A bank that misplaced over one-fifth of its deposits would be shut down almost immediately. So would a hospital that bungled one in five operations, or a private health insurer that mishandled one-fifth of its claims.
But apparently, the bar is a lot lower for government programs. The Biden administration recently admitted that “improper payments” made up 21.69% of total Medicaid spending in fiscal year 2021, which ended September 30.
That error rate, which the administration buried in the tenth paragraph of a press release about the supposedly great work they’re doing on fraud prevention, underscores how deeply broken the program is.
Congress created Medicaid in 1965 to cover indigent Americans, including the blind, the disabled, the impoverished elderly, and mothers of dependent children. Enrollment skyrocketed almost immediately—from about 4 million in 1966, about 2% of the U.S. population at the time, to 14 million by 1970, or 7% of the population.
Eight years ago, one in five Americans was covered by the program. This year, about one in four Americans—nearly 83 million people were beneficiaries of Medicaid and a related program for children called CHIP.
Spending has grown by even more staggering proportions, from about $900 million in 1966, to $5.1 billion by 1970, to $456 billion by 2013.
The growth of the program surged starting in 2014. That year, the federal government began funding an expansion of the program to anyone making less than 138% of the federal poverty level under the terms of Obamacare. Thirty-eight states and the District of Columbia took the new federal dollars.
Spending predictably ballooned, exceeding $683 billion in fiscal 2020, a 50% increase since the expansion started and a nearly 13,300% increase since 1970.
Despite that staggering tab, Medicaid does a poor job advancing enrollees’ health, in part because many doctors refuse to see the program’s beneficiaries because of its low reimbursement rates. A limited 2008 expansion of Medicaid in Oregon that enrolled beneficiaries through a lottery—creating a perfect natural experiment to compare the newly insured population to their uninsured peers—resulted in no statistically significant boost in physical health outcomes.
In other words, neither enrollees nor taxpayers are getting much value out of the program. One analysis found that more than half of Medicaid recipients would prefer $2,800 in cash benefits rather than $7,000 in Medicaid spending on their behalf.
The program does appear to excel at making payments it’s not supposed to. In its press release, the Biden administration said 88% of improper payments “were due to insufficient documentation.” A separate fact sheet claimed that “most improper payments are not attributable to fraud.”
Evidently, the administration wants Americans to rejoice in the fact that, of the well over $100 billion in improper payments, only one-tenth or so was actually fraudulent.
And fear not, the administration adds: “HHS continues to develop a multi-faceted approach to corrective actions.” They’re offering robust guidance to providers. They’re having more meetings at the Medicaid Integrity Institute. They’re hosting webinars about “best practices.”
In other words, the solution to this wasteful government program is—you guessed it—more government.
Taxpayers deserve better than a series of bureaucracies that exists solely to track the waste of other bureaucracies. Here’s an idea—let’s stop throwing good money after bad. After market discipline disappears, fiscal integrity tends to deteriorate, too.