Saving Without Slashing

How to Reduce Waste, Fraud, and Abuse While Preserving Vital Services

There was one exception to the deficit reduction commission’s call this month for across-the-board cuts in discretionary spending. The panel did not call for limits on so-called “program integrity efforts.”

And for good reason. These are programs designed to reduce mistaken and improper government payments to people and companies, a $125 billion problem in 2010. At a time of fiscal belt-tightening, they offer a way to reduce spending without cutting vital services more in demand now than ever.

One promising such initiative is the new Partnership Fund for Program Integrity Innovation, charged with cultivating creative approaches to a problem that has long vexed Washington. The $37.5 million, three-year fund establishes pilot programs to test new ideas for reducing improper payments and improving the delivery of services in federal programs.

Here’s how it works. Government workers and members of the public submit suggestions for improving payment accuracy through an online tool. After vetting by the relevant federal agency, the best ideas are passed on to a “collaborative forum” of nonfederal representatives, made up of state and local financial managers, program managers, technology experts, and beneficiary advocates. That forum assesses the costs, benefits, risks, and service implications of each idea and develops the most promising into concept proposals. Finally, the Office of Management and Budget, which administers the fund, works with a group of senior agency officials to decide which proposals to fund as state and local pilots.

The program flips the traditional reform model on its head by soliciting ideas from the very government workers who make the payments. Many of the programs most prone to payment mistakes—Medicaid, food stamps, unemployment insurance—are either partially or fully administered by state and local governments, and many others rely on services from nongovernmental community groups. Without input from these key stakeholders, the federal government’s ability to curb improper payments is limited.

Consider the Earned Income Tax Credit, one of the largest antipoverty programs in the country. The Treasury Department distributed $50 billion to low- and moderate-income families through the program last year, and the government estimates that about a quarter of those payments were deemed improper. According to the Treasury Department, most of the errors are caused by mistaken or fraudulent tax returns: excess claims, misreported income, or erroneous filing status.

During its inaugural meeting last month the fund’s forum previewed frontrunners for pilot funding. One of these was an initiative to reduce eligibility errors in the EITC program. The pilot would establish a network for sharing information between states and the federal government, allowing Treasury staff to better validate an individual’s EITC eligibility. The department expects this information will help identify erroneous and fraudulent EITC claims.

The forum also discussed a cross-program data system in Wisconsin that consolidates eligibility information for the state’s Temporary Assistance for Needy Families, food stamps, children’s health insurance, and Medicaid programs. The system allows intake staff from each program to pull up-to-date, verified information at the moment an individual seeks assistance, avoiding data errors that often result in services to ineligible recipients. The forum is considering piloting similar data systems elsewhere.

The forum discussed other promising ideas that take aim at ineffective auditing processes, out-of-date information systems, and inefficient methods for determining program eligibility. The fund plans to announce its first round of pilot programs by the end of the year.

The fund is part of the administration’s focus on payment errors as part of its Accountable Government Initiative, which has a goal of reducing improper payments by at least $50 billion by 2012. Since taking office, President Barack Obama has instructed agencies to identify high-priority programs, established a public website to track payment accuracy, instituted a federal Do Not Pay List to help avoid repeat errors, and called on agencies to intensify audits to identify and recover improper payments in entitlements and other programs.

To be sure, these initiatives alone are not likely to reach the president’s goal. That’s because none of these programs directly targets provider billing and other payment errors in Medicare and Medicaid, which accounted for roughly half of all improper payments last year. And in just the past six months the Government Accountability Office has uncovered extensive fraud and abuse in the Low-Income Home Energy Assistance Program, the Child Care and Development Fund, and the Head Start program.

Still, the Partnership Fund for Program Integrity Innovation can make a meaningful dent in our $125 billion improper payment problem. If it does, Congress and the White House should stand ready to invest more money in this and other program integrity efforts.

John Griffith is a Research Associate at the Center for American Progress.