Over $200 million a year is wasted or defrauded from the federal employee health benefits and retirement programs, according to recent testimony in the House Government Reform Committee (search), and lawmakers are looking for ways to reduce the losses.

Millions more dollars going down the drain can be saved if mismanagement and waste are put in check, say lawmakers on Capitol Hill.

“Since we’ve been given the directive to identify waste, fraud and mismanagement under our committee’s jurisdiction, we’ve been surprised by what we’ve found,” said David Marin (search), spokesman for the House Government Reform Committee, which oversees federal civil service programs, government contracting and reorganization.

Under a resolution passed by Congress this year, each committee is tasked with identifying cost-cutting measures equaling 1 percent of total spending in their jurisdiction. The deadline is Sept. 2, at which time each committee must submit a report to the House Budget Committee (search) detailing its findings.

The Government Reform Committee must identify savings of $827 million in fiscal year 2004. The Office of Personnel Management administers the majority of spending under the committee -- an estimated $57 billion out of $78 billion in spending for 2004.

According to officials at OPM, which administers all of the federal government’s pension, disability and health benefits, most of the annual losses can be attributed to erroneous medical payments to health care providers and insurance carriers.

OPM officials say audits have found that over $200 million had been lost in fiscal year 2002 because of improper payments to insurance carriers, either due to mistakes in filing codes or duplicate payments, as well as fraud, where health care providers and insurance carriers have filed for -- and received -- payments for services not rendered.

In the case of retirement benefits, the OPM’s inspector general’s office found that $5 million in payments are sent to deceased retirees each year.

Officials at the agency's inspector general’s office told the committee that they have plans to implement new data mining techniques that will uncover cases of fraud and mismanagement and improve their auditing procedures overall.

“Basically, we want to enhance the auditing efforts to continue to reduce the erroneous payments,” said Jeff Cole, division chief for the information systems audits division at OPM.

But, employee benefits is just one area of concern. Plenty of other steps can be taken toward tightening the federal belt.

Marin said the committee plans to investigate waste in federal contracting, as well as redundancy in programs. So far, the committee has found that, among other examples, the federal government is funding 90 different early childhood education programs in 11 different agencies, and 86 teacher-training programs in nine different agencies.

Rep. Henry Waxman, D-Calif., ranking Democrat on the committee, said the “real waste, fraud and abuse” is in the Department of Defense, which contracts out more work than any other agency and handles more than $1 trillion in assets. 

“If we’re serious about curbing waste, fraud and abuse in the federal government, we have to stick with the old adage, ‘follow the money,'” he said.

In July, three freshman House lawmakers announced the “Washington Waste Watchers,” in which they hope to identify “the shocking amounts of wasted tax dollars” and suggest legislative solutions to problems such as the ones uncovered by OPM.

Reps. Tom Feeney, R-Fla., Jeb Hensarling, R-Texas, and Mario Diaz-Balart, R-Fla., plan to take to the House floor every week to bring attention to different areas of waste, mismanagement and fraud in the federal bureaucracy.

“Spending other people’s money can be an intoxicating experience,” Feeney told Foxnews.com. “Part of this is to remind ourselves and one another that we are the guardian watchdogs of the taxpayers’ purse.”

Feeney said that the losses mentioned by the OPM are a small amount compared to federal Medicare losses -- $35 billion in overpayments in 2002, according to the House Budget Committee.

Hensarling said people don’t realize that the money that is wasted could have been used more effectively somewhere else, and that taxpayers may be actually losing out on programs due to rampant mismanagement.

“Part of what we want to do is let people know that whatever people are saying about a dollar spent in Washington translating into a dollar of love, happiness and kindness, it’s not necessarily so,” Hensarling said.

Thomas Schatz, president of Citizens Against Government Waste, which this year identified a record $22.5 billion in federal pork-barrel projects in its annual “Pig Book,” said the Government Reform Committee hearing, and the larger mandate to identify waste and fraud in the budget, is a good start.

“It’s a step in the right direction,” he said. “There is no question about it. And it’s certainly an improvement over what they have done before.”

This story was originally published on July 29, 2003.