SAVINGS TO MEDICAID DON’T NEED TO BE FOUND, THEY JUST NEED TO BE IMPLEMENTED

GAO has already identified hundreds of billions in potential savings through waste, fraud, abuse and duplicative payments.

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A political dogfight has broken out about funding for Medicaid in the wake of President Trump’s direction to free up $880 billion in savings to fund his agenda. It’s the return of the perennial “they want to throw grandma over a cliff” claim.

But the truth is, finding savings in Medicaid, one of the most wasteful and abused federal programs, to make sure the program can serve those who are truly needy, shouldn’t be a tall order. Since the Affordable Care Act (Obamacare), Medicaid has grown far beyond its initial purpose to include able-bodied adults of working age; it’s subject to state-level schemes aimed at sapping more federal funds; and the federal government’s own auditor, the Government Accountability Office (GAO) says it’s filled with potential savings.

Indeed, House Speaker Mike Johnson said last month that the people most in need of the government’s health coverage would continue to have it. Instead, the savings would come by targeting waste, fraud and abuse rife throughout the program – to the tune of about “$50 billion a year in fraud alone,” he said.

While that figure is not quite accurate, taking aim at that type of spending is exactly what Republicans and Democrats can do to spare Medicaid from fiscal oblivion. They simply must identify savings to make the social safety net solvent without continuing to crush taxpayers with debt.

Unfortunately, it’s a refrain we’ve heard for decades already. Because it represents a “Third Rail” of American politics, politicians are only willing to mention fixes for “waste, fraud and abuse.” But the details never seem to emerge in the media, nor do the fixes get implemented.

By eliminating the waste, fraud and abuse from both Medicaid and Medicare – and doing a better job tackling improper payments across government – it’s possible to net $880 billion in savings over a decade. But it will take an unprecedented new willingness from Congress to actually do the hard work.

Elected officials don’t lack for ideas – the GAO supplies them on a routine, annual basis when it releases a report on potential improvements to mitigate or eliminate waste, duplication and inefficiency. Implementing them would go a long way toward solving the coming crisis of solvency at the Centers for Medicare and Medicaid Services (CMS), while also freeing up the funds needed to implement Trump’s agenda.

Let’s take a look at just a few of the angles Congress, CMS (and other executive agencies) can take to find huge savings.

IMPROPER PAYMENTS TO THE TUNE OF TRILLIONS

The Centers for Medicare and Medicaid Services have been the largest contributors to improper payments across the federal government in recent years.

Over the past decade, CMS has made over $1 trillion in improper payments – the wrong payment to the wrong person or entity, for the wrong amount or the wrong reason.

That’s more than half of the $1.9 trillion in improper payments made by all executive branch agencies.

Payments were made in error because there was insufficient documentation to determine the eligibility of applicants; because the information that was needed didn’t exist; or because that information wasn’t able to be accessed, or the employee failed to access it. In other cases, bureaucrats failed to follow the relevant statute or regulation. States and individual vendors often didn’t have or didn’t send sufficient documentation to the federal agency from which they were receiving funding. 

Open the Books reported last month that President Joe Biden had the dishonorable distinction of overseeing $925 billion worth of improper payments during his four years as chief executive.

Add in the $673 billion in improper payments during President Donald Trump’s first term, and you have $1.6 trillion in possible savings over eight years — almost double the amount Trump is asking Congress to save from Medicaid, without explicitly saying the name of the entitlement program.

If even half of those improper payments were prevented, the Trump agenda could be fully funded.

MEDICAID FRAUD

Fraud doesn’t happen solely through people gaming the system, and mismanagement doesn’t happen only because of bureaucratic bungling. States can improperly benefit by effectively laundering federal funds, a scenario detailed by Paul Winfree, Ph.D., founder, president and CEO of Economic Policy Innovation Center; and Brian Blase, president of Paragon Health Institute. Their new report, “California’s Insurance Tax Shuffle: How Federal Money Ends Up Paying for Medicaid for Illegal Immigrants,” paints the picture.

The practice involves increasing taxes on Medicaid insurers, which necessitates an equal payment from the state of California. California can then invoice the feds, who match 60% of their Medicaid spending. That added revenue can go toward paying for care for more people – in this example, it’s illegal immigrants – and the balance can go to the general fund for use on other spending priorities.

