Simple Solutions for Medicaid Fraud

Simple Solutions for Medicaid Fraud
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Waste, fraud, and abuse within Medicaid costs taxpayers billions of dollars and steals limited resources from the truly needy. A new report from the U.S. Department of Health and Human Services shows just how bad the problem has gotten in recent years.


In 2019, taxpayers paid out nearly $100 billion in improper Medicaid spending, including more than $57 billion at the federal level. That means more than one out of every seven dollars spent on Medicaid over the last year was improper. What’s driving that? Massive eligibility errors and enrollment fraud.


Between 2010 and 2014, eligibility errors accounted for a whopping 60 percent of all improper Medicaid spending. But then the Obama administration stopped collecting this eligibility-related information altogether. This information freeze didn’t stop state-level audits from uncovering significant problems, though.


For example, these audits uncovered individuals still enrolled in Medicaid long after their deaths. In some cases, individuals who died as far back as 1981 were still enrolled in the program three decades later. Other state audits revealed individuals enrolled in the program with out-of-state addresses, including some who had no record of ever having lived in the state. There were states in which Medicaid made payments to managed care organizations multiple times for cases with the same Social Security number. In some instances, the same Social Security number was used in seven or more open cases. In other states, audits identified thousands of enrollees with high-risk identities, including individuals committing identity fraud or using fake Social Security numbers.


The Trump administration, which has taken several steps to restore program integrity across the welfare system, began collecting eligibility error information again in 2019. The results reveal a fiscal nightmare for taxpayers and the truly needy. According to estimates from the Foundation for Government Accountability, upwards of 20 percent of all Medicaid spending in the states reviewed for 2019 were likely caused by eligibility problems.


Thus far, HHS has collected eligibility error data on just 17 states, but states with known eligibility problems — like California, New York, and Louisiana—are noticeably absent from the list. The real scope of the problem may not be known for years ahead. Ultimately, this means states are siphoning away billions of dollars from the truly needy to fund benefits for ineligible enrollees.


There are several immediate steps the Trump administration can take to fix this massive and growing problem. First, it should let states check eligibility more often. States previously had the flexibility to set how frequently they checked Medicaid eligibility, so long as they performed the checks at least once a year. In 2014, the Obama administration unilaterally overturned that longstanding policy without any legislative authority. Today, states can check eligibility no more than once per year, even though life changes happen frequently. Giving states the ability to ensure enrollees are still eligible on a more frequent basis could go a long way in improving program integrity.


Second, the administration should roll back Obama-era regulations that require states to automatically renew eligibility for Medicaid enrollees unless those enrollees proactively report that they are no longer eligible or states otherwise receive information indicating changes. State-level audits have found that up to 93 percent of the errors found in automatically renewed cases were caused by enrollees failing to report accurate and timely information.


Third, the administration should rescind guidance issued by the Obama administration that let states bypass important eligibility guidelines and enroll people into Medicaid if they were already enrolled in other welfare programs like food stamps. Unfortunately, this guidance allowed states to import major program integrity issues into Medicaid from the food stamp program.


Fourth, the administration should work with states to crack down on hospitals that deem individuals “presumptively eligible” for Medicaid who later turn out to have never been eligible in the first place. Hospitals have collected millions of dollars from taxpayers by enrolling people into Medicaid who were never truly eligible.


Finally, the administration should allow states to lock fraudsters out of the program. Although states already require enrollees to report changes in circumstances that affect eligibility, most states lack adequate enforcement tools. The Trump administration should grant waivers so states can lock able-bodied adults out of the program when they refuse to report changes in income, residency, or other factors affecting eligibility, as required by law.


These five tools will help the Trump administration crack down on Medicaid fraud and refocus the program on the truly needy. After all, every dollar spent on someone ineligible is a dollar that can’t fund services for seniors, poor children, or individuals with disabilities. Best of all, the Trump administration can take these actions without congressional involvement. The clock is ticking.


Jonathan Ingram is the Vice President of Policy and Research at the Foundation for Government Accountability

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