It’s not just Minnesota.
The past few weeks have made clear that fraudsters stole billions of dollars from states’ welfare programs, much of it from Medicaid. It also appears that Democratic politicians tolerated the heist for their own political benefit. Yet politicians in virtually every state have let waste, fraud, and abuse spread like wildfire in Medicaid, putting taxpayers on the hook for an estimated $2 trillion in improper spending over the next decade alone. Thankfully, President Donald Trump and congressional Republicans have given states a reason to clean up this mess and spare taxpayers that pain.
In a new paper, I show how Democrats have turned Medicaid into one of the most fraud-ridden programs in America — and how Republicans are fixing it. While Medicaid has long been plagued with improper spending, Democrats supercharged this crisis in the Obama years.
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ObamaCare added tens of millions of able-bodied adults to the program, yet that population is much more likely to be ineligible.
The Obama administration refused to rigorously check eligibility, and the Biden administration adopted the same policy, deliberately hiding an explosion in waste, fraud, and abuse. Meanwhile, states refused to police their Medicaid programs, confident that the federal government would look the other way and cover the tab.
The first Trump administration found that 27.4% of federal Medicaid spending was improper in 2020 — or about $120 billion at the time. The administration also found that four out of every five improper payments were the result of eligibility errors. This money flowed to people who shouldn’t have been on Medicaid and therefore diverted money and care away from its intended recipients. Five years later, it’s highly likely that at least one in five Medicaid dollars is still wrongly spent.
Call this what it is: an assault on taxpayers. It’s also a clear violation of federal law. States are legally required to reimburse the federal government for Washington’s share of Medicaid payments if their improper payment rates are above 3% — far cry from the 27.4% rate in 2020.
The Trump administration is once again conducting eligibility checks, but even without that info, it’s all but certain that every state already exceed the 3% threshold. The only reason they’ve avoided a budget blowout is by receiving so-called “good faith waivers” from Washington. Essentially, states have promised that they’ll tackle fraud and abuse, even when they have no intention of doing so.
Republicans called time on this rigged game in the law President Trump signed on July 4. They effectively eliminated good-faith waivers and told states that, starting in 2030, they will be forced to cover the federal share of any improper payments above 3 percent. While five years may seem like an eternity, it’s an acknowledgment that states have a mountain to climb to bring their error rates into the low single digits.
Consider Ohio. In 2019, it had an improper payment rate of nearly 45%—giving the Buckeye State the worst record in the nation for waste, fraud, and abuse. Based on its most recent spending levels, Ohio would be on the hook for $9.7 billion, equal to roughly 15% of its current state budget. Illinois, with a 35.4% rate, would pay $6.4 billion—a tough ask given the state’s famous fiscal woes. Even states with lower improper payment rates, like Pennsylvania, Michigan and Missouri, would still be looking at annual costs of more than $1 or $2 billion.
Without reform, I estimate that states will pay a combined $100 billion in penalties beginning in 2030. Their only hope to avoid this fiscal pain is to immediately start rooting out waste, fraud, and abuse. In the state legislative sessions that start in January, lawmakers should focus on several key reforms.
First, stop allowing Medicaid recipients to self-attest their income, address and other personal information. Using the honor system invites abuse.
Second, review recipients’ eligibility at least twice a year for able-bodied adults and once a year for everyone else, thereby removing ineligible individuals early and often.
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Third, cross-check Medicaid data with easily accessible information such as wage, hiring, and tax records; returned mail and changes of address; out-of-state food stamp transactions; and prison and death records. These basic good-government measures can quickly identify people wrongly receiving taxpayer money.
Waiting to tackle Medicaid fraud is the most foolish thing states can do. So is hoping that Democrats get their wish and successfully repeal Republicans’ Medicaid reforms. That won’t happen while Trump is president, and if states wait to see the outcome of the 2028 election, they may be disappointed. At that point, they’d face an even steeper hill with barely a year to get their act together.
There’s no avoiding the reality that Democrats broke 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.
