How Much Can the Administration Really Save by Cutting Down on Improper Payments?
Last Updated April 17, 2025
Recently, there has been significant attention on the potential to improve the unsustainable fiscal outlook in the U.S. by reducing waste, fraud, and abuse in the government. A recent report from the Government Accountability Office (GAO) highlights the extent of one component—improper payments—which are payments from the federal government that should not have been issued or that were made in an incorrect amount. GAO estimates that improper payments since 2003 have totaled $2.8 trillion. For 2024, GAO estimates that $162 billion of improper payments were made; that amount is down from $236 billion in 2023, mainly because of the expiration of programs related to the pandemic.
The payments measured by GAO 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 $46 billion (or 2.0 percent of outlays) in 2004 to $162 billion (or 2.4 percent of outlays) in 2024. 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 diminished over the last four years with the gradual expiration of many provisions related to the pandemic, improper payments remain high.
About $121 billion, or 75 percent, of the improper payments in 2024 came from the following five 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: $54 billion
- Medicaid: $31 billion
- Earned Income Tax Credit (EITC): $16 billion
- Supplemental Nutrition Assistance Program: $11 billion
- Restaurant Revitalization Fund: $9 billion
Ways to Reduce Improper Federal Payments
While the agencies that manage those five programs have implemented some of GAO’s recommendations to reduce improper payments, numerous recommendations remain unimplemented across the programs. Such recommendations include seeking legislative authority for prepayment reviews for Medicare claims and digitizing information from taxpayers who file paper returns to examine EITC payments.
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.
- 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, which 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 reforms to spending and revenues to put the nation on a better fiscal path.
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