How the feds lose money faster than it can be counted

[Editor's note: This story originally was published by Real Clear Wire.]

By Bob Ivry
Real Clear Wire

Not long after Jeremy Gober started running a sleep center, he quit treating patients for narcolepsy and sleep apnea and went full-time submitting bogus insurance claims. According to Gober’s 2022 indictment, he committed at least one especially sloppy error: One of his make-believe billings included a Medicare claim for treatment in March 2018 for a patient who’d died in December 2017. Before Gober was caught, Medicare and California’s healthcare system, Medi-Cal, ended up paying him a total of $587,000 for claims that turned out to be fiction.

The payments to Gober were part of $260 million the U.S. Department of Health and Human Services spent from 2009 through 2019 to reimburse healthcare providers in 15 states and Puerto Rico for services to patients who were dead, according to the inspector general of the HHS, which administers Medicare and Medicaid — programs with combined expenditures of $1.7 trillion.

The government classifies money like the sums that went to Gober as “improper payments.” The estimated total for all executive-branch agencies is startling: In the 2023 fiscal year, which ended September 30, improper payments amounted to $236 billion. The Government Accountability Office, which compiles the figures from agency estimates, notes that the number would be much higher if it got a full accounting from all the departments required to report them, which it doesn’t. Still, it’s the only estimate we have, and out of that number, nearly three-quarters, or $175 billion, were overpayments that included fraud. The rest were a mix of underpayments ($11.5 billion), payments that were made outside program rules ($4.6 billion), or what the agencies identified as unknown payments ($44.6 billion), meaning they couldn’t be sure whether there was an error or not.

Since 2003, cumulative estimates of improper payments by executive-branch agencies, which GAO reports show are on the low side just like the 2023 numbers, have reached $2.7 trillion. That’s equivalent to roughly 10% of everything produced in the U.S. this year.

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The fiscal 2023  numbers were down 16% from fiscal 2021, when pandemic-related relief such as the Small Business Administration’s Paycheck Protection Program boosted improper payments to a peak of $281 billion. Fiscal 2023, however, still tops pre-COVID-19 amounts, the GAO said, and executive-branch watchdogs warn that they expect the numbers to increase with new spending related to programs like the Inflation Reduction Act, the Infrastructure Act, and the CHIPS Act.

“As programs get bigger, the likelihood of improper payments gets bigger, too,” said Hannah Padilla, the director in charge of the latest comprehensive GAO report. “That’s just math.”

In fiscal 2023, the government was able to recoup only about $26 billion, or 11% of the wayward taxpayer funds. Such a leaky bureaucracy indicates waste, at best, and at worst, unpunished crimes. Inspectors general at Cabinet-level agencies say they need more resources to prevent improper payments rather than chase the money after it goes out the door. They say their budgets right now are too tight to allow them to pursue tips that could lead to fraud convictions, nor is it possible for them to even estimate how much is actually being robbed from government programs that suffer from the shortfalls created by misdirected money.

“Every dollar lost to an improper payment is a dollar not spent on lifesaving care, innovative treatment, or essential services for our citizens,” said Republican Rep. Morgan Griffith of Virginia, who hosted an April subcommittee hearing on improper payments at HHS. “Financial mismanagement cannot be tolerated.”

Raw numbers are collected by the U.S. Office of Management and Budget and are available for download by the public at paymentrecovery.gov.

Even without the coming gusher of new spending, federal watchdogs are complaining to Congress about the obstacles they encounter keeping track of taxpayer funds. The hurdles they enumerate include:

• • Agencies failing to release their estimates. That makes it impossible to identify trouble spots or sketch out a clear picture of the scope of the problem. In fact, the GAO’s fiscal 2023 report includes estimates from just 14 of the 24 largest federal agencies, putting a giant asterisk on the final numbers released to the public.

Agencies that have not fully complied include two rent-assistance programs run by the Department of Housing and Urban Development with a combined fiscal 2023 budget of $47 billion, making them HUD’s two largest expenditures. The GAO says the two programs haven’t reported estimates for the past seven years. That puts taxpayer money in peril, according to Rae Oliver Davis, HUD’s inspector general. “If left unaddressed,” Davis said in a January management alert, “hundreds of billions of dollars in HUD rental-assistance payments will continue to be at heightened risk of waste, mismanagement and fraud.”

And though most Department of Agriculture programs have dutifully reported their estimates through the years, the $111 billion Supplemental Nutrition Assistance Program, or SNAP, simply hasn’t. SNAP, formerly known as food stamps, skipped estimates in 2015, 2016, 2020, and 2021, citing problems with the numbers the agency received from the states that administer the program. That’s a problem not confined to SNAP.

• • Failures to coordinate with state agencies. Some programs aren’t included in the GAO’s compilation because even though they spend federal money, they’re managed by state officials. Many of the state offices don’t provide federal agencies with the details of their mistakes. No doubt the total estimate of improper payments would be higher if it included those connected with the $31 billion TANF, or Temporary Assistance to Needy Families, a program for which HHS provides funding but leaves the individual states to handle.

In one eye-opening state-related boondoggle, the HHS inspector general found that over three years, from 2014 to 2016, the Michigan Department of Health and Human Services paid nearly $40 million to care providers whose beneficiaries were dead. That’s because most of the payments by the state are made automatically every month. Without a death notification, they can go on for a while. What’s surprising is the reason Michigan stands out: It often took state workers two years to record the deaths of clients in the claims-processing system.