“California launders federal funds through a tax on Medicaid insurance plans to cover illegal immigrants,” Winfree said in a post on X. “While the feds covers 50% of Medicaid for the disabled & pregnant in California, they pay 100% for illegal immigrants.”

It’s essentially a shell game to secure additional cash from Washington, DC. Putting a stop to it would save tens of billions from California alone.

While California serves as a case study, this same method – raising taxes, gaming federal invoices – is duplicable across the country. How much more of this is happening?

RIGHT-SIZE REPAYMENTS

Congress could also pare back the 90% of costs that the federal government pays for more than 20 million people enrolled through the Medicaid expansion under the Affordable Care Act. The Obamacare law puts federal taxpayers on the hook for an inordinate amount of the Medicaid bill.

For those who qualify under the prior Medicaid requirements, the federal government instead repays between 50 and 77 percent of the cost of health care, varying by state.

But in order to make the math work on Obamacare, Congress expanded qualifications for Medicaid – previously you needed to be beneath the poverty line or unable to work due to disability. Now, those up to 138% of the poverty level would be included, and states would be given a free ride for the first few years – 100% repayment.

Over time, the federal repayment rate eased down to 90% -- still the vast majority of the costs.

All of that spending was to entice states into agreeing to expand Medicaid without exploding their own budgets, a move many states resisted for years.

Medicaid expansion took what was a vital social safety net for those in the most need and turned it into a veritable hammock that includes able-bodied, working-age adults. Simply right-sizing these federal repayment rates would incur more savings.

GAO: HOW TO CUT WASTE, DUPLICATION AT CMS

Critics might argue, if it were possible to save all that money, it would have been done already. But would it?

Aside from responding to the occasional damning audits from inspectors general, neither Congress nor the agencies have shown a willingness to do the hard work of reforming decades-old systems that lead to errors or changing policies that allow billions of dollars in payments to be sent out in error.

Since 2011, Washington’s internal watchdog, the U.S. Government Accountability Office (GAO), has penned an annual report on the federal agencies with fragmented and duplicative programs and goals, and recommended hundreds of ways to fix the problems and reduce costs.

$667.5 billion in taxpayer dollars have been saved so far by merely implementing some of the suggestions for Congress and federal agencies.

The report comes thanks to the efforts of the last Senator Dr. Tom Coburn. The legendary senator from Oklahoma earned the nickname "Dr. No" by using Senate rules to stop thousands of pork-barrel projects. Projects that he couldn't stop, Coburn included in his oversight reports, shining a white-hot spotlight on taxpayer abuses.

“Quite frankly, the reason the guidance of GAO is so important at this time is because Congress has increasingly ignored its own duties to oversee the functions of government,” he wrote in 2011.

Beyond the $667.5 billion that has been saved, there are still hundreds of billions of left on the table. That’s because Congress and executive branch agencies only address and follow through on a portion of the GAO’s recommendations.

Between 2011 and 2024, Congress and federal agencies fully addressed 1,341 (66 percent) of the 2,018 matters and recommendations identified by GAO, and only partially addressed 139 (about 7 percent).

GAO closed another 128 matters and recommendations — about 6.5 percent — as “no longer valid.”

In the 2024 report, the GAO identified 112 more new matters for Congress to consider and recommendations for federal agencies to take.

There are still 410 open matters and recommendations that have not been addressed at all.

Among them are half a dozen open matters wherein GAO made savings recommendations to CMS that have been left on the table for years, adding up to hundreds of billions of dollars. They include:

Medicare Payments by Place of Service (GAO-16-189) Recommended since 2015: “Congress could realize additional financial benefits if it took steps to direct the Secretary of Health and Human Services to equalize payment rates between settings for evaluation and management office visits and other services that the Secretary deems appropriate,” the report states.

• IN PLAIN ENGLISH: Back in 2018, the agency stopped paying more for outpatient care visits just because they happened to be on a hospital campus. GAO says they can “realize additional financial benefits” by equalizing other payment rates for routine evaluations and care management visits.

• COST SAVINGS: About $2.2 billion from fiscal years 2019 through 2022, and $141 billion of additional savings could potentially accrue over 10 years

Medicare Advantage (GAO-12-51) Recommended since 2012: “Congress took steps to increase the minimum adjustment made for differences in diagnostic coding patterns between Medicare Advantage plans and traditional Medicare providers, which reduced excess payments by the Centers for Medicare & Medicaid Services (CMS) to Medicare Advantage plans for beneficiaries’ care. CMS could realize additional financial benefits by adjusting payments for differences between Medicare Advantage plans and traditional Medicare providers in the reporting of beneficiary diagnoses.”

