In a significant move to address the issue of improper payments, lawmakers have updated a proposal aimed at cutting down on billions of dollars lost annually due to fraud, waste, and abuse. This initiative is part of a broader effort to make government programs more efficient and cost-effective, ultimately saving taxpayer money and ensuring that funds are used for their intended purposes.
The updated proposal comes at a time when the federal budget is under intense scrutiny, with both parties seeking ways to reduce the deficit without compromising essential services. The President’s FY 2024 Budget outlines a comprehensive plan to invest in America, lower costs for families, protect and strengthen Social Security and Medicare, and reduce the deficit. A key component of this plan is the crackdown on improper payments, which have long been a drain on federal resources.
Improper payments, which include payments made in error or as a result of fraud, have been a persistent issue across various federal programs. These payments not only waste taxpayer dollars but also undermine public trust in government efficiency. The updated proposal aims to tackle this problem head-on by implementing stricter oversight, enhancing fraud detection mechanisms, and holding bad actors accountable.
Cutting Wasteful Spending on Big Pharma
One of the major areas targeted by the updated proposal is the pharmaceutical industry. Building on the prescription drug reforms in the Inflation Reduction Act (IRA), the proposal seeks to expand Medicare’s ability to negotiate drug prices. This move is expected to cut federal spending by $160 billion over ten years by increasing the number of drugs eligible for negotiation and bringing more drugs into the negotiation process sooner. These reforms will not only reduce costs for the federal government but also save billions of dollars for seniors.
Additionally, the proposal aims to expand the IRA’s requirement that drug companies pay rebates when they increase prices faster than inflation. By extending this requirement to commercial drug sales as well as sales to Medicare, the federal government could save an additional $40 billion. This measure will help curb prescription drug price inflation and reduce health insurance premiums for people with private health insurance coverage.
Another significant reform is the strengthening of the Medicaid Drug Rebate Program. The proposal will give the Department of Health and Human Services the authority to negotiate additional, supplemental Medicaid drug rebates on behalf of states, thereby pooling and increasing purchasing power. This action is expected to reduce federal spending by almost $8 billion and help lower prescription drug spending.
Eliminating Wasteful Corporate Subsidies
The updated proposal also targets wasteful corporate subsidies, particularly those benefiting the oil and gas industry. The President is committed to ending tens of billions of dollars in federal tax subsidies for oil and gas companies. Despite benefiting from these special tax breaks, oil companies have failed to invest in production, instead realizing record profits and undertaking stock buybacks that benefit executives and wealthy shareholders. By eliminating special tax treatment for oil and gas company investments, the proposal aims to save $31 billion.
Furthermore, the proposal seeks to lower Medicaid spending by addressing excessive payments to Medicaid Managed Care Organizations. Currently, only about half of states require private insurance companies providing Medicaid coverage to pay back excess profits. The updated proposal would apply this requirement nationwide, ensuring that insurance companies can no longer charge for unnecessary administrative expenses or sacrifice quality care to increase their profit margins. This measure is expected to save over $20 billion.
Another area of focus is the elimination of tax subsidies for real estate. The proposal aims to close the “like-kind exchange” loophole, a special tax subsidy that allows real estate investors to defer paying taxes on profits from deals indefinitely as long as they keep investing in real estate. By closing this loophole, the federal government could save $19 billion.
Cracking Down on Systemic Fraud and Identity Theft
The updated proposal includes significant measures to crack down on systemic fraud and identity theft. The Biden Administration has already made substantial efforts to punish and prevent pandemic-related fraud, including restoring anti-fraud guardrails and committing $2 billion of American Rescue Funds to help states modernize and prevent unemployment fraud. Building on this progress, the proposal aims to empower law enforcement, investigators, and watchdogs to pursue, investigate, punish, and recover money from those engaged in major or sophisticated frauds.
Investing in fraud prevention and stopping identity theft is another critical component of the proposal. The pandemic exposed significant vulnerabilities in government benefits systems, particularly in preventing systemic identity theft. The proposal includes significant resources to support stronger preventative steps, such as establishing a permanent antifraud data and analytics capability and expanding Treasury’s Do Not Pay Service. These measures are designed to prevent identity theft in public benefits and ensure that lessons learned from the pandemic are applied going forward.
