Improper Payments Elimination and Recovery Act. But the Congressional watchdogs found that only half of the agencies were in compliance with the law as of 2018. 

Unfortunately, this is not a new problem. GAO estimates that federal agencies have made $1.7 Trillion in improper payments since 2003. 

Moving forward, auditors at the GAO will have new tools to increase monitoring of improper payments, thanks to the recent launch of the Science, Technology Assessment, and Analytics (STAA) team, which is intended to increase GAO’s work and focus on science and technology issues. 

According to Comptroller General Gene Dodaro, one of the team’s new responsibilities is to “use data analytics in auditing federal programs.” 

Last year, GAO described how advanced analytics could modernize its oversight and approach to identifying improper payments: 

“When we conduct audits of programs like Medicare, we typically identify improper payments within one data set,” GAO wrote. “But what if auditors could analyze multiple large data sets simultaneously to identify deceased individuals who are continuing to receive Medicare payments?” 

Many people are familiar with how some companies use data science and analytics to monitor transactions and can appreciate how government could benefit by using similar tools, with appropriate safeguards. The result could be tens of billions in government savings. 

In the short-run, modernizing oversight to end improper payments will ease the current burden on the federal treasury, particularly as Congress considers ways to help address the current public health emergency and related impacts. 

Moving forward, Congress should consider allowing the GAO and Inspectors General to capture some of the savings generated from oversight of federal improper payments. Oversight agencies are underfunded, and rewarding them with a small percentage of the savings they generate would incentivize and pay for their oversight work, while avoiding misspending government funds.

Providing watchdogs this “reward” would allow them to expand their work, likely yielding new savings and improvements.  For example, GAO reported more than $1.1 trillion in financial benefits that have accrued to the American people since 2003 and has reported an annual return-on-investment of more than $100 in savings for every dollar spent on GAO each year since 2012. In Fiscal Year 2019, GAO saved $338 for every dollar invested in the agency. 

The federal budget was about $4.7 Trillion in Fiscal Year 2019. $175 Billion of this was improper payments, nearly 4% (and that estimate is likely low).  Funding for the entire Legislative Branch (which includes Congress and GAO) was about $5 Billion. We can minimize improper payments and direct those funds to better uses.  The technology exists to use data analytics and real-time monitoring to ensure payments are authorized and correct. 

Congress should act to stop improper payments and empower GAO’s data analytics team and others to address this challenge.  This will ensure that every tax dollar is spent wisely and allow us to fund unforeseen threats like the Coronavirus pandemic.

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Maggi Molina is Policy Manager with Demand Progress. Dan Lips is Director of Cyber and National Security with Lincoln Network.

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