Dr. Murray Shames, center, a vascular surgeon, implants a medical device into a patient at Tampa General Hospital. (Tampa General Hospital) Dr. Murray Shames, center, a vascular surgeon, implants a medical device into a patient at Tampa General Hospital. (Tampa General Hospital)

Dr. Murray Shames, center, a vascular surgeon, implants a medical device into a patient at Tampa General Hospital. (Tampa General Hospital)

Tom Kertscher
By Tom Kertscher April 19, 2019

$50 billion in Medicare waste? Yes, that's how much in 'improper payments' are made per year

At a town hall in New Hampshire, U.S. Rep. Tim Ryan of Ohio, one of the many Democrats running for president in 2020, was asked how he would stop the federal government from wasting taxpayer money.

"This has got to be a major initiative for Democrats; we don’t talk enough about waste in the government," Ryan replied. "If you look at the Medicare program, for example, there is $50 billion a year wasted in the Medicare program. That’s a billion dollars a week."

It’s a claim the 45-year-old Youngstown-area resident, a moderate who has been in Congress since 2003, has made going back to at least 2017.

Waste is enough a problem that it is part of an acronym used by the federal Centers for Medicare & Medicaid Services: FWA, for fraud, waste and abuse. In a training manual for employees, CMS says with bold type and an exclamation point that "combating FWA is everyone’s responsibility!"

Ryan’s figure is solid. But let’s see whether it’s really "waste."

Estimate from a solid source

Medicare is health insurance primarily for people 65 and older, but it also helps millions of citizens with disabilities. It is massive: The program spends about $700 billion per year serving some 58 million Americans and making payments to 1 million entities.

Lately, some Democrats who have announced or are pondering a run for president have made claims about huge cuts to Medicare. Those statements haven’t fared all that well on our Truth-O-Meter.

To back Ryan’s statement, his campaign cited 2018 testimony to a congressional subcommittee from a gold-standard source, the U.S. Government Accountability Office, which is a nonpartisan auditing and investigative agency that serves Congress.

The testimony from Seto Bagdoyan, a GAO director of audit services, was on recommendations for handling fraud in Medicare. He said that during fiscal year 2017 — Oct. 1, 2016 through Sept. 30, 2017 — the Department of Health and Human Services, which administers Medicare, reported "improper payments" for Medicare of $52 billion. He noted that the figure could include payments that were a result of fraud, but that there are no reliable estimates of fraud in Medicare.

The figure for fiscal year 2018, Badoyan told us, is $48.5 billion.

Featured Fact-check

Now to "waste" vs. "improper payments."

‘Improper payments’

Under federal law, an improper payment is one "that should not have been made or that was made in an incorrect amount, including overpayments and underpayments." These could range from coding errors in the billing process to fraud, such as companies billing Medicare for services that were never provided.

Of the $52 billion Ryan alluded to, $45 billion consisted of overpayments and $7 billion, underpayments, Badoyan told us.

So, that was money "wasted," in the general sense of the word, in that much of it, at least, was spent unnecessarily.

Some Medicare experts think the word "waste" goes too far. "I wouldn't call this waste  — some may be, but it is difficult to tell," said Joseph J. Doyle Jr., a professor of management and applied economics at Massachusetts Institute of Technology and faculty director of MIT’s Sloan Initiative for Health Systems Innovation.

But other experts said Ryan’s claim is essentially on target, given the common understanding of what waste means.

One of them, Malcolm Sparrow, a professor of the practice of public management at Harvard, said that in a general, non-technical sense, Ryan’s claim is accurate. He added that the audit protocols that Health and Human Services uses to produce the estimates are weak, "so the actual levels of overall waste, or overpayments, are undoubtedly much higher than these government estimates."

Finally, Joseph Antos, a Medicare expert at the conservative American Enterprise Institute, offered a different view. The real waste, he said, is not what is measured by the improper payment estimates, but Medicare providing services that aren’t necessary, or aren’t delivered well, such as poor follow-up after a patient is hospitalized, resulting in that patient having to return to the hospital.

Our ruling

Ryan said: "There is $50 billion a year wasted in the Medicare program."

The statement is correct in that in the past two years, the federal agency that administers Medicare reports that $52 billion and then $48.5 billion in "improper payments" were made  — ranging from payments made with bookkeeping errors to fraud. Ryan goes a bit too far in that some of those payments are underpayments and some were for payments in which there wasn’t sufficient documentation to determine whether the payment was improper.

On balance, we rate his statement Mostly True.

Share the Facts
5
1
7
PolitiFact rating logo PolitiFact Rating:
Mostly True
"There is $50 billion a year wasted in the Medicare program."
In a town hall
Thursday, April 11, 2019

Our Sources

WMUR-TV, Tim Ryan interview (13:50), April 11, 2019

Email, Tim Ryan campaign spokeswoman Julia Krieger, April 13, 2019

Paymentaccuracy.gov, "What is an Improper Payment?" accessed April 17, 2019

U.S. Government Accountability Office, statement to the Subcommittee on Oversight, Committee on Ways and Means, House of Representatives, by Seto Bagdoyan, director of the forensic audits and investigative service of the U.S. Government Accountability Office, July 17, 2018

Email, Seto Bagdoyan, U.S. Government Accountability Office director of audit services, forensic audits and investigative service, April 16, 2019

PolitiFact, "Coburn says 20 percent of every Medicare dollar goes to fraud," Aug. 27, 2009

PolitiFact, "Checking Jon Ossoff on $16 billion in government waste," April 27, 2017

Email, Tyler Evilsizer, deputy policy director, Committee for a Responsible Federal Budget, April 17, 2019

PolitiFact, "Medicare fraud rate is 8 to 10 percent, says Roskam of Illinois," June 17, 2013

U.S. Department of Health and Human Services, "The Department of Health and Human Services And The Department of Justice Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2017," April 2018

Email, Joseph J. Doyle Jr., professor of management and applied economics at the Massachusetts Institute of Technology and faculty director of the MIT Sloan Initiative for Health Systems Innovation, April 16, 2019

Interview, Jack Hoadley, health policy analyst at Georgetown University’s Center for Medicare and Medicaid Research, April 17, 2019

Interview, Joseph Antos, scholar in health care and retirement policy at the American Enterprise Institute, April 17, 2019

Email, health policy and management professor Paul Ginsburg, director of the University of Southern California-Brookings Schaeffer Initiative for Health Policy, April 17, 2019

Email, Harvard Kennedy School of Government professor of the practice of public management Malcolm Sparrow, April 17, 2019

Interview, Kaiser Family Foundation associate director of the program on Medicare policy Gretchen Jacobson, April 18, 2019

PolitiFact, "Medicare in 5 charts: A 2018 midterm report," Sept. 11, 2018

Browse the Truth-O-Meter

More by Tom Kertscher

$50 billion in Medicare waste? Yes, that's how much in 'improper payments' are made per year

Support independent fact-checking.
Become a member!

In a world of wild talk and fake news, help us stand up for the facts.

Sign me up