Is There Any Fraud In The Medicaid Program? Here's A Place To Start Looking
/Elon Musk, of the Department of Government Efficiency, has asserted that his goal is to cut some $1 trillion of “waste and fraud” from annual federal spending. Skeptics of the effort say that that’s just not possible, mainly because almost half of federal spending constitutes the “entitlements” — Social Security, Medicare, Medicaid, and some smaller health insurance programs — and President Trump has pledged not to cut those. Add something close to $1 trillion for defense, and another close to $1 trillion for interest on the national debt, and the remainder (less than $2 trillion) doesn’t leave nearly enough room for a trillion of cuts.
But here’s the missing piece: What if there are large amounts of fraud in the entitlement programs? Trump hasn’t pledged not to go after that. Could the amounts of such fraud be significant in the context of the huge numbers at issue? I don’t fully know the answer to that question; but today I’ll look at one example involving very big numbers where obvious fraud is hiding in plain sight.
First, a look at the big picture numbers. The Center on Budget and Policy Priorities has on its website an overview of federal spending dated January 28, 2025, providing figures for fiscal year 2024 (which ended on September 30, 2024). The big categories:
Federal spending for fiscal year 2024 was approximately $6.9 trillion.
Health insurance entitlements (Medicare, Medicare, CHIP, and Obamacare subsidies totaled $1.7 trillion, or 24% of spending.
Social Security totaled $1.5 trillion, or 21% of spending.
Defense totaled $872 billion, or 15% of spending.
Interest on the debt was about $892 million, or another 15% of spending.
The remainder added up to $1.936 trillion.
And now, here’s a good place to start looking for fraud in the entitlements. In New York we have something called the Consumer Directed Personal Assistance Program. Bloomberg had a piece about it in July 2024, which is behind paywall, but Newsweek re-wrote the story here. The idea, supposedly, was that we could use Medicaid funds to pay relatives like spouses and children to take care of their infirm relatives, and thus save the costs of professional aides, let alone nursing homes. From Newsweek:
"Oftentimes, ideas that start with the best of intentions can be taken advantage of in the wrong hands," Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek. "With home health, some states like New York thought it would be a good idea to allow family members and friends to get paid for providing home health assistance to loved ones using Medicaid and Medicare dollars.
So what’s the problem?
[Beene]: “The problem is now you have individuals taking advantage of a pretty liberal, open-ended process for determining who qualifies."
It seems that the program to let family members become the home health aides got going in 2015.
In 2015, the eligibility rules changed, and the number of people getting care skyrocketed from 20,000 to 250,000.
And that was just the start. Here’s what Newsweek says were the relevant stats for the period 2019-2024:
[T]he money going to this program triple[d] across the span of the last five years, and home health jobs are [in 2024] considered to make up 12 percent of New York City's private sector jobs, Bloomberg reported.
The occasion for the Bloomberg and Newsweek pieces in 2024 was an interview given to Bloomberg by New York Governor Kathy Hochul in July of that year. In the interview, Hochul appeared to recognize that the home health care aide situation had gotten out of hand and needed to be reined in. From the Newsweek piece:
[Hochul said,] “The problem is now you have individuals taking advantage of a pretty liberal, open-ended process for determining who qualifies." Hochul told Bloomberg that the program was being abused so much that it now makes up the majority of New York City's job increases. . . . "I'm telling you right now, when you look on TikTok and you see ads of young people saying, 'Guess what, you can make $37 an hour by sitting home with your Grandma. You know, here's how you sign up,' it has become a racket," Hochul told Bloomberg.
So less than a year ago, Governor Hochul had recognized this as a “racket.” Surely then she did something to get it under control? Not at all. Instead, it appears that she has switched sides, and in ongoing budget negotiations this year is supporting a vast increase in Medicaid spending to continue funding this racket, among many other things. The New York Post had an editorial on April 6. Excerpt:
In a tale all too typical of Albany, Gov. Kathy Hochul a year or so ago was pushing to rein in out-of-control state Medicaid spending on home health aides, only to since switch sides with an eye on her re-election run next year. Now Medicaid outlays are set to soar at least 17% in the next budget, while the aide ranks are soaring and indeed are by far the single largest job category in all New York.
The Post collects some truly incredible statistics from a Report issued by the Empire Center think tank on April 3. The Empire Center Report is based on federal BLS data issued on April 2, although the data only go up to May 2024. From the Empire Center:
New York’s home health employment is continuing to soar, growing by 57,000 jobs or 10 percent from 2023 to 2024, according to newly released data from the U.S. Bureau of Labor Statistics. The state’s workforce of home health and personal care aides grew to an estimated 623,000 as of May 2024, according to BLS. . . .
From 20,000 in 2015 to 623,000 in 2024. Thanks, federal taxpayers, for picking up more than half of the tab. The Empire Center Report shows New York as by far the highest in the country in the number of these home health care aides per capita:
[New York has] 171 aides per 1,000 residents aged 65 or older, which was the highest rate in the U.S. – 153 percent higher than the national average and 24 percent ahead of the No. 2 state, California.
Over this period, the job category of home health aide has become far and away the largest job category in New York State. Here is a chart from the Empire Center Report, derived from BLS data, of the largest job categories in New York in 2024:
There are almost three times as many of these home health aides as all jobs in retail sales!
The Post attributes Governor Hochul’s switch of sides substantially to her buying the support of a health care union known as “Local 1199” (of the SEIU) in the run-up to her re-election campaign next year. Local 1199 hopes to unionize the home health aides to get hundreds of thousands of new dues-paying members, and then to engage in collusive wage negotiations where the bill will be paid substantially by the federal taxpayers.
I don’t know all the other examples of fraud in the entitlement programs. But if one this big and this obvious is just allowed to metastasize for years without any attempt at oversight, there are likely to be plenty of others.