Asked about broader spending cuts … Trump said we’ll “love and cherish” Social Security, Medicare and Medicaid, the last of which insures more than 70 million Americans. “We’re not going to do anything with that, unless we can find some abuse or waste,” Trump said. “The people won’t be affected. It will only be more effective and better.”

– Politico January 31, 2025

“We’re not going to touch it. Now, we are going to look for fraud,” Trump said Wednesday when asked about Medicaid.

– Washington Post (February 27, 2025)

On Tuesday February 25, the House of Representatives narrowly adopted a budget resolution calling for at least $880 billion in cuts in federal spending over the next ten years from programs within the jurisdiction of the Energy and Commerce Committee. The large bulk, if not all, of these cuts would come from Medicaid in the form of a massive and damaging cost shift to states.  Cuts allocated to Medicaid are the largest source of offests in the package, which is designed to finance the President’s agenda of very large tax cuts and other priorities like border security. President Trump endorsed the House’s “big, beautiful bill.” 

When interpreting statements by elected officials, my guiding principle is to watch what they do, not what they say.  Nonetheless, I have been carefully observing an interesting change in President Trump’s rhetoric over the past month. In specific, neither major party candidate mentioned Medicaid much if at all during the election; Trump did repeatedly promise to protect Medicare and Social Security. The President now frequently frames himself as a “Medicaid protector” which suggests that there is no doubt a growing awareness inside the White House about the political perils of cutting Medicaid. Evidence abounds that voters of all political persuasions, including Republicans, do not want to see Medicaid cut. See KFF poll here.  To the contrary.  One take-away from recent KFF focus groups of Trump and Harris voters is that both voters “wanted policymakers to focus on improving Medicaid instead of cutting it.” 

I’m not going to try to square the President’s stated focus on curbing Medicaid fraud with his endorsement of the House budget resolution. There is fraud against Medicaid, as there is against Medicare and private insurers, and I strongly support rooting it out.  Fraud is criminal activity that diverts Medicaid funds from their intended use of paying for health and long-term care services needed by program enrollees.  But let’s be clear: there is nothing remotely approaching $880 billion in fraud against Medicaid.  Arguments that fraud justifies cuts in federal funds of that magnitude are simply false.

Some suggest that all “improper payments” are fraud.  That claim is also false, as the Government Accountability Office (GAO) has explained.  Improper payments are payments that do not meet statutory, regulatory, or administrative requirements or are made in an incorrect amount.  They include payments that are lost to fraud, but not all improper payments are payments lost to fraud. The Medicaid improper payment rate—5.09% in 2024—is not a “fraud rate.”  The estimated improper payment amount—$31.1 billion in 2024—is not the amount lost to fraud.  And 95% of Medicaid payments—$579.7 billion—were properly made.

So how much of Medicaid’s “improper payments” were made to fraudsters?  The HHS estimates are not broken down that way.  We do know that 74% of the improper payments had insufficient documentation; 16% were made on behalf of enrollees who were ineligible or who were eligible but did not have a medical need for the service; and 5% were technically improper (the payment was to the right provider for the right amount but the payment process did not comply with applicable regs).  The remaining 5% of improper payments were payments that definitively should not have been made, either because the provider receiving the payments was not enrolled in the program (2%) or for other reasons.   

Figure 12 from the HHS FY 24 Agency Financial Report (page 212) breaks down improper payment categories.

Even assuming that all of these 5% of all improper payments (five percent of five percent) that definitively should not have been made went to fraudsters—there’s no data to support this—the amount lost to Medicaid fraud would be 5% of $31.1 billion, or $1.5 billion.  Let’s assume that over 10 years that represents a loss of $20 billion; it’s still not remotely close to $880 billion. 

Of course, we should do all we can to prevent the bad actors—overwhelmingly providers, not enrollees—from defrauding the program and crack down hard on those who do. (As the fraud investigations summarized in this report from DOJ/HHS make clear, Medicaid enrollees are the victims, not the perpetrators, of fraud against Medicaid). Hiring more investigators and prosecutors at both the state and federal levels, as well as better claims processing systems (perhaps using AI) for flagging fraud, would help, but it is not at all clear that CBO would score much in the way of savings for such investments.  Maybe single-digit billions over ten years, but certainly not $880 billion.

The President has also claimed that he will crack down on “illegals” using Medicaid. This claim belies the fact that, with one minor exception, federal Medicaid funding is not available to cover undocumented people. (For the facts on what Medicaid does and does not cover see this KFF brief.)  That one exception is Emergency Medicaid, which is designed to reimburse hospitals for services that they must provide as a consequence of EMTALA – in cases of emergencies like a heart attack or being shot so those folks will not be left to bleed or die on the sidewalk. I would not favor getting rid of Emergency Medicaid, but if that is what the President means by cracking down on “illegals” using Medicaid, this constitutes 0.45% of Medicaid spending in 2023, which equates to $2.7 billion in federal spending according to CBO.

So there is no possible way that attacking fraud and cutting Emergency Medicaid is going to get the House anywhere near the $880 billion.

The rhetorical cousins of fraud are waste and abuse.  Again, some are suggesting that there is a lot of waste in Medicaid; others contend that the states are abusing their financial partnership with the federal government by funding some of their share of Medicaid programs through provider taxes.  We will dive into these claims in future blogs.