GAO report recognizes that improper payments are not necessarily the result of fraud

A December report, “Improper Payments and Fraud: How They are Related but Different” (Report), is the Government Accountability Office’s (GAO) latest quarterly report to the US House of Representatives Committee on Appropriations, Subcommittee on Legislative Branch on improper payments or payments “that should not have been made or that were made in the incorrect amount.”[1] The Report lays out a point that is often at the core of reimbursement disputes and healthcare fraud cases: “while all fraudulent payments are considered improper, not all improper payments are due to fraud.”[2]

In the Report, GAO elaborates on the distinction between “fraud-related improper payments” and other types of improper payments. Fraud-related improper payments “generally involve individuals or entities intentionally or knowingly providing false information” per the Report. Another distinction, per GAO, is that agency officials are able to make a determination that a payment is improper, while judicial and other adjudicators make fraud determinations.

GAO recognizes two kinds of overpayments in the Report: unintentional overpayments that are accidental in nature, and fraudulent overpayments that are the result of willful misrepresentation. Improper payments, not connected to fraud, include those resulting from administrative errors as well as underpayments—nonpayment of amounts owed and payment of less than an amount owed. 

The Report breaks down Office of Management and Budget (OMB) data and guidance on the root causes of improper payments and includes an overview of the regulations and guidance federal agencies are required to follow to identify, manage and report improper payments. Pursuant to the Payment Integrity Information Act of 2019 (PIIA), for example, agencies report descriptions of the causes of improper payments for programs susceptible to “significant” improper payments.[3] Detailed information is available at www.paymentaccuracy.gov, including with respect to programs such as Medicare and Medicaid, which are designated as particularly high risk.

The two most common root causes of improper payments, as evaluated by the GAO based on eight OMB categories, include the failure of agencies to determine whether a beneficiary or recipient should be receiving a payment (an estimated 2022 fiscal year (FY) impact of US$145.1bn) and information access restrictions that prevent verification that a payment is proper (an estimated FY 2022 impact of US$35.9bn). The GAO indicates that fraud can contribute to each type of improper payment, but that due to the current reporting framework and other issues, improper payment estimates “cannot be used to determine the extent of fraud in a particular program.”[4]

The GAO indicates that it is exploring avenues to estimate fraud, uniformly, across federal agencies. It should be anticipated that there will be even a greater focus by programs, including by heath care programs, on categorizing improper payments based on fraudulent or nonfraudulent root causes. Future GAO reports are also likely to offer insight on the standardization efforts.  

[1] See 31 U.S.C. § 3351(4).  The current Report and the previous reports produced by GAO on improper payments can be found here: https://www.gao.gov/reports-testimonies.

[2]  Report, page  2.

[3]  PIIA also requires OMB to maintain guidance for agencies on establishing controls to identify and prevent fraud.

[4] Report, page 8.