Medicaid Savings Contribute to $18 Billion in Waste Reductions

The federal government cut spending waste by $18 billion in 2011.
by | November 16, 2011

Cuts to wasteful spending helped the federal government save more than $18 billion during fiscal year 2011, the Obama administration announced Tuesday. A substantial piece of those savings came from an effort to avoid improper payments in the state-run Medicaid programs.

The error rate for improper payments for Medicaid providers fell from 9.4 percent in 2010 to 8.1 percent in 2011, totaling about $4 billion in savings since 2009, according to estimates by the administration.

This year, U.S. Health and Human Services Secretary Kathleen Sebelius credited 33 states with initiating the Medicaid Electronic Health Records Incentives Program. The program provides funding to eligible hospitals and healthcare providers to update their electronic databases, allowing fewer incorrect and duplicate payments to be made.

In a conference call with reporters, Sebelius also pointed to new initiatives that the states would be undertaking to continue saving money through Medicaid. The Medicaid Recovery Audit Program, finalized in September as part of the Affordable Care Act, enables states, via independent auditors, to find and recover improper payments. The auditors will then be paid a fee based on those recovered funds. HHS estimates the program will save $2.1 billion over five years, $900 million of which will be returned to the states.

Another new pilot program would allow states to share a Medicaid provider enrollment system, intended to ease the process of identifying provider fraud and increase efficiency. Five states, yet to be determined, will participate in that program.

Another $12 billion in savings came through Medicare. The error rate fell from 10.2 percent in 2010 to 8.6 percent in 2011. Specifically, about $7 billion in fee-for-service payment errors were avoided, and about $5 billion in erroneous payments for Medicare Part C plans were prevented.

The federal government also saved a projected $800 billion by preventing fraud and improper payments in the food-stamp program. Another $300 million in savings was achieved by reducing errors in Pell Grant payments.


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