Commentary Magazine


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Government Waste … and Squirrels

Imagine that a health insurance company chose a random sample of payments made to its claimants and found that 10.1 percent of them should not have been paid at all, either through error or fraud. What do you suppose would happen?

First, whoever was in charge of accounts payable would be fired on the spot, his office contents on the sidewalk in cardboard boxes before the day was out. Second, a thorough overhaul of procedures would be quickly put into place to make sure the error rate was reduced to as near zero as possible. Third, a federal prosecutor would open an investigation into possible criminal activity. Fourth, a congressional committee would convene hearings and beat up the CEO for charging such high premiums when simply running his company properly would have allowed them to be drastically reduced. 

But when Medicare’s fee-for-services programs ran exactly this error rate, the result was … oh, look, a squirrel!

As the Fiscal Times reports, the Department of Health and Human Services in fiscal 2013 had exactly that error rate and paid no less than $33.2 billion that it shouldn’t have paid at all. Overall, HHS paid out $55.9 billion improperly. And what did HHS do about this?

Asked what the agency does to recoup improper payments, [Center for Medicare and Medicaid services spokesman Tony] Salters said CMS doesn’t even attempt to recover all of its estimated overpayments. When improper payments are identified in the random sample, he said, agency contractors attempt to recover it, and get “most” of that money back. However, the improper payments identified in the sample represent only a fraction of the total amount paid out incorrectly.

The Office of Management and Budget, an arm of the White House, estimates that in just 13 “high-error programs” in fiscal 2012, the government wrongly paid out a staggering $101.3 billion. That’s 2.86 percent of total federal spending that year, 9.3 percent of the budget deficit, and $16 billion more than the entire sequester for fiscal 2013 ($85.4 billion) that the Washington establishment proclaimed would be the end of the world if it went into force.

Insurance companies run far tighter ships, looking constantly for ways to cut costs and eliminate fraud and error, for the simple reason that it is in their interest to do so. Every penny of the money saved, after all, goes right to the bottom line. Any company with a 10.1 percent error rate would be in bankruptcy court in weeks. But the federal government can’t go bankrupt, so … oh, look, a squirrel!