How Much Can DOGE Really Save by Cutting Down on Improper Payments?
Last Updated January 3, 2025
President-elect Trump has announced the creation of an advisory committee known as Department of Government Efficiency (DOGE), promising that “as the first order of business, this commission will develop an action plan to totally eliminate fraud and improper payments within six months.” The Government Accountability Office (GAO) has tried to quantify the extent of improper payments and estimates that they totaled $236 billion in 2023.
Improper payments are payments from the federal government that should not have been issued or that were made in an incorrect amount. Such payments could be fraudulent but are often the result of insufficient documentation or human error. It is oftentimes complicated for federal agencies to track and address improper payments, but nevertheless, eliminating that waste is important to appropriately and efficiently manage federal funds, bolster the public’s confidence in government, and prevent unnecessary additions to the national debt.
Annual Improper Federal Payments Remain High
Improper payments have grown sharply over the last few decades — from $35 billion (or 1.6 percent of outlays) in 2003 to $236 billion (or 3.8 percent of outlays) in 2023. The amount of improper payments reached a high of $281 billion (4.1 percent of outlays) in 2021 at the peak of the pandemic. Such payments, for example to provide income support to businesses and individuals, showed a higher proportion classified as improper because agencies allocated funding quickly and were often underprepared to implement and track widespread emergency measures at such a scale. Though the level of improper payments has waned over the last three years with the gradual expiration of many provisions related to the pandemic, improper payments remain high.
About $200 billion, or 85 percent, of the improper payments in 2023 came from the following six programs. Each program has been or currently is on GAO’s High Risk List, meaning the capacity for fraud and waste within the program had been identified prior to the recent report.
- Medicare: $51 billion
- Medicaid: $50 billion
- Unemployment Insurance: $48 billion
- Paycheck Protection Program (PPP): $23 billion
- Earned Income Tax Credit (EITC): $22 billion
- Supplemental Security Income (SSI): $5 billion
Ways to Reduce Improper Federal Payments
While the agencies that manage those six programs have implemented some of GAO’s recommendations to reduce improper payments, the agency reports that 14 recommendations remain unimplemented across the programs. Such recommendations include seeking legislative authority for prepayment reviews for Medicare claims, utilizing cross-program analytics from the Small Business Administration to improve PPP and other program payments, digitizing information from taxpayers who file paper returns to examine EITC payments, and identifying and correcting the cause of overpayments to Ticket to Work recipients within SSI.
Private sector participants have also suggested ways to reduce improper payments. J.P. Morgan, for example, offers a three-part solution on how the public sector can better control and prevent improper payments:
- Use commercial solutions to validate bank accounts and identity prior to payments.
- Utilize data analytics and machine learning prior to payments to increase accuracy paired with scale.
- Consolidate identity verification across agencies and programs.
Similarly, a hearing held by the U.S. House of Representatives Committee on Oversight and Accountability discussed the recent GAO report and how the federal government should be more prepared moving forward. The consensus was that agencies must incorporate data-led practices to prevent fraud and better protect taxpayers’ dollars.
Improper Federal Payments are an Element of a Larger Fiscal Battle
Cutting down on improper payments should be a priority for policymakers to increase program efficiency, bolster Americans’ confidence in their government, and safeguard taxpayer dollars. Though not a key driver of America’s structural imbalance between spending and revenues, improper payments do represent a large opportunity for savings.
Through enhanced technologies like artificial intelligence and other efficiencies, it is possible to limit improper payments that can add up for taxpayers over time. Still, placing the federal government on a fiscally sustainable trajectory will require more than just addressing those payments — and there are many options available for spending and revenue reforms to put the nation on a better fiscal path.
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