By Romina Boccia and Tyler Turman, Cato Institute
State-run, federally funded welfare programs lose billions of dollars to improper payments every year. Examples abound. Medicaid paid more than $200 million to deceased enrollees in one year; 2.8 million peoplewere enrolled in two or more Medicaid/Obamacare exchange plans in 2024; and half a million Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) recipients were reportedly receiving benefits twice or more under the same name.
Medicaid and SNAP alone combined for nearly $50 billion in payment errors in fiscal year (FY) 2025. Most of that money is never recouped.
The Treasury’s Do Not Pay (DNP) system, a data-sharing tool that screens payments for eligibility in real-time, is designed to solve these problems by catching erroneous payments before the money goes out the door. But the system is underutilized and underequipped, and agencies are not required to respond when it flags potential errors. Congress should address these shortcomings by strengthening and expanding the use of DNP. More importantly, Congress should pair it with structural reforms that give states a stronger reason to use the system properly.
Preventing Improper Payments Before They Happen
The Congressional Research Service (CRS) has identified data-access issues as one of the root causes of payment errors—agencies either cannot access the information they need to verify eligibility or fail to use the data already available to them.
Additionally, rather than catching errors up front, agencies frequently default to a difficult, expensive, and largely ineffective “pay and chase” approach. They issue the payment first, find the error later, and try to claw it back after the fact. It rarely works. Of the $175 billion lost to overpayments in FY 2023, only 15 percent was successfully recouped.
The DNP system is meant to stop this cycle by providing agencies with access to data sources to cross-check and verify applicant eligibility at the point of issuance.
The system has a proven track record. In a three-year pilot that gave DNP access to the Social Security Administration’s (SSA) Death Master File, the system identified or prevented $113.5 million in improper payments at a cost of just $4.6 million—a 23-to‑1 return on investment in the first year alone. After such remarkable success, Congress permanently authorized SSA to share its full death data with DNP.
In FY 2025, DNP reportedly helped agencies prevent, detect, and recover $11.7 billion in potential improper payments.
House Oversight Bills Strengthen DNP
Despite its proven value, DNP has several gaps that limit its effectiveness. A House Oversight hearing on fraud in state-run, federally funded welfare programs highlighted the need to expand and improve the system and give it the data, authority, and reach that it currently lacks. In April, the committee advancedseveral bills aimed at doing exactly that.
- DNP lacks access to important databases. The system screens well for deceased enrollees, but only $1.5 billion in FY 2024 overpayments were death-related. Far larger drivers of overpayments—income and financial data ($80.2 billion), employment status ($68.9 billion), and identity ($31.6 billion)—are not fully accounted for in DNP’s current databases. The Pre-Payment Fraud Prevention and Treasury Data Access Act (H.R. 8463) from Reps. James Comer (R‑KY) and Jodey Arrington (R‑TX) would help address these gaps by expanding DNP to include the National Directory of New Hires, SSN/name matching, and tax return income data for agencies to use during prepayment eligibility screening.
- DNP can flag a potentially improper payment, but agencies are under no obligation to act on it. As Rep. Comer points out, Treasury “is not fully empowered to stop” potentially improper payments flagged by DNP, leaving agencies free to disburse funds even when the tool identifies a risk. To address this, Reps. Comer and Arrington’s Stopping Fraudulent Payments Act (H.R. 8464) would require agencies that wish to proceed with a payment flagged by DNP to first take corrective action and verify the payment before certification.
- DNP is woefully underused. Only 4 percent of eligible programs across the federal government fully utilize DNP. Many states lack access to DNP and instead rely on outdated and fragmented data systems with significant gaps in eligibility verification. The Timely and Accurate Benefits Act (H.R. 1755) from Rep. William Timmons (R‑SC) would help close this gap by expanding DNP’s availability to state agencies and requiring them to use DNP or other real-time data-matching tools for fraud prevention and eligibility determinations.
- Agencies aren’t using the data they already have. CRS found that 73 percent of data access–related overpayments between fiscal years 2021 and 2024—$556.6 billion—were human errors resulting from agencies failing to use the data that already existed. Ensuring administrators know how to use the tools available to them is one potential solution, and the Federal Fraud Prevention Workforce Training Act (H.R. 8428) from Reps. Glenn Grothman (R‑WI) and Raja Krishnamoorthi (D‑IL) would help by establishing a training program on fraud risk management and the use of tools such as DNP for federal and state agencies administering federal programs.
Together, these bills would give DNP better data, strengthen enforcement when it flags a potential error, and expand its availability to more states administering federal programs.
Better Tools Still Need Better Standards
Even with these improvements, DNP would still have significant limitations that the aforementioned bills do not address. CRS cautioned that the system sometimes produces false positives and contains inaccurate data, undermining its effectiveness for some agencies. Moreover, even if every federal agency were using the DNP system as intended, it cannot account for the different laws and regulations governing eligibility across programs, which require case-by-case determinations that no centralized database check can substitute for.
Congress should continue to expand DNP to give agencies more information during eligibility screening, such as access to the Systematic Alien Verification for Entitlements service to verify applicants’ citizenship status. Legislators should also ensure the Treasury continues to improve the accuracy of data already in the system and establish clear standards for what triggers a payment delay. H.R. 8464triggers if a payment has an “elevated risk of fraud” based on a “fraud-risk indicator” but doesn’t specify what either term means in practice. Stricter screening is warranted, but poorly defined criteria risk creating administrative backlogs and unnecessary red tape that delay payments to eligible recipients.
Accountability Starts With Incentives
More fundamentally, DNP is a tool that is only useful if agencies have the right incentives to use it. As the Government Accountability Office’s Seto Bagdoyan testified, states can have intricate fraud risk management systems, but without a “culture of accountability,” those systems will not deliver results. Many of the 90-plus federal welfare programs are state-administered but funded largely, and in some cases almost entirely, by federal taxpayers. States face few fiscal consequences for tolerating waste, fraud, and abuse when the costs fall on federal coffers rather than state budgets. Ideally states choosing to run welfare programs would both fund them and answer directly to the constituents paying for them.
Congress should strengthen and expand use of the DNP system to ensure taxpayer dollars reach the people they are intended for. But relying on DNP is not enough. Fraud prevention works best when the governments administering benefits are also responsible for the costs of errors.
Romina Boccia is director of budget and entitlement policy at the Cato Institute. Tyler Turman is a research associate in Budget and Entitlement Policy.
