Medicaid's improper payments show why the program needs reform 
© (XiXinXing/iStock)

If there’s something both sides of the aisle ought to be able to agree on, it’s that we must eliminate waste in federal programs. This is especially true if that waste increases with each passing year. 

That’s exactly what’s happening with Medicaid. According to the Centers for Medicare and Medicaid Services, the program’s improper payment rate ballooned from 9 percent in 2018 to nearly 15 percent in 2019 and all the way to 21 percent in 2020.

That might seem like just one more big number from Washington, but it amounts to a whopping $143 billion — enough to pay for health care for 24 million adults or 7.2 million disabled Americans for an entire year. 

ADVERTISEMENT

And this figure probably understates the problem, as Medicaid officials admit it is based on incomplete data. The real numbers may be closer to a 27 percent error rate and more than $100 billion wasted each year. If so, the staggering amount Medicaid misspends annually could cover half the U.S. uninsured population. 

Little wonder, then, that the Government Accountability Office has included Medicaid on its “High Risk List” — that is, programs vulnerable to waste, fraud, and abuse — since 2003. In December 2020, the office noted that “89 of our more than 300 recommendations for Medicaid remain open, and several major steps remain to improve program integrity.” 

And while the Social Security Act requires CMS to recover improper Medicaid payments greater than 3 percent, the agency all but abandoned its recovery efforts four years ago, and habitually stonewalls inquiries for these data

In other words, CMS is not helping solve this issue. It is covering it up. 

Both Republicans and Democrats have a stake in fixing this issue. 

Unfortunately, Washington appears to be taking the opposite approach. Instead of fixing Medicaid, Sen. Bernie SandersBernie SandersOn The Money — No SALT, and maybe no deal Menendez goes after Sanders over SALT comments It's time for the Senate to vote: Americans have a right to know where their senators stand MORE (I-Vt.) wants to make the program — and the problem — bigger. His $3.5 trillion “infrastructure” package — with a real cost of about $5 trillion — includes provisions to pressure states into expanding Medicaid, aiming to add more able-bodied and childless adults onto its rolls. 

Medicaid was designed to help the most vulnerable Americans. Pushing Americans off their private plans and onto Medicaid would only ensure that the program is less able to serve those in need. 

And Sanders’ plan would do nothing to lower Medicaid’s improper payment rate. It would only make the problem worse. 

Instead, Congress should give the states an incentive to use Medicaid dollars wisely. 

For example, Congress could disburse Medicaid funds on a block-grant basis, determining how many poor and disabled Americans each state has, setting aside federal dollars, and allowing the states to provide services to those in need, with maximum flexibility under sensible federal oversight. That way, states would have a reason to be more circumspect about waste. 

Congress can also increase access to more affordable health care for those in need by making popular, tax-free Health Savings Accounts available to all Americans. Policymakers could use savings from reducing waste and inefficiencies in Medicaid to directly fund accounts for those who truly need assistance. 

Either way, we cannot continue down the current path. Any program that is losing one-in-five of its dollars to improper payments is in serious need of reform. This should be obvious to both supporters and critics of Medicaid. 

We still do not know the full extent of Medicaid’s mismanagement — and it is possible that the program is more wasteful than has been reported.

Congress should find out and, with that, commence real reform of the program.

Dean Clancy is senior policy fellow at Americans for Prosperity.