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VA made stunning $2.2 billion in mistaken payments in 2012

By John Solomon

Sunday - 3/17/2013, 9:26pm  ET

Already saddled with long waits and a massive backlog of beneficiary claims, the Department of Veterans Affairs is also struggling to manage its money properly, handing out an astounding $2.2 billion in mistaken payments last year.

And despite increased attention from the agency’s internal watchdog and its fiscal managers, the VA’s percentage of errant payments actually jumped substantially from 2.65 percent in 2011 to 3.4 percent in 2012, according to the department’s own fiscal records.

To put the figure into perspective, the VA's improper payments amount to more than half the money the Navy was asked to cut from its budget as part of the sequester. The improper payments mean less money was available for deserving veterans, many who remain languishing in the system awaiting help on everything from medical care to education and job training.

The VA, the second largest federal agency, insists it is making progress, noting the costs of the erroneous payments dropped in 2012 by $200 million even as the percentage of mistakes rose.

But it also acknowledges the department remains years away from getting a handle on the core problems that have plagued its payment systems.

“Although much has been accomplished at VA to control improper payments, much more remains to be done,” the department says in its most recent fiscal statement to Congress.

A report released Friday by the VA’s internal watchdog, the inspector general, paints a portrait of an agency still struggling to create systems that will catch erroneous payments before they are sent and to comply with a federal law known as the Improper Payments Elimination and Recovery Act (IPERA).

“VA did not comply with four of seven IPERA requirements in FY 2012,” the inspector general noted.

In fact, one major office in the VA, the Non-VA Care Fee program that covers veterans’ medical expenses outside the VA system, had an erroneous payment rate of about 12 percent last year, well above the 10 percent limit set by the IPERA law.

VA official blamed the high-rate of mistakes on an antiquated payment system that is “manual nature” and significantly “decentralized.”
If there was a silver lining three other programs that had been above the red-flag 10 percent level for mistaken payments in 2011, fell below that level in 2012, though only slightly.

Still, the inspector general report found widespread concerns for worry, including whether the numbers the VA is currently reporting are even accurate. For instance, the watchdog said:

• The Veterans Benefit Administration, a large office inside the VA responsible for determining payments for medical, death and retirement benefits, “used methodologies that were not statistically valid to estimate improper payments for two of its three reported programs.”
• Auditors were unable to determine the error rate for the VA’s pension program because “because VBA combined the Compensation and Pension programs in reporting on improper payment rates
• The VBA did not properly account for some of the monies it tried to recover from
• The VA was late in filing two required IPERA-related reports to Congress and had to correct a third report because of errors.

The inspector general has spent significant time pressing the VA to improve its financial management, especially on the issue of erroneous payment. One reason is that once a mistaken payment is made, the VA’s ability to recover the money is substantially constrained, both by law and capability.

Of the $2.2 billion in improper payments in 2012, VA was only able to recover less than one percent, or $18.6 million, after the fact and it stopped just $11.1 million in improper payments before they were sent.

The erroneous problems are the latest problem to hamper the much-maligned and overburdened VA. Over the last six months, the Washington Guardian has highlighted numerous other problems, including:

The VA says it is taking the erroneous payment problem seriously, forming a task force governed by its Chief Financial Officer last year that has already held several summits “to increase our knowledge of improper payments – types of improper payments, what types are avoidable, what types aren’t, and root causes."

“These actions will set the stage for our work in the coming years,” it added.