Billions could be saved by consolidating government spending, GAO says

Imagine a deeply indebted household paying two companies to cut the same lawn, a shopper going to Costco and not buying bulk or a failing company paying billions to study itself.

You don’t have to imagine hard. Uncle Sam is essentially doing all of the above right now.

That’s the message of a new Government Accountability Office report that has identified billions of dollars the government could save just by ending duplicate contracts and eliminating unnecessary programs.

“Selected agencies could better leverage their buying power and achieve additional savings,” the GAO said in a report this month that highlighted 31 areas of potential savings. It estimated that each one percent saved by agencies could return $4 billion annually to the treasury.

Take, for instance, the Department of Health and Human Services and its Medicare Advantage Quality Bonus Payment Demonstration. The program has already spent more than $6 billion looking for cheaper alternatives to existing Medicare Advantage plans. The GAO says taxpayers would save more — $2 billion in all – if it simply canceled the last year of the program.

The problem is the agencies that spend such money don’t want to give it up. The Centers for Medicare and Medicaid Services, which runs the Medicare Advantage demonstration, argues the program “further tests whether stronger financial incentives and investments in quality plans will lead to more rapid increases in quality among Medicare Advantage plans.

For the third year in a row, GAO issued reports to both Congress and executive branch agencies identifying programs that could relieve some of the government’s financial stress by improving efficiency without cutting necessary services.

As of March 6, the executive branch has addressed 22 percent of issues raised by GAO in the last two years, and partially addressed 57 percent of the ideas. Congress, however, has addressed 20 percent and partially addressed 12 percent.

GAO says some solutions will take time. “A number of issues are difficult to address, and implementing many of the actions identified will take time and sustained leadership,” the report released last Thursday said.

One area for Pentagon savings is camouflaged, literally. The military has gone from using two types of camouflage uniforms in 2002 to 10 today, the very sort of duplication that can lead to easy savings. GAO estimates $82 million can be saved by the military branches collaborating on their uniform development.

DOD officials say they are working on solutions. “The Department of Defense continues to look for ways to streamline processes and implement better business practices associated with camouflage uniform procurement, research and development, product quality, storage, packing, and delivery,” DOD spokesman Mark Wright said.

A separate GAO report found the Pentagon could save some of the $2 billion it spends annually on medical contractors if the military services coordinate their spending.  Just like developing uniforms, each branch of service is separately in charge of its own contracts for medical personnel.

One issue the report addressed that did not have to do with wasted spending was tobacco taxes. GAO estimated that $615 million to $1.1 billion in tobacco tax revenue was lost between April 2009 and 2011 because consumers have been switching to similar but lower-taxed products, according to the report.

GAO suggested that Congress adjust tobacco tax rates to avoid substantial revenue losses in the future.

On April 25, Sen. Frank Lautenberg, D-NJ, introduced The Tobacco Tax and Reform Act, which, if ratified, would give all tobacco products a flat tax and increase its tax rate by 93 percent. The bill was referred to the Senate Finance Committee, but has a one percent chance of getting past the committee and zero percent chance of being enacted, according to Govtrack, an independent company that specializes in tracking congressional bills.

The federal watchdog will follow up the agencies’ progress in June, then again in 2015 and once more in 2017. It has also developed an online ‘Action Tracker,’ so everyone can access the progress via the GAO website.

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