Fraud/Waste- Medicaid: Improper Payments Caused by Mismanagement, Broken Priorities

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[MM Curator Summary]: In which the author says things we don’t want to hear.

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Progressive health policy over the past decade has centered on expanding Medicaid. Unfortunately, this drive has undermined the original purpose of Medicaid and compromised the program’s integrity. Improper payments have spiraled out of control even as the government has systematically undercounted them.

The Centers for Medicare and Medicaid Services (CMS) recently released a report estimating $132 billion in annual improper payments in federal health-care programs. Over 60 percent of reported improper payments are from Medicaid, and CMS estimates that about 16 percent of Medicaid payments don’t follow program rules.

The operative word is “reported.” That’s because the actual level of improper payments is much higher than what the government is counting.

Efforts to uncover problems with eligibility have been notably lacking, even though eligibility problems are the primary reason for Medicaid’s improper payments. Since Medicaid is a welfare program only lawfully available to low-income Americans, verifying eligibility is vital.

From 2014 to 2017, as Obamacare’s expansion of the program began, the Obama administration halted Medicaid-eligibility reviews. In 2018, those reviews restarted, and the reported improper-payment rate soared. But CMS only did meaningful reviews for two years.

Between April and August 2020, it entirely halted improper-payment assessments. CMS has cited “COVID-19 flexibilities,” such as postponed eligibility determinations, as a factor in the decrease of reported improper payments from $99 billion in last year’s report (22 percent of all Medicaid payments) to $81 billion this year.

In short, Medicaid has become prone to improper payments while the government refuses to measure them accurately.

The government’s failure to confirm Medicaid eligibility before enrollment is egregious, particularly since expanded eligibility over the past decade has transformed the program. Medicaid was originally designed to assist the most vulnerable Americans: low-income pregnant women, children, seniors, and individuals with disabilities. However, Obamacare offered states generous financial incentives to expand Medicaid to able-bodied, working-age adults. These incentives resulted in massive increases in Medicaid enrollment and spending in states that adopted the Obamacare expansion — accompanied by a significant increase in improper payments.

Covid-19 policies have caused the program to swell further. Congress explicitly forbade states from updating their eligibility criteria or removing ineligible Medicaid enrollees during the Covid-19 public-health emergency. Once again, it deployed federal subsidies to entice them to comply. Even though the pandemic is over, the Biden administration has refused to end the official emergency; Medicaid rolls continue to swell, with one-in-four Americans on this welfare program.

Just from the Obamacare expansion, Medicaid already had a flood of spending on ineligible individuals. An Inspector General audit from 2014 to 2015 estimated that just two states (California and New York) made more than $6 billion in Medicaid payments for 5.4 million enrollees who were either ineligible or did not have their eligibility adequately reviewed. And the problem is much worse today.

This disregard for taxpayer dollars is particularly scandalous as the country grapples with ballooning deficits and 40-year high inflation. But it isn’t just a matter of dollars and cents.

Medicaid expansion has devoted more resources to able-bodied working-age adults rather than the neediest people for whom Medicaid was originally intended. In a program where long wait times are nothing new, this means a further deterioration in quality. The combination of improper payments and deficient audits point to deep programmatic mismanagement, not to mention broken policy priorities.

There is much to fix in Medicaid, and the task is so much more arduous when the federal government downplays the problem. Eligible recipients, as well as taxpayers footing the bill for Medicaid, deserve better than this mismanagement and careless spending. The new Republican House majority should investigate the Biden administration’s policies that have contributed to improper payments and the steps taken to downplay the problem.

Brian Blase, who served as a special assistant to President Trump at the National Economic Council, is president of Paragon Health Institute. Joe Albanese is a policy analyst at Paragon Health Institute.