Special Report

10 Big Ways the Government May Be Wasting Taxpayer Money

5. Food stamp fraud
> Cost: $3.0 billion (tied-4th highest)

The Supplemental Nutrition Assistance Program (SNAP), formerly known as the federal Food Stamp Program, helps families afford the food they need. However, the program is also one of 13 identified by the OMB as a “high-error program” due to its high level of improper payments. According to PaymentAccuracy.gov, SNAP is projected to have an improper payments rate of 3.8%, totalling $3.0billion, in 2014. Dr. Coburn told 24/7 Wall St. that going to a debit-type card for SNAP benefits helped curtail some amounts of fraud. However, “it’s used to run all sorts of dark operations,” Coburn also asserted. “In other words, people sell their card with their ID to somebody else for cash.” A 2013 study from the U.S. Department of Agriculture found that, from 2009 through 2011, 1.3% of all SNAP benefits were trafficked — or sold for cash — totalling some $858 million per year.

However, some groups have defended SNAP’s casehandling. This includes the Center of Budget Policies and Priorities, which says that many errors in payments are actually underpayments, and that SNAP “has long had one of the most rigorous systems of any public benefit program to ensure payment accuracy.”

ALSO READ: The 10 Least Livable Countries

4. Golf club testing and elementary school experiments on the International Space Station
> Cost: $3.0 billion (tied-4th highest)

The International Space Station (ISS) is described by Coburn’s report as “one of the greatest achievements in manned spaceflight.” However, this does not preclude it from being extremely expensive. The report argues that projects designed by elementary and high school students for the ISS are probably not justified by their costs. The report calculates that, based on the operating cost of the ISS, each hour of research costs $1.5 million. Dr. Coburn told 24/7 Wall St., that there is nothing at all wrong with trying to boost interest in science, technology, engineering, and math education. But, he added, “we ought to have some judgement about what we are doing and why.” NASA is included in Coburn’s Wastebook several times, including for sponsoring a $15,000 challenge to find the tomb of Genghis Khan, as well as for its participation in Comic-Con.

3. States taking advantage of a Medicaid provider tax loophole
> Cost: $4.0 billion

Coburn’s report estimates that one Medicaid tax loophole costs the federal government roughly $4 billion a year. Under this loophole, many states impose taxes “on the very same health care providers who are paid by the Medicaid program, [then] increasing payments to those providers by the same amount,” according to a 2010 report from The National Commission on Fiscal Policy and Reform. These added payments then count as spending on Medicaid in determining the amount of a state’s spending on Medicaid that the federal government must match. Although the commission was composed of representatives and senators from both major parties, Congress has yet to close the loophole. For fiscal 2015, total federal spending on Medicaid is expected to be over $331 billion.

ALSO READ: The 10 Most Livable Countries

2. Identity thieves file bogus tax returns
> Cost: $4.2 billion (at least)

People filing tax returns under other peoples’ names represent a major problem for the federal government. Based on a 2012 report from the Treasury Inspector General for Tax Administration, Dr. Coburn’s Wastebook estimates that such fraud could cost Americans as much as $4.2 billion per year. This is based on the report’s claim that the Treasury could issue roughly $21 billion in refunds to fraudsters over five years. According to a GAO study also cited by Dr. Coburn’s report, identity thieves were able to successfully claim roughly $5.2 billion in fraudulent refunds from some 900,000 returns in the latest tax season. The IRS was able to prevent or recover even more money from being fraudulently claimed, amounting to $24.2 billion in refunds on about 4.1 million tax returns.

Dr. Coburn’s report notes, “While the IRS is increasing efforts to address identity theft and stolen refunds, much remains to be accomplished.” In fact, the Earned Income Tax Credit (EITC) is considered by OMB to be one of 13 “high-error programs,” with more than 24% of payments deemed improper, the most of any federal program. However, this does not mean that tax credits are not useful. Writing in Democracy, a progressive policy journal, Jason Furman, chairman of the President’s Council of Economic Advisers, states, “The EITC and partially refundable child tax credit have dramatically altered the impact of the tax code on poverty.”

1. Medicare practice leads to higher costs
> Cost: $5.0 billion

One particular Medicare practice is the largest source of waste, in dollar terms, identified by the 2014 Wastebook. Coburn’s report cites a June study published by Health Affairs, a health policy journal. In the report, the authors note that a relatively small change to Medicare Part D, which offers prescription drug coverage to Medicare recipients, would save the government money — $5 billion as of 2009. Currently, the study says, Medicare randomly assigns qualified recipients “to a stand-alone Part D plan whose premium is equal to or below the average premium for the basic Part D benefit in the region.” The report states that an algorithm that matches new enrollees to plans that meet their prescription needs would be enough to generate the $5 billion in savings.

Dr. Yuting Zhang, Associate Professor at the University of Pittsburgh and one of the authors of the Health Affairs study, discussed her findings with 24/7 Wall St. “We figured if we could design a more intelligent reassignment based on their medication use, prior-year, then that might be more efficient,” Dr. Zhang said. She then reiterated her team’s finding that “the government could potentially save $5 billion just from this simple reassignment.”

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