The GAO's $2.7 Trillion Finding and What It Means

Since 2003, federal agencies have made an estimated $2.7 trillion in improper payments — money sent to the wrong person, in the wrong amount, or for ineligible recipients. This figure comes from the U.S. Government Accountability Office (GAO), which audits federal spending. The number is not a one-time event but a running total across decades, spread across dozens of programs including Medicare, Medicaid, unemployment insurance, and tax credits.

Improper payments include overpayments (sending too much), underpayments (sending too little), and payments to people who should not have received them at all. The GAO tracks this because Congress requires federal agencies to report it, and because the scale matters to taxpayers and to people trying to understand whether the programs they rely on are working as intended.

This is not the same as fraud, though fraud is part of it. Most improper payments result from administrative errors, outdated systems, or people making honest mistakes on forms. Some result from agencies not checking whether someone still meets the program's rules. The GAO's job is to count it all and tell Congress where the biggest problems are.

Key Takeaways

  • The $2.7 trillion figure spans from 2003 to the present and includes overpayments, underpayments, and payments to ineligible recipients across federal programs.
  • Medicare and Medicaid account for the largest share of improper payments, followed by unemployment insurance and tax credits like the Earned Income Tax Credit.
  • Most improper payments result from administrative errors and system failures rather than intentional fraud, though the GAO does not separate the two in its total.
  • Federal agencies are required by law to report improper payments to Congress each year, and the GAO reviews these reports to identify trends and problem areas.
  • If you received an improper payment, the agency will typically ask you to return it, though the process and timeline depend on which program sent it.

Which Programs Have the Largest Improper Payment Problems

Medicare and Medicaid together account for roughly half of all improper payments the GAO has tracked. Medicare's improper payment rate has hovered between 8 and 12 percent of total spending in recent years, meaning roughly one dollar in ten goes out incorrectly. Medicaid's rate varies by state but runs similarly high. Both programs process millions of claims per year from thousands of providers, and the sheer volume makes catching every error difficult.

Unemployment insurance is the third-largest source, especially during economic downturns when claims spike and states process them faster than they can verify. The Earned Income Tax Credit (EITC), which the IRS administers, also generates significant improper payments because may be able to access depends on income and family status that can change mid-year. Social Security, despite being one of the largest federal programs, has a lower improper payment rate than Medicare or Medicaid, though the dollar amounts are still substantial.

Smaller programs like SNAP (food assistance), housing vouchers, and student loan servicing also appear in the GAO's reports. The common thread is that all of them rely on self-reported information from applicants, and all of them struggle to verify that information in real time or to catch changes in circumstances after a payment begins.

Why Improper Payments Happen at This Scale

Federal agencies use computer systems that often cannot talk to each other. Medicare cannot automatically check whether someone is also receiving Medicaid, or whether they died, or whether their income changed. States running unemployment insurance do not automatically share data with the IRS. This means agencies often process payments based on incomplete information, and by the time they discover an error, months have passed.

Many federal programs rely on people to report changes in their circumstances — a new job, a move, a change in family size. People forget, do not understand the requirement, or do not realize the change matters. Agencies do not always follow up to verify what people report. Some agencies lack the staff or funding to do thorough checks before sending money out.

Fraud exists but is smaller than the improper payment total suggests. The GAO does not break out fraud separately in its $2.7 trillion figure, so the number includes honest mistakes, system failures, and intentional deception all together. Intentional fraud — someone lying on a form to get money they know they should not receive — is a real problem but not the majority of improper payments.

How the GAO Counts and Reports Improper Payments

Each federal agency that runs a large payment program is required by law to estimate its improper payment rate and report it to Congress. The GAO then reviews these reports, checks the agencies' math, and publishes a government-wide summary. The process happens annually, which is why the $2.7 trillion figure grows each year as new improper payments are discovered or estimated.

Agencies use different methods to estimate improper payments. Some pull a random sample of payments and review them by hand. Others use data analytics to flag payments that look unusual. The methods vary in accuracy, and the GAO has repeatedly criticized agencies for using weak estimation methods or for not catching errors at all.

The GAO's reports are public and available on its website. Congress uses them to decide whether to fund new verification systems or to investigate specific agencies. The reports also drive policy changes — for example, after years of high improper payment rates in unemployment insurance, Congress and states invested in better verification systems.

What Happens If You Received an Improper Payment

If an agency discovers it sent you too much money, it will contact you and ask you to return it. The process depends on which program sent the payment. Medicare and Medicaid typically withhold future payments or ask you to repay in installments. Unemployment insurance may ask for a lump sum or set up a payment plan. The IRS, if it overpaid a tax credit, will reduce your next year's refund or ask you to repay when you file your taxes.

You have the right to appeal or dispute an overpayment information. The agency must explain why it believes you were overpaid, and you can respond with evidence that you were not. If you disagree, you can request a hearing. The timeline and process vary by program, so read the notice the agency sends you carefully and follow the instructions for responding.

If you received an underpayment — the agency sent you less than you were owed — the agency should correct it and send the difference. This usually happens automatically once the error is caught, though it can take weeks or months. If you discover an underpayment yourself, contact the agency and ask them to review your case.

What Congress and Agencies Are Doing About It

Congress has passed laws requiring agencies to improve their payment accuracy. The Improper Payments Elimination and Recovery Act (IPERA), passed in 2010, set up the framework for annual reporting and set targets for reducing improper payment rates. Agencies that miss their targets for multiple years can face budget penalties or be required to implement new systems.

Many agencies have invested in better data-matching systems. Medicare now shares data with the Social Security Administration to verify that beneficiaries are still alive. States have built systems to cross-check unemployment claims against wage records. The IRS has improved its verification of EITC claims. These changes take years to build and cost money upfront, but they reduce improper payments over time.

The GAO continues to recommend that agencies modernize their computer systems, hire more staff for verification, and share data with each other. Progress has been slow — the improper payment rate has not dropped dramatically despite decades of effort — but agencies are moving in that direction.

Frequently Asked Questions

Is the $2.7 trillion number the same as fraud?

No. The $2.7 trillion includes fraud, but most of it is administrative error, system failures, or people making honest mistakes. The GAO does not separate fraud from other improper payments in its total, so the exact amount of intentional fraud is unknown but smaller than the headline number.

Can I check whether I received an improper payment?

If an agency believes you were overpaid, they will contact you directly. You do not need to check yourself. If you suspect you were underpaid or that an error was made, contact the agency that sent the payment and ask them to review your case. Bring any documents that support your claim.

What if I cannot afford to repay an overpayment?

Most agencies offer payment plans. Contact the agency and explain your situation. They may agree to smaller monthly payments instead of a lump sum. You can also request a hearing to dispute the overpayment if you believe the agency made an error in calculating it.

Why do improper payments keep happening if agencies know about them?

Fixing the problem requires money, time, and coordination between agencies. Many federal computer systems are decades old and expensive to replace. Agencies also process millions of payments per year, and catching every error before it goes out is extremely difficult. Progress is happening but slowly.

Where can I read the GAO's full report on improper payments?

The GAO publishes its improper payment reports on its website (gao.gov). Search for "improper payments" to find the most recent government-wide summary and reports on specific agencies. Congress also holds hearings on improper payments, and those transcripts are available through Congress.gov.