President Obama signed into law today measures that hold government accountable for responsible use of taxpayer dollars and are intended to cut down on waste, fraud and abuse. The President also remarked that he has directed federal agencies to perform rigorous audits, paying companies conducting these audits based on the abuses or errors that they find. This method is already being used with great success (for the auditors) for the CMS Recovery Audit Contractors program. A video and transcript are available below.

In his statement before signing the bill, the President explained that, “…we’ve begun an unprecedented effort to put an end to a problem known as improper payments, which is the purpose of the bill that I’m signing into law today.” He went on to say that “sometimes these payments are the result of innocent mistakes or reflect valid claims that were paid at the wrong time.  But sometimes, they result from abuses by scam artists and crooked companies.  And all told, they added up to $110 billion.  I want everybody to understand — just get some perspective on that.  That is more than the budgets of the Department of Education and the Small Business Administration combined.  And that’s unacceptable.”

The President then commented on how new methods of hiring and paying auditors are now being used:

“[The huge amount of overpayments is] why, earlier this year, I directed our federal agencies to launch rigorous audits conducted by auditors who are paid based on how many abuses or errors they uncover – the more they find, the more money they make.  So they are highly incentivized.”

The use of auditors paid on a contingency fee basis is not new, however, since it is the exact method used to incentivize the CMS Recovery Audit Contractors (RACs), which have been conducting audits under this kind of incentive program since 2003, when the original RAC Pilot or Demonstration project was conducted in selected states. That program was so successful from its inception that after only 18 months of operation during its 36-month duration, Congress began immediate steps to make the program permanent. Evidently, the continued success of the program has encouraged the current Administration to expand its use both within and beyond the realm of healthcare.

The President also made it clear that he expects great results from the new measures enacted by signing this law. “With these new tools, the challenge I’m making to my team today is to reduce improper payments by $50 billion between now and 2012.  This goal is fully achievable due in no small part to some of the great work of the members of Congress standing with me today, particularly Senator Tom Carper and Representative Patrick Murphy, who sponsored the bill I’m about to sign and worked with all the other members of Congress who are here today to get it passed,” he said.

The bill had no trouble getting through both houses of Congress, as noted by the President. “And I think, by the way, it’s worth noting that this bill passed unanimously in both the House and the Senate – a powerful reminder of what we can accomplish when we put partisanship aside and do what’s best for the people we serve,” he said.

After the signing, Speaker of the House Nancy Pelosi released the following statement about the Improper Payments Elimination and Recovery Act, sponsored in the House by Congressman Patrick Murphy of Pennsylvania:

“With the President’s signature today, our nation takes a critical step forward for fiscal discipline. The Improper Payments Elimination and Recovery Act will save taxpayers tens of billions of dollars by cracking down on waste, fraud, and abuse in government spending, identifying and eliminating improper payments, and recovering lost funds that federal agencies have spent improperly.

“This legislation is part of our broader effort to restore fiscal responsibility and uphold our commitment to accountability and transparency. This Congress has made pay-as-you-go spending the law of the land and cracked down on wasteful spending in Medicare and Medicaid. And the House has passed a budget that requires cuts of $7 billion below the President’s request.

“We will continue to work to expand our economy, rein in spending, strengthen initiatives that work, and make investments that benefit our families and restore balance to our budget.”

Read the complete Transcript of President Obama’s remarks HERE, and see a video of it, below.