Medicaid Fraud Reduction Might Save $50 Billion
At the most. The GOP leadership keeps trumpeting work requirements and fraud when asked where they’ll find $880 billion in cuts to health care programs. That’s nonsense according to Merrill Goozner.
The fraudulent work requirement meme, GoozNews
I was glad to see fellow substacker Paul Krugman weigh in this morning on how the Republican Party is attacking their own constituents when it proposes massive cuts to Medicaid. Fully 20 out of the top 24 states most dependent on federal support to run their Medicaid programs voted for Donald Trump in 2024.
Reporters in states that will be hurt most by those cuts need to start highlighting how much is at stake in their regions, which they can quantify at the state level by referencing my post from last week. It shows every state’s federal match and share of the program from 2023. If the $880 billion in proposed cuts to health care programs were evenly applied, every state would have its federal match reduced by 6.75% this year rising to 25% by 2034, according to the House Budget Committee resolution that passed earlier this week.
When asked for their alternatives to massive cuts in Medicaid to help offset the cost of more tax breaks for corporations and the rich, the House leadership continues to prattle on about cracking down on fraud and imposing work requirements. As I pointed out last week, eliminating every dime of fraud in the Medicaid program would save at most $50 billion, according to the Government Accountability Office. And that one-time savings has been reduced to a pipedream given the Trump administration’s evisceration of the Justice Department and his firing the HHS inspector general.
As for work requirements, “they’re basically a fraud,” Krugman wrote.
“There are almost no Americans choosing not to work because they can live on government benefits instead; our social safety net isn’t generous enough for that. The real purpose of work requirements is to create more hoops for people to jump through, to make it harder to collect the benefits they’re legally owed.”
Who’s on Medicaid?
The idea that there are a bunch of malingerers out there feasting off government programs is bogus. According to the Congressional Budget Office, one-third of the $607 billion in federal matching money sent to the states in 2024 went to pay for nursing home and home care for the destitute elderly and permanently disabled; aid to hospitals that serve a disproportionate share of the poor; and administrative costs. These non-working groups, more than half of all beneficiaries, also account for the largest share of the spending on the health insurance side of the program.
If we look only at the 26.1 million-plus able-bodied adulted under 65 who were on Medicaid in 2023, nearly two-thirds were already working either full or part-time. Most of the rest were either caregivers, disabled, sick or in school. Just 8% or about 2 million people were not working.
If Congress succeeded in pushing every one of them off the roles, it would save at most $14 billion a year, and that includes the states’ contribution to their care. You don’t have to be a math wizard to know that’s not going to put much of a dent in a $2 trillion tax cut.
Now compare those savings to cutting the federal match for the 41 states and District of Columbia that expanded Medicaid to cover the working poor earning up to 138% of the poverty line. That option, contained in a CBO report, would cut state aid by nearly $600 billion over the next decade, starting with $44 billion in 2026. That, of course, would require a change in the law, and the votes of Congresspersons and Senators whose constituents who would be hurt the most.
I have a read a lot recently about Christian nationalism and its influence over the Trump administration and many newly elected GOP members of Congress. One has to wonder where demonization of the poor and cruelty toward low-wage workers fits into their theology.
A bit of a tangent, but Medicaid sort of shakes the same tree of (my) thought that a lot of the Social Security and some other discussions here do. With Social Security one prominent argument here is that compensation trends are so good that current and future workers will hardly notice a 2% increase in the tax (absolute, about 16% relative). But it also seems that one of the key drivers of needing this is that since the last major reform, the compensation of a very large part of workers did not actually respond as predicted. Child care is a similar evolution in my mind. A service that was minimal during the height of the American baby boom now is very common and there is a large demand to subsidize it more and more. I don’t argue policy here, just the evolution of this seems much more consistent with a society losing wealth rather than gaining it….two adults need to work and even then need major public assistance to have about half as many kids as 70 years ago? Medicaid similarly would seem to be a service that ought to shrink in importance as time passes if society is getting more prosperous. I would put an asterisk on that, because we might have decided to make healthcare funding fully public. Still, why is the healthcare funding stream created to address poverty in the 1960s seemingly more critical in the 2020s? How have we screwed up this badly?