Medicaid hemorrhaging $100B on Americans ineligible for the program

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Suspension of eligibility audits for several years has hidden $100B in spending on people who are not Medicaid eligible. The author advocates for Trump to finalize MFAR before leaving office.


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ObamaCare ushered in rapid Medicaid expansion, but checks on fraud were stymied, leading to record waste — which Trump can tamp down before he leaves office. NY Post photo composite

Medicaid is meant to cover health care and long-term care for lower-income Americans. But a new report reveals the government — both in Washington and in state capitols across the country — is failing to ensure that only people who are eligible for Medicaid are enrolling.

The federal government’s improper Medicaid payments now exceed $100 billion a year. This means that more than one-in-four dollars flowing out of Medicaid — our nation’s third-largest government program — do not meet program rules. This staggering failure doesn’t just reduce health-care access for the truly eligible, it also harms taxpayers who fund it.

The main problem is that states are not verifying people’s eligibility. In fact, “the required verification of eligibility data, such as income, was not done at all” in many cases, according to the report from the Centers for Medicare and Medicaid Services (CMS). The report also suggests that many people remain on Medicaid well past the time they were initially eligible.

CMS examined states each year from 2017-2019 for its 2020 report — which was entirely pre-coronavirus. The report showed an improper payment rate of 21.4 percent — a total of $86.5 billion — but the actual amount is much higher, because eligibility audits were not conducted in the year 2017. If you only count the two years where an eligibility audit was performed, the improper payment rate is actually 27 percent — and improper federal spending totals more than $100 billion.

The Obama administration canceled the eligibility audits from 2014 to 2017 — the first four years of ObamaCare’s Medicaid expansion — to build political support for its signature law by maximizing enrollment, even if it was unlawful. They were successful. Millions of ineligible people enrolled in Medicaid.

ObamaCare created a new class of Medicaid enrollees — non-disabled, childless, working-age adults — for whom the federal government reimburses no less than 90 percent of the cost. Since their coverage is financed almost entirely by federal dollars, states loosened eligibility reviews and increased payments to health insurers, who reaped massive profits from ObamaCare’s Medicaid expansion.

After Obama signed the Affordable Care Act, Americans weren’t tested for their Medicaid eligibility for four years — enabling millions to unlawfully enroll.

Because Washington pays nearly two-thirds of the total Medicaid tab, states do not spend with an eye toward value. Program integrity efforts, like ensuring only eligible people enroll, almost always get short shrift. But the primary job of executive branch agencies, like CMS, is to implement the law and ensure enrollees and taxpayers are well-served.

Before the year ends, the Trump administration can take one important and overdue step to address Medicaid’s improper payments, which have soared with ObamaCare’s expansion. CMS should finalize a fiscal accountability rule that would enhance Medicaid program integrity. This rule would require states to report to CMS where the $600 billion of Medicaid expenditures — including the $400 billion of federal tax dollars — is going. It also limits accounting gimmicks that some states use to rip off federal taxpayers.

While much more work needs to be done to reform Medicaid, including ensuring only eligible people are enrolled, greater transparency would be a good first step toward limiting widespread waste, fraud, abuse, and misspending.

Brian Blase served as a special assistant to President Trump at the National Economic Council, 2017-19. He is CEO of Blase Policy Strategies and a senior research fellow at The Galen Institute and The Foundation for Government Accountability.