It’s not just Minnesota.
In recent weeks, it has become clear that fraudsters have stolen billions of dollars from states’ welfare programs, much of it from Medicaid. It also appears that Democratic politicians tolerated the robbery for their own political benefit.
Yet politicians in virtually every state have allowed waste, fraud, and abuse in Medicaid to spread like wildfire, leaving taxpayers to pay an estimated $2 trillion in improper spending over the next decade alone.
Fortunately, President Donald Trump and Republicans in Congress have given states a reason to clean up this mess and spare taxpayers the pain.
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In one new paperI show how Democrats made Medicaid one of the most fraud-ridden programs in America – and how Republicans are fixing it. While Medicaid has long been plagued by inappropriate spending, Democrats supercharged this crisis in the Obama years.
ObamaCare has added tens of millions of healthy adults to the program, but this population is far more likely to be ineligible.
The Obama administration refused to rigorously vet eligibility, and the Biden administration followed the same policy, deliberately hiding an explosion of waste, fraud, and abuse. Meanwhile, states refused to oversee their Medicaid programs, trusting that the federal government would look the other way and foot the bill.
The first Trump administration found that 27.4% of federal Medicaid spending was inappropriate in 2020, or about $120 billion at the time. The administration also found that four in five improper payments were the result of eligibility errors. This money flowed to people who should not have been on Medicaid and therefore diverted money and care away from the intended recipients. Five years later, it is highly likely that at least one in five Medicaid dollars is still being spent improperly.
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Call this what it is: an attack on taxpayers. It is also a clear violation of federal law. States are legally required to return Washington’s share of Medicaid payments to the federal government if their improper payment rates are above 3%, a far cry from the 2020 rate of 27.4%.
The Trump administration is conducting eligibility checks again, but even without that information, it’s almost certain that every state is already over the 3% threshold. The only reason they have avoided a budget crisis is because they received so-called “good faith waivers” from Washington. Essentially, states have promised that they will crack down on fraud and abuse, even if they don’t intend to.
A handcuffed man with cash in his hand (Kurt “CyberGuy” Knutsson)
The Republicans have asked for time for this rigged game in the law that President Trump signed on July 4. They eliminated the good faith exemptions and told the states that starting in 2030 they will be forced to cover the federal share of all improper payments above 3%. While five years may seem like an eternity, it is an acknowledgment that states have a mountain to climb to get their error rates into the low single digits.
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Consider Ohio. In 2019, the country had an improper payment rate of nearly 45%, giving the Buckeye State the worst record in the country for waste, fraud and abuse. Based on the most recent spending levels, Ohio would have to pay $9.7 billion, which amounts to about 15% of the current state budget. Illinois, with an interest rate of 35.4%, would pay $6.4 billion, a difficult task given the state’s famous budget woes. Even states with lower improper payment rates, such as Pennsylvania, Michigan and Missouri, would still face annual costs of more than $1 billion to $2 billion.
Without reforms, I estimate that states will have to pay a total of $100 billion in fines starting in 2030. Their only hope of avoiding this budget pain is to immediately begin rooting out waste, fraud and abuse. During the state legislative sessions that begin in January, lawmakers should focus on a number of important reforms.
First, stop allowing Medicaid recipients to self-verify their income, address, and other personal information. The use of the honor system invites abuse.
Second, eligibility of recipients should be assessed at least twice a year for able-bodied adults and once a year for all others, removing ineligible individuals early and often.
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Third, review Medicaid data with easily accessible information such as payroll, hiring, and tax data; returned mail and address changes; out-of-state food stamp transactions; and prison and death certificates. These basic measures of good governance can quickly identify people who wrongly receive tax money.
Waiting to address Medicaid fraud is the foolishest thing states can do. So does the hope that Democrats will get their wish and successfully repeal Republicans’ Medicaid reforms. That won’t happen as long as Trump is president. And as states wait for the results of the 2028 election, they may be disappointed. At that point, they would face an even steeper hill, with barely a year to get their act together.
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There is no escaping the reality that Democrats have destroyed Medicaid — in Minnesota and everywhere else — or that Republicans have given states an urgent mandate to finally root out the waste, fraud and abuse.
Michael Greibrok is a senior research fellow at the Foundation for Government Accountability.
