Wasteful Medicaid spending prevents government from fulfilling core responsibilities

Few states can waste public healthcare dollars like California.

According to a recent state audit, Medi-Cal — the Golden State’s Medicaid program, which covers about 13 million people — improperly spent more than $4 billion on thousands of ineligible enrollees from 2014 to 2017. At least one of those ineligible enrollees had been dead for years.

Such waste is commonplace in Medicaid programs nationwide. Every year, the healthcare entitlement for low-income Americans wastes billions of dollars on faulty and fraudulent payments — billions that could surely be put to better use underwriting core government functions, like infrastructure.

In California, the ineligible payments resulted from discrepancies between county and state records. Up-to-date county records showed that up to 453,000 enrollees didn’t meet the requirements to receive Medicaid coverage. Many received free health care anyway due to outdated state records. The system actually spent $383,000 over four years on a single dead person, simply because the former enrollee’s death had only been recorded in county records.

The California debacle isn’t unique. In 2017, Medicaid made $37 billion in improper payments nationwide, according to federal audits. That’s roughly the amount the Highway Trust Fund — which finances most federal spending on mass transit and highways — earned from gas and diesel taxes over the past year.

Illinois paid out more than $71 million in Medicaid benefits in 2017 without checking whether enrollees were eligible. The state also overpaid private insurers to the tune of $76 million over five years. That money could have helped defray the cost of replacing Chicago’s aging water mains — an effort that receives $225 million per year.

A state audit in Massachusetts, meanwhile, uncovered “more than $211 million in unallowable, questionable, duplicative, unauthorized, or potentially fraudulent billings” from March 2017 to March 2018. That’s more than four times what the state is spending to repair the crumbling Tobin Memorial Bridge just outside Boston.

A January 2018 report from the federal Department of Health and Human Services found that state officials in New York spent more than $26 million in federal dollars over a six-month period on more than 47,000 people who were actually ineligible for Medicaid. That’s $11 million more than the state is spending repairing two bridges in upstate Monroe County near Rochester.

A Florida audit found the Sunshine State spent $5.5 million for an “advanced data analytics system,” and renewed the contract five times — even though the system failed to capture data on most of Medicaid enrollees. That money could have funded two recent bridge repair projects near Jacksonville and Fort Myers.

Medicaid doesn’t just fritter away taxpayer dollars on ineligible enrollees and ineffective software. It also delivers abysmal care to people who legitimately qualify for the program. A study of cancer patients in Ohio found that Medicaid enrollees were up to 2.4 times as likely as other patients to die from the disease within five years.

Enrollees have such poor outcomes, in part, because Medicaid underpays doctors — as much as 65 percent less than private insurers. Consequently, many physicians turn away Medicaid patients or restrict the number they’ll take. Only 53 percent of physicians in major metro markets accept new Medicaid patients, according to a survey conducted by Merritt Hawkins.

In other words, enrollees’ Medicaid coverage is virtually worthless in many communities. Unable to schedule regular doctor’s appointments, enrollees often rely on emergency rooms when they’re ill. Many enrollees are functionally uninsured, despite states spending thousands of dollars on their health plans.

Medicaid is America’s largest health insurer, covering roughly 76 million people. Yet it delivers lousy care at an outrageous cost to taxpayers. It’s time for states to become better stewards of that money.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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