• IN PLAIN ENGLISH: To the extent Medicare Advantage is overcharging for particular diagnoses, close the gap with traditional Medicare.

• COST SAVINGS: About $2.5 billion from fiscal years 2013 through 2022, according to CBO, and tens of billions of dollars of additional savings are possible

Medicaid Demonstration Waivers (GAO-08-87) Recommended since 2008: “Congress should consider requiring the Secretary of Health and Human Services to improve the demonstration review process through steps such as (1) clarifying criteria for reviewing and approving states' proposed spending limits, (2) better ensuring that valid methods are used to demonstrate budget neutrality [to the fed govt], and (3) documenting and making public material explaining the basis for any approvals.

• IN PLAIN ENGLISH: States can apply for waivers to test a new approach to delivering care through Medicaid, with the stipulation it be budget neutral. GAO suggests improving the approval process for these waives.

• Potential financial benefit: Tens of billions of dollars

Critical Incidents in Medicare Skilled Nursing Facilities (GAO-21-408) Recommended since 2008: “Congress should consider directing the Secretary of the Department of Health and Human Services (HHS) to implement additional reductions in payments to Skilled Nursing Facilities (SNF) that generate Medicare spending on potentially preventable critical incidents — hospital readmissions and emergency room visits that occur within 30 days of the SNF admissions — either through the SNF Value-Based Purchasing program or some other vehicle, including, as needed, making any appropriate modifications to enable HHS to take action.

• Potential Financial Benefit: Hundreds of millions of dollars

Medicaid Supplemental Payments(GAO-13-48) Recommended since 2008: “Congress should consider requiring the Administrator of the Centers for Medicare & Medicaid Services to require states to submit an annual independent certified audit verifying state compliance with permissible methods for calculating non-Disproportionate Share Hospital (DSH) supplemental payments.”

• IN PLAIN ENGLISH: Get states to pass an audit showing they are not overcharging for supplemental payments they are owed. This would not apply do Disproportionate Share Hospitals – facilities with a high concentration of low-income patients in need.

• Potential financial benefti: Ten million dollars or more

Medicare Payments to Certain Cancer Hospitals (GAO-15-199) Recommended since 2015: “Congress should consider requiring Medicare to pay these prospective payment system (PPS)-exempt cancer hospitals (PCH) as it pays PPS teaching hospitals for both inpatient and outpatient services, or provide the Secretary of HHS with the authority to otherwise modify how Medicare pays PCHs, and provide that all forgone outpatient payment adjustment amounts be returned to the Supplementary Medical Insurance Trust Fund.”

• IN PLAIN ENGLISH: Certain specialized cancer research hospitals were given supplemental payment rates because prevailing Medicare payments rates were considered inadequate. But research suggested they have similar attributes and outcomes, so GAO is suggesting adjustments to how they’re repaid.

• Potential Financial Benefit: Hundreds of millions of dollars

DUPLICATIVE COVERAGE

Even beyond the GAO, members of Congress could leaf through the newspaper and learn of big savings to be had.

Between 2019 and 2021, states paid $4.3 billion in duplicative payments to Medicaid insurers for people simultaneously enrolled in more than one state’s Medicaid program, according to a recent Wall Street Journal report.

States made duplicative payments to insurers for an average of about 660,000 patients a year.

Centene, the biggest Medicaid insurer, told the Journal it repaid about $2 billion to states between 2019 and 2021.

But this is a problem of which CMS is well aware.

Reviewing enrollments in 2019 and 2020, the inspector general for the Department of Health and Human Services found that taxpayers were wasting about $1 billion a year in this manner.

“It should be low hanging fruit,” John Hagg, director of Medicaid audits at the oversight agency, told the Journal. “The data is there showing it is a problem. This is ripe for correction.”

In 2022 CMS rejected another recommendation from the IG to use national data to detect double enrollees. The health agency said its existing system, which also helps find people who sign up for food stamps in multiple states, was adequate.

Clearly not, if $1 billion is being wasted on double enrollees every year.

CONCLUSION

Congress, CMS and President Trump don’t need to reinvent the wheel, they just need to build on the work that’s already been done. They must take action and not passively squander our tax dollars.

In the era of DOGE, there’s no excuse to leave low-hanging fruit on the money tree.