The Michigan agency blames “an administrative delay in getting paper records entered electronically,” a snafu it said it addressed by instituting a routine review of the rolls so they can be upgraded on a timely basis, according to agency spokesperson Lynn Sutfin. The state recouped the full amount of the 2014-2016 overpayments, she said.

• • Inadequate resources. According to congressional testimony in April from Christi Grimm, HHS’s inspector general, her office’s 1,600 employees, who oversee more than 100 programs representing expenditures of $2 trillion — almost a quarter of the federal budget — “reviewed and evaluated more than 2,698 hotline complaints in fiscal 2022 and more than 4,501 complaints in fiscal 2023 that might have developed into viable cases, but we lacked resources to follow up.”

The fiscal 2023 budget for the inspector general’s office was almost $433 million, or as Grimm points out, two cents for every $100 of HHS spending. Grimm is asking for a fiscal 2025 budget of $500 million.

“Failing to do so often costs more in the long run,” Grimm told Congress.

Recovered Waste as a Reward?

The more the government spends, federal watchdogs say, the more resources it takes to keep track of it all.

The Department of Energy offers a good example. In the 2023 fiscal year, the agency was downright obsessive when it came to following the money. Teri Donaldson, the DOE inspector general, estimated that the agency’s improper payments amounted to $47 million, which seems like a lot (and is), but it’s only 0.09% of the agency’s total budget, which was $51 billion. That relatively stellar record won’t be maintained, however, the inspector general said in a June 3 report. That’s because new programs — including the Infrastructure Act, the Inflation Reduction Act, and the CHIPS Act — have added an unprecedented $99 billion in new appropriations, $31 billion in new authorizations, and $400 billion in “enhanced loan oversight” to the Energy Department over the next few years, she said.

“As a result of the influx of funds, we concluded that enhancements to the department’s payment-integrity process are necessary, as it is likely that improper payments will significantly increase,” Donaldson said in the report.

The Biden administration heard Donaldson’s warning, and after two years of an unchanged annual budget of $86 million, for fiscal 2025, the White House proposed bumping it up 73% to $150 million.

Another, perhaps more cost-effective, solution comes from Griffith, the Virginia Republican who led the April subcommittee hearing on HHS’s improper payments. It might entice state auditors to help track down improper payments.

“Give them a percentage of the money they’re able to collect,” said the chair of the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations. “A lot of times it’s just an error. If we let state auditors keep some of the money, I think that’s a good way to go.” He said the details would still need to be worked out.

Griffin, 66, who has represented southwestern Virginia for seven terms, said he’s sympathetic to families who are slow to notify government programs of the deaths of their loved ones who are in the system. After his 92-year-old mother passed away in October 2022, he said his family was wrapped up in grief and taking care of other arrangements. It wasn’t a priority to inform the Virginia Retirement System that she should no longer be included on the rolls.

Griffin said his family returned the money that was posted to his mother’s bank account in the months before they were able to correct the oversight. “It’s nothing criminal, it’s just that families don’t want to deal with it, so they don’t,” he said. “Sometimes you don’t have family, and if the person is alone, nobody does it. It just goes to show you how difficult it can be.”

HHS investigators have the ability to cross-reference patient rosters with Social Security data that would identify death notices. Most information about possible, and actionable, criminal activity in Medicare and Medicaid, however, comes from patient complaints, according to Joe Barton, assistant U.S. attorney for the Eastern District of California in Sacramento and Fresno. The patients are billed for a service they didn’t get, and they call the tip line.

Sleep Patients Who Were Wide Awake

That’s how investigators from the HHS inspector general’s office nabbed Jeremy Gober, 43, and his brother Travis Gober, 45, Barton said. The patients who contacted the HHS office “said they did a sleep study five years before but hadn’t done any since, and there it is on their bill,” he said.

Patient complaints come in handy for a staff that’s short of resources. Grimm, the HHS inspector general, said that investigators nationwide have been turning down between 300 and 400 “viable criminal and civil health care fraud cases” each year simply because they don’t have the time.

Still, Grimm said investigators nationwide could boast a return on investment of about $10 for every $1 invested, including approximately $3.16 billion in expected recoveries in fiscal 2023, and 1,453 criminal and civil actions.

HHS investigators in Fresno fingered the Gober brothers, who were running a pair of sleep centers. The brothers had chosen a burgeoning field. Everybody, it seems, is having sleep problems. The global market for sleep apnea devices alone is worth an estimated $13.5 billion and is expected to keep growing.

But at some point, the Gobers quit seeing patients. Instead, prosecutors say, the brothers simply filed false claims for treating patients they hadn’t seen. Jeremy Gober began in Orange County at a sleep center called Got Sleep, and according to prosecutors, he filed false claims through Travis’ sleep center, VIP Sleep, in Fresno.

Once HHS investigators established that they had a case, they brought it to Barton, who said he works with them on a daily basis. At any given time, Barton said, he has roughly five HHS-related probes on the roster of 80-150 investigations he’s pursuing. He said his office works with the HHS investigators “hand in hand” until the cases are over.

In March, a judge sentenced Travis Gober to 19 months in prison. In June, Jeremy Gober, who prosecutors say made $1.5 million in fraudulent claims, got 46 months.

In addition to keeping up on patient complaints, HHS investigators do regular audits, selecting targets randomly to make sure things are on the up-and-up. “They look for statistical markers,” Barton said. Red flags include a high volume of repeat claims on the same patients and overall volume for a region. In other words, if a provider in Fresno is billing as much as a busy clinic in Los Angeles, that would probably warrant a closer look.

“The HHS investigators I work with are some of the best agents I know,” Barton said. “They work with HHS for a reason. They care about health care and they look for good cases that have a meaningful impact.”

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