Additionally, the proposal aims to combat identity theft and other unemployment insurance (UI) fraud. The Biden Administration has already enacted $2 billion in the American Rescue Plan to help states modernize and prevent future fraud and identity theft. The updated proposal includes new measures for modernizing, protecting, and strengthening the UI program, which are expected to save $2 billion in budgetary savings. These provisions will tackle fraud, support more robust identity verification for UI applicants, and increase investigations of fraud rings targeting the UI program.
Updating Civil Monetary Penalties for Labor Law Violations
The proposal also includes measures to update civil monetary penalties for labor law violations. By increasing penalties for bad actors who violate workers’ rights, the proposal aims to deter employers from engaging in illegal activities such as wage theft, child labor violations, and unsafe working conditions. This measure is expected to increase federal government collections by approximately $2.5 billion and ensure that those who violate labor laws are held accountable.
Cutting Wasteful Spending Through the Tax Code
The updated proposal seeks to cut wasteful spending through the tax code by ending tax loopholes that provide billions of dollars in unwarranted subsidies to high-income individuals. One such loophole is the carried interest loophole, which allows wealthy investment managers to pay a lower tax rate on their earnings. By closing this loophole, the federal government could save $6 billion.
Another target is the exploitation of middle-class retirement savings incentives by billionaires. Some wealthy individuals have used a loophole to accumulate tens of millions of dollars in tax-favored retirement accounts, far exceeding what is needed for retirement security. The proposal aims to limit the amount taxpayers with incomes over $400,000 can hold in these accounts, saving $23 billion.
Additionally, the proposal seeks to eliminate tax subsidies for cryptocurrency transactions. Currently, crypto investors can exploit a loophole that allows them to report excessive losses, reducing their tax burden. By modernizing the tax code’s anti-abuse rules to apply to crypto assets, the federal government could save $24 billion.
Saving Taxpayer Dollars by Making Programs More Cost-Effective
The updated proposal also includes reforms to make government programs more efficient and cost-effective. One such reform is the cancellation of nearly $1 billion in unused Bureau of Prisons construction funding, which is no longer needed due to a decline in the federal prison population. This measure is expected to save significant taxpayer dollars.
Another reform aims to lower Medicaid spending by expanding access to prevention and treatment options for HIV/AIDS and Hepatitis C. By improving access to these programs, the proposal is expected to save Medicaid thousands of dollars per patient and reduce overall spending by $10 billion.
Finally, the proposal seeks to extend the authority for the Federal Communications Commission to auction radio spectrum, generating over $50 billion in savings. This measure will ensure that the government can make efficient use of this valuable resource, benefiting a wide range of uses including high-speed internet, satellite communications, and public safety.
FAQs
1. What is the main goal of the updated proposal?
The main goal of the updated proposal is to cut down on billions of dollars lost annually due to improper payments, fraud, waste, and abuse, making government programs more efficient and cost-effective.
2. How does the proposal aim to reduce prescription drug costs?
The proposal aims to reduce prescription drug costs by expanding Medicare’s ability to negotiate drug prices, requiring drug companies to pay rebates when they increase prices faster than inflation, and strengthening the Medicaid Drug Rebate Program.
3. What measures are included to combat systemic fraud and identity theft?
The proposal includes measures to empower law enforcement to pursue and punish fraudsters, invest in fraud prevention, and combat identity theft and unemployment insurance fraud.
4. How does the proposal address wasteful corporate subsidies?
The proposal targets wasteful corporate subsidies by eliminating tax breaks for oil and gas companies, addressing excessive payments to Medicaid Managed Care Organizations, and closing tax loopholes for real estate investors.
5. What are the expected savings from the proposal?
The proposal is expected to save billions of dollars by cutting wasteful spending, eliminating tax loopholes, and making government programs more efficient and cost-effective. Specific savings include $160 billion from drug price negotiations, $31 billion from eliminating oil and gas tax subsidies, and $24 billion from closing cryptocurrency tax loopholes.
