Economy & Budget

Found: $40 billion for the federal budget


Discussions about the federal budget take center stage this week, sparking conversations about where to cut and where to increase funding. One important issue to consider is how we might reduce waste and improper payments in order to infuse more resources into vital programs that are struggling financially.

Medicare wastes more taxpayer dollars than any other program government-wide, with more than $40 billion lost annually. It’s outrageous that the federal government allows such rampant wasteful spending to persist while it is in dire need of funding to bolster important healthcare programs — whether to extend full Medicare coverage, improve health services for veterans or extend funding for the Children’s Health Insurance Program (CHIP).

{mosads}We’re not talking about Medicare fraud here, that’s accounted for separately. The loss of $40 billion each year is due purely to rampant billing mistakes — coding errors, double billing, upcoding — issues that could be easily caught and corrected. In fact, over the past four years these billing errors have drained more than $166 billion from the Medicare Trust Funds.


According to a Kaiser Family Foundation issue brief from last month, Medicare’s actuaries estimate that at current spending levels the program will be able to cover hospital insurance benefits for seniors until 2028. After that, Medicare will have to reduce coverage to 87 percent of what is covered today, relying solely on dwindling payroll deductions to fund the program.

The pressure on Medicare is mounting. The number of Medicare beneficiaries is exploding, heathcare costs are rising and the Medicare billing error rate has exceeded 10 percent for the past three years.   

With large projected spending increases on the horizon, the government will need to increase revenue to continue to cover future costs. But where will this revenue come from?

Interestingly, the ability to stop the hemorrhaging of taxpayer dollars from the Medicare FFS program exists, is in place and has been tested — it’s just barely being used.

After seeing its success in the private sector, Congress mandated the Recovery Audit Contractor (RAC) Program in 2009 to review post-payment Medicare FFS claims, identify improper payments and return misbilled funds back to the program. Since the RAC Program began, more than $10 billion has been returned to the Medicare Trust Funds, all while auditing a mere 2 percent of a provider’s claims.

Recently, the Centers for Medicare and Medicaid Services (CMS) scaled back the RAC program, allowing auditors to only review 0.5 percent of a Medicare provider’s claims — essentially green-lighting the continued loss of tens of billions of dollars from the program each year.

CMS also has the opportunity use pre-payment audits to catch billing mistakes before claims are paid. In 2012, a RAC Prepayment Review Demonstration Project was approved and implemented to audit a limited number of certain error-prone claims before they were paid. The short demonstration of RAC pre-pay audits was greatly successful, saving Medicare $192 million. Despite its success, the program was paused in 2014 and never restarted.

The negligible use of proven Medicare integrity programs is quite startling when you compare Medicare auditing practices to those of private insurance payers. The private health insurance industry requires the same providers to submit to up to 100 percent claim review before paying for services rendered. With only 0.5 percent of claims reviewed in Medicare, it’s no wonder the program is facing insolvency.

It’s very simple — if the new administration wants to improve oversight of federal spending, here is the low-hanging fruit that can put an additional $40 billion back into a critical program each year. Put RAC auditors back to work by reviewing more Medicare post-payment claims, and institute permanent RAC pre-pay auditing to prevent additional taxpayer dollars from leaving the program in the first place.  Millions of Americans are counting on Medicare.  It’s time to take action to keep this program strong today and solvent in the future.

Kristin Walter serves as the spokesperson for The Council for Medicare Integrity, a 501(c)(6) non-profit organization. The Council’s mission is to educate policymakers and other stakeholders regarding the importance of the integrity programs that help Medicare identify and correct improper payments.

The views of contributors are their own and not the views of The Hill.

Tags budget reform Federal assistance in the United States Federal budget Health care Healthcare reform debate in the United States Healthcare reform in the United States Medicaid Medicare Recovery Audit Contractor

The Hill has removed its comment section, as there are many other forums for readers to participate in the conversation. We invite you to join the discussion on Facebook and Twitter.

Most Popular

Load more


See all Video