The headline probably has most of you saying to yourselves: Of course, I believe the amount of fraud taking place in federal ‘safety net’ programs. No matter what number you report, Moran, I’ve already imagined it.
I’d agree with you, except that the scale of the fraud, waste, and lax enforcement is beyond anything anyone ever imagined.
Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University and a contributing editor at Reason, has spent her entire career as a voice crying in the wilderness, trying to get Congress, opinion-makers, and citizens to pay attention to the extraordinarily lax oversight of most government spending.
Will the Minnesota Medicaid fraud scandal finally be the tipping point that will convince the parties to get serious about safeguarding the taxpayers’ money? “The outrage is justified because Americans are finally getting a concrete look at what happens when pushing public money out the door matters more than verifying the eligibility of the recipients, confirming services were delivered, or, ultimately, being a good steward of taxpayers’ money,” writes de Rugy.
Federal prosecutors in Minnesota are suggesting that up to half the $18 billion spent on 14 Medicaid-funded Minnesota programs since 2018 may have been tied to fraud. Yes, that’s nine billion dollars of “government” money. It’s not real. “A billion dollars here, a billion dollars there, pretty soon, you’re talking about real money,” said former Illinois Sen. Everett Dirksen.
Ultimately, it is, in fact, “real money” because it goes into people’s pockets and gets spent on everything from chewing gum to cancer treatments. We’ve become so inured, so numb to the gargantuan amount of government spending that goes out the door in Washington in our name that it just doesn’t seem real.
That’s only the tip of the iceberg. Medicare, the Supplemental Nutrition Assistance Program (SNAP), and many other welfare programs also suffer from massive fraud. The Affordable Care Act’s (ACA) exchange subsidies provide another cautionary example.
A recent Government Accountability Office report shows that the fraud risks in the ACA’s advanced premium tax credit remain severe a decade after they were first identified. The ability to gain subsidized coverage for fictitious applicants without providing required documentation, tens of thousands of Social Security numbers used for overlapping coverage, and more than $21 billion in subsidies never reconciled with tax filings are among the findings. Nonetheless, the Centers for Medicare and Medicaid Services has not updated its fraud risk assessment since 2018 and still lacks a comprehensive anti-fraud strategy.
That’s the criminally negligent aspect of this issue. Despite it being obvious to a child that the procedures, policies, and people who oversee the spending of our tax dollars on these programs are completely inadequate and desperately need wholesale changes, both parties traipse along as if nothing is amiss.
Indeed, acknowledging the size and scope of the problem would indict the lot of them in the biggest political scandal in American history.
It’s tempting to treat the Minnesota scandal as a morality play about managerial incompetence. And yes, Gov. Tim Walz deserves some blame. When red flags persist for years across multiple programs, failure of leadership is part of the story. But focusing on a single official or state misses the deeper lesson.
The problem is not administrative capacity; it’s incentives. Spending other people’s money with little personal consequence for failure leads to a collapse of accountability, regardless of who’s in charge. In addition, voters have limited incentives to monitor complex programs. Interest groups, by contrast, have strong incentives to organize around government spending.
De Rugy has some common-sense suggestions on how to improve the situation: Simplify the programs’ structure to make it easier to track who’s getting how much.
“Second, do away with automatic enrollment and the ‘pay now, scrutinize later’ style of oversight, which lets temporary errors turn into recurring bills,” writes de Rugy. Regularly affirm a beneficiary’s eligibility, which would likely cut Medicaid rolls by as much as a third. This is because (gasp!) people’s lives change regularly. They get or lose jobs; they have children; they get divorced, marry, or remarry; all of these things affect a beneficiary’s eligibility. And most states fail to spend the money to re-verify beneficiaries’ eligibility.
Third, the government is just too big. “Some programs must be split up or entrusted with fewer responsibilities,” writes de Rugy. “Those that can’t account for where their dollars go should operate with tighter budgets.”
The sad fact is that spending by the American government is a dream come true for the hordes of fraudsters, charlatans, and petty criminals who stalk the American taxpayer like jungle cats. Highly organized criminal gangs, both in the U.S. and overseas, have set up shop and are robbing us blind. Hidebound bureaucracies, indifferent politicians, and a lackadaisical attitude toward guarding the public purse have combined to make defrauding the government the most profitable enterprise on the planet.
The American people (those who care about the government) are outraged. Most citizens are not. They’re either unaware of what’s happening or so cynical that they don’t believe it can change.
Are they right?
The new year promises to be one of the most pivotal in recent history. Midterm elections will determine if we continue to move forward or slide back into lawfare, impeachments, and the toleration of fraud.
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