President Trump’s plans to cut taxes and reduce the federal budget have put a bull’s-eye on significant wasteful spending entrenched in Medicaid, Medicare and Social Security programs.
Democrats say Mr. Trump’s government efficiency adviser Elon Musk is exaggerating the cost of misspending within the programs when he said $700 billion can be saved by eliminating waste, fraud and abuse.
But federal officials and think tanks say hundreds of billions of dollars are improperly handed out annually and show the government is unable to rein in flagrant misspending tied to the nation’s expanding entitlement programs.
Federal spending for Medicare and Medicaid alone has grown by almost 80% over the past decade, as the aging U.S. population, increased longevity and rising health care costs weigh on the safety net programs.
“Growth in these and other health programs is projected to continue,” the Government Accountability Office reported in 2023.
Along with the growth is an increased opportunity for fraud, such as false medical billing involving stolen patient identities, unneeded treatments or money laundering.
The Justice Department recently nabbed dozens of people accused of committing billions of dollars in Medicare billing fraud. Among those arrested last year were owners of a company that charged Medicare $900 million for unneeded wound grafts ordered for 500 dying patients. The feds also uncovered a similar wound-care scam in Arizona that bilked Medicare out of $330 million.
Yet far more taxpayer money is lost to other flaws in the nation’s massive entitlement system.
The government issued $72 billion in improper Social Security payments between 2015 and 2022, the Social Security Administration inspector general reported last year. As of late 2023, $23 billion remained uncollected and administrators had failed to put in place recommendations that would fix the problem.
“Without better access to data, increased automation, systems modernization, and policy or legislative changes, improper payments will continue to be a major challenge for SSA into the future,” Assistant Inspector General Michelle L. Anderson said in August.
The House GOP’s budget that paves the way for extending tax cuts calls for slashing $880 billion in federal spending, which Democrats say cannot be achieved without cuts to entitlements.
Republicans and Mr. Musk said those reductions can be reached by putting a stop to federal misspending, especially on entitlement programs.
Mr. Musk earlier this month called waste, fraud and abuse in entitlement spending “the big one to eliminate.”
Democrats scoffed at the plan.
The Social Security Administration’s improper payments comprise just 1% of all SSA program benefits paid during the same period, Democrats pointed out.
Instead of cutting waste, fraud and abuse, Democrats warned, Mr. Trump and Republicans, led by Mr. Musk and the Department of Government Efficiency, are getting ready to gut critical spending on retirees and the needy.
“The richest man on earth repeated again a bevy of lies that entitlement programs tens of millions of people rely on are riddled with fraud and abuse,” Senate Minority Leader Charles E. Schumer, New York Democrat, said. “That’s a pretext to slashing them. But it’s false.”
Democrats argue the percentage of misspending is tiny, but the totals add up to staggering losses for taxpayers.
Last year, Social Security payments cost $1.4 trillion and accounted for 21% of the federal budget. Mandatory federal spending on Medicare, Medicaid, Obamacare, and the Children’s Health Insurance Program made up 24% of spending in 2024, costing $1.7 trillion.
Brian Blase, president of the conservative Paragon Health Institute, said not only is Medicaid’s waste, fraud and abuse “the big one” in federal misspending, as Mr. Musk said, but it is also significantly underestimated.
In a March 3 report, Mr. Blase said Medicaid issued nearly $1.1 trillion in improper payments over the past decade, double the $543 billion error rate reported by the federal government.
The federal government underreports improper payments by excluding money mistakenly paid to those who were ineligible for Medicaid, he said.
Obamacare made the problem worse, quadrupling improper Medicaid payments by discouraging states from ensuring applicants are eligible for the money.
“They have no incentive. They actually make money if they improperly enroll people. So that is certainly waste and abuse,” Mr. Blase said.
By reducing Medicaid’s improper payments, he said, the federal government can save “hundreds of billions of dollars” in the next decade.
In 2024 alone, the federal government estimated Medicaid made improper payments of more than $31 billion, much of it attributed to people gaining access to the program who may have been ineligible. Medicaid officials estimated more than $50 billion in improper payments were made the year before, in 2023. The number of misspending detected in 2024 shrunk by $20 billion, but that’s likely due to the Biden administration suspending some eligibility requirements during the COVID-19 pandemic.
A 2023 study by the Government Accountability Office determined Medicare and Medicaid programs that year made more than $100 billion in improper payments. An improper payment includes overpayments, underpayments and any payment that should not have been made.
The misspending on Medicaid and Medicare made up 43% of all improper payments made by the federal government.
In response, the Center for Medicare and Medicaid Services improved fraud prevention in Medicare and improved Medicaid management oversight with increased investigations.
The GAO said its recommendations for reducing waste, fraud and abuse, as well as other reforms to Medicare and Medicaid, have resulted in $200 billion in “financial benefits” since 2006.
“Action on recommendations that remain unimplemented,” the GAO advised, “would further enhance program integrity and save billions of dollars in Medicare and Medicaid spending.”
