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Monday, November 22, 2010

Agencies turn to technology for help reducing payment errors

In the past few years, 14,000 felons, both fugitive and jailed, raked in $230 million in federal benefits they were not entitled to receive. Twenty thousand dead Americans earned $180 million. In 2009 alone, the federal government made $110 billion in improper payments--that's nearly double the amount taxpayers will end up shelling out for the massive financial bailout, according to the latest estimates from the Congressional Budget Office.


The Office of Management and Budget breaks down the numbers like this: One-third of improper payments can be explained by poor documentation that makes it impossible to verify whether they were accurate, and another third result from failure to confirm individuals are eligible to receive the payments in the first place. The rest boil down to simple program errors, or people duping the system.

In July, President Obama signed the 2010 Improper Payments Elimination and Recovery Act, saying it would reduce waste and fraud by $50 billion by 2012. The law requires agencies to conduct recovery audits for programs that spend $1 million or more annually, review programs susceptible to significant payment errors every three years, and plan corrective actions for preventing future waste.


The White House also launched PaymentAccuracy.gov, a public website to track progress in reducing improper payments, and established the Do Not Pay List for agencies to verify individuals' or contractors' eligibility before making payments. Agencies were instructed to establish prepayment controls that systematically confirm eligibility of payment beneficiaries with existing databases, including the Social Security Administration's Death Master File and the General Services Administration's Excluded Parties List System that tracks companies barred from receiving federal contracts. At the same time, OMB is leading an initiative to integrate relevant databases into a central portal agencies can check prior to making payments.

Technology, Werfel agrees, plays a critical role in enabling access and integration of data, "so agencies can make smart, informed judgments before payment are made." But no single technology solution will address all risk of fraud or waste in federal programs. Agencies will have to customize data mining and analytics software to extract patterns from information and to flag anomalies, he says.


The Health and Human Services Department, whose Medicare program accounted for $24.1 billion in improper payments in 2009, according to a June report from the Government Accountability Office, plans to install data analysis tools to root out fraudulent payments in that program, as well as Medicaid and children's health insurance programs. Under a rule introduced in September, the Centers for Medicare and Medicaid Services will deploy computer applications that alert administrators to suspicious activities in the systems that process requests, including unusual patterns in billing and applying for services.

The agency will buy more sophisticated analytical tools to screen applications to enroll in the program and to identify patterns in phone calls to the toll-free Medicare hot line from beneficiaries who flag possible problems in the program. CMS also is seeking public comment on the rule's proposal to collect fingerprints from health care providers and suppliers, which would be checked against law enforcement databases.


Technology solutions depend largely on individual programs, all of which face different challenges in closing loopholes or addressing flaws in their systems. For the Agriculture Department that means finding a way to prevent school employees from ringing up the cost of meals incorrectly, which led to $1.6 billion in improper payments through the School Lunch Program in 2009, INPUT reported. That objective is distinct from HHS identifying individuals attempting to defraud the health insurance system, or the IRS flagging errors taxpayers make in filing their own returns.

Though automated processes can go a long way in identifying anomalies in financial systems, the human element is crucial to targeting the right data and taking steps to address problems once they're identified.


-Jill R. Aitoro, NextGov.com
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