Gene Dodaro, comptroller, says government spending mistakes totaled $124 billion last year

The government doled out $124 billion in improper payments last year — up $19 billion over 2013 and accounting for more than enough money to cover the entire sequester budget cuts, if only the government had been able to save it.

Medicare accounted for nearly half of those bad payments, with Medicaid and the earned income tax credit the next-biggest problem programs, the Government Accountability Office said.

Not all of the money is fraud, and in some cases improper payments mean the government underpaid a taxpayer. In either case, it signals a program that is misspending taxpayers’ money and is another sign of the government’s “unsustainable long-term fiscal path,” Comptroller General Gene L. Dodaro, head of the GAO, told the Senate.

The sheer size of the problem, and the fact that it grew last year amid tight budgeting, left lawmakers on both sides of the aisle shaking their heads.

“Just think about what could be purchased with $125 billion,” said Sen. Orrin G. Hatch, chairman of the Senate Finance Committee, who called the hearing. “That amount would buy an iPad for every single American. It would buy every person in the country a year’s worth of meals at Chipotle. Or, to put it another way, $125 billion would be enough to pay for health insurance for every living person in Florida, our third most populous state.”

Sen. Sherrod Brown, Ohio Democrat, called the numbers shocking.

In the case of the government’s two major health care programs, Mr. Dodaro has made a number of recommendations for how to cut the size of bad payments. But he told the Senate committee that the Centers for Medicare and Medicaid Services, which runs the program, hasn’t followed through on all of those.

“They’ve implemented some of the suggestions we had, but there are many they have not yet done,” Mr. Dodaro said.

Mr. Dodaro said the problems were largely human errors, compounded by the major enrollment jump in Medicare and Medicaid, which swelled budgets and left more room for improper payments.

Mr. Dodaro said the government could cut fraud and identity theft by removing Social Security numbers from Medicare cards. The Internal Revenue Service, he said, should have the authority to compare information with other information collected by the federal government to identify problems with spending and prevent any improper payments.

The Centers for Medicare and Medicaid Services had no response to the comptroller general’s comments.

Improper payments could include fraud, but it could also just be a misunderstanding of the country’s complex and “Byzantine” tax code, Sen. Ron Wyden said.

The Oregon Democrat said an even bigger fiscal problem — to the tune of $385 billion a year — is the tax gap: the amount of money the government fails to collect each year because people underreport their incomes.

The GAO’s report said 84 percent of taxpayers underreport their incomes and 10 percent underpay their taxes. Completely closing the income tax may not be feasible without increased enforcement of tax laws, which Americans would likely find intrusive and would cost more than the IRS could afford, the GAO said.

“The real strategy is an integrated strategy where we prevent improper payments from happening in the first place,” Mr. Dodaro said.

He said the system needs to keep out bad actors, better regulate tax preparers who file on behalf of people and match information across government agencies to detect waste and fraud patterns ahead of time.

He suggested that Congress find a way to streamline some of the tax laws because they are difficult for average filers to understand, but said adding rules on top of an already messy system could make the situation worse.

Mr. Wyden also said military spending should have more scrutiny but was getting “a free pass when it comes to improper payments just because some members of Congress find it easier to focus on health care and tax programs.”