The federal government disbursed $60 billion in improper Medicare payments in fiscal 2014. That accounted for nearly half of all improper federal government payments documented in a report issued Thursday by the nonpartisan Government Accountability Office.
The bulk of that misspent money—$45.8 billion—went to the Medicare fee-for-service program. An additional $12.2 billion in improper payments was made to provide coverage to seniors enrolled in private Medicare Advantage plans. The remaining portion of misspent Medicare dollars, $1.9 billion, paid for prescription drug benefits.
The $60 billion equals roughly 10% of the $603 billion spent to provide coverage for 54 million Medicare beneficiaries last year.
Federal tax dollars were used to make $17.5 billion in improper Medicaid payments in 2014, according to the GAO. That accounted for 6.7% of all misspent federal funds last year. Roughly 6% of the $304 billion spent on Medicaid in 2014 was improperly disbursed.
The GAO offered several ideas to reign in fraudulent spending on Medicare and Medicaid. For example, the watchdog agency noted that the “CMS could save billions of dollars by improving the accuracy of its payments to Medicare Advantage programs.”
Specifically, the report cited inaccurate coding, which determines payment levels for Medicare Advantage plans, as an area where improvements are needed. Humana disclosed last month that the Justice Department is probing its Medicare Advantage risk-adjustment practices.
The GAO report also singled out Medicaid managed-care programs, which represent a growing share of overall Medicaid spending, as an area that warrants more scrutiny. States should conduct regular audits of payments made to and by the managed-care organizations that they contract with to provide coverage to beneficiaries, it suggested.
Reigning in financial mismanagement in the Medicare and Medicaid programs is particularly important because they are expected to make up a growing portion of the federal budget in future years, the GAO said. “Consequently, it is critical that actions are taken to reduce improper payments in these programs,” the report states. “Over the past several years, we made numerous recommendations that, if effectively implemented, could improve program management, help reduce improper payments in these programs, and achieve cost savings.”
Overall, the federal government wasted $124.7 billion in the fiscal year that closed at the end of September, according to the GAO. The improper payments were attributable to 124 programs spread among 22 federal agencies. That was up from $105.8 billion in improper payments in fiscal 2013—an 18% spike.