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Rampant healthcare fraud result of unmanageable federal spending, report says

Improper payments under-reported, George Mason researchers find; Medicare, Medicaid budgets too big to control

Researchers at the Mercatus Center at George Mason University argue that government estimates for fiscal year 2013, which show $106 billion in improper payments, show federal budgets have outgrown the oversight required to prevent fraud, waste and abuse. Additionally, those numbers may be underreported, and improper spending related to healthcare may be closer to 20 percent of federal spending, according to the report.

Healthcare programs accounted for three of the top four improper payments from high-error federal programs in fiscal 2013. Medicare fee-for-service spending accounted for $36 billion in improper payments, more than double the improper payment amount for the next highest program, Earned Income Tax Credit. Improper payments for the Medicare program accounted for 10 percent of the budget for that program. Government data shows that figures for improper payments have consistently increased over that past decade.

Medicaid and Medicare Advantage (Part C) also had high improper payment rates in fiscal 2013. Nearly 6 percent of Medicaid spending was improperly allocated, totaling $14.4 billion. Medicare Advantage had a lower figure ($11.8 billion in improper payments), but it represented nearly 10 percent of spending for that program. Previous reports show that improper Medicare Advantage payments totaled $70 billion from 2008 to 2013. Medicaid Part D represented a smaller chunk of improper payments--$2.1 billion, or 3.7 percent of spending.

The report's authors, Veronique De Rugy and Jason Fichtner, also noted that these figures merely are estimates from the federal government, and there is "reason to believe they low-ball the amount of taxpayer dollars lost to fraud and bureaucratic ineffectiveness." The authors point to a 2009 testimony from healthcare fraud expert Malcolm Sparrow, who estimated that, although previous figures estimated that fraud, waste and abuse represented just 10 percent of the federal healthcare budget, the true figure is likely closer to 20 percent.

Last year, the government reported $5.7 billion in recoveries related to false claims and fraud. However, De Rugy and Fichtner conclude that the only way to reduce fraud and abuse is to reduce the size of existing federal programs.

"While people on both sides of the political aisle can debate the merits of whether or not government should be involved in certain activities, no one in good conscience should tolerate the high levels of improper payments currently associated with government spending on social welfare programs," the authors wrote.

For more:
- read the Mercatus Center report
- see the reported improper payment data

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