The Pentagon’s watchdog is flagging the behemoth agency for severely underestimating how much money it lost in improper payments in the military health benefits program for 2013.
Under federal law, agencies are required to report how much they lose to improper payments each year. The government loses about $100 billion in such payments annually.
In its financial statement for 2013, the Pentagon reported that it had lost about $68 million to improper payments. In a new report, auditors say the real number is much higher. That’s because the Defense Department did not review at least 73 million claims worth a total of $13.1 billion. These claims had been flagged as being fraudulent so as part of their accounting practice, the agency leaves them out of the total improper payment tally.
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The Defense Department’s Inspector General estimated that had these claims been included in DoD’s report, the actual amount of improper payments would be closer to about $213 million, or $145 million higher than DoD’s estimate.
“The inadequate methodologies resulted in unreliable improper payment estimates, and limit DoD’s ability to identify and report improper payments, determine underlying weaknesses that cause the improper payments, and initiate corrective actions to reduce the improper payments,” the auditors said in the report.
Instead of reviewing all of the claims, officials from the Defense Health Agency tested a select number of contracts and excluded claims that they said were at risk for fraud or abuse—a move that the auditors say does not fairly reflect the actual amount of money lost to erroneous payments.
The practice of allowing “at-risk payments to be excluded from consideration increase the risk that improper payments may not be identified,” the IG said in the report.
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The Pentagon disagreed. It argued that the reporting requirements surrounding improper payments don’t pertain to fraudulent health care claims.
“The primary basis for this belief rests in an understanding that reporting of such information could and would expose investigative and litigation pending actions to public disclosure,” Joseph Marshal, DHA’s business support director, wrote in a response to the report.
He added that the agency has a whole separate unit dedicated to investigating fraud.
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