Government waste, fraud and abuse rose 13% last year despite DOGE

Federal waste, fraud and abuse rose roughly 13% last year despite the Department of Government Efficiency’s pledge to root it out, according to recent watchdog reporting. The headline number lands as TSLA CEO Elon Musk and DOGE continue to publicize savings claims that have fallen short of their own targets.

What the watchdog actually found

The report identifies that in fiscal year 2024 alone, $162 billion in improper payments were reported across 68 federal programs. Notably, 75% of these losses stemmed from just five program areas, including Medicare, Medicaid, SNAP benefits, Earned Income Tax Credits, and the Restaurant Revitalization Fund.

According to the GAO, the government loses between $233 billion and $521 billion each year to fraud, based on data from fiscal years 2018 through 2022. Additionally, improper payments, funds that should not have been paid or were paid in incorrect amounts, have amounted to approximately $2.8 trillion since 2003.

The DOGE backdrop

A handful of federal programs haven’t been doing enough to protect against fraud, according to a new Government Accountability Office audit that follows reports that DOGE’s pledge to root out waste, fraud and abuse fell well short of its own projections.

The List highlights 38 areas across the federal government that are seriously vulnerable to waste, fraud, abuse, and mismanagement or that are in need of transformation. GAO added a new area on federal disaster assistance due to the recent increase in natural disasters and the need for efficient and effective federal relief. Over time, progress on the List has led to about $759 billion in savings—but there’s still more on the table.

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Where the money is leaking

The areas on the High-Risk List include programs that represented about 80 percent of the total government-wide reported improper payment estimate. These include two of the fastest-growing programs—Medicare and Medicaid—as well as the unemployment insurance system and the Earned Income Tax Credit. While agencies and the Department of the Treasury are taking some steps to address this issue, much more needs to be done to control billions of dollars in overpayments and prevent fraud.

In 2024, the Internal Revenue Service projected that the gross tax gap—the difference between taxes owed and taxes paid on time—was $696 billion for tax year 2022. IRS estimated that it will collect an additional $90 billion through late payments and enforcement actions, leaving an estimated $606 billion net tax gap.

The contractor angle

The federal government spends more than $750 billion buying goods and services from the private sector each year. The GAO recommended that agencies adopt generally accepted practices used in private sector procurement to help save billions of dollars and speed up the procurement process.

That spend touches every major federal contractor, from defense primes to health IT vendors. For more market and policy coverage, see other news.

Options market and stocks to watch

Watch for sensitivity in names tied to federal contracts, healthcare reimbursement, and IT modernization spend:

• UNH — watch for headline risk tied to Medicare and Medicaid improper-payment scrutiny.
• HUM — watch for managed-care reaction if Medicare Advantage oversight tightens.
• LMT — watch for defense-contracting flow as procurement reform talk heats up.
• PLTR — watch for federal IT and anti-fraud analytics demand.
• TSLA — watch for political-risk premium tied to Musk and DOGE coverage.

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