Medicaid Double Payments Cost Taxpayers $4.3B In Three Years

I recently analyzed in these pages why claims that the House Republican budget will “cut” Medicaid have no merit, not least because Medicaid will continue to grow by over $1 trillion in the coming decade. But if that weren’t enough reason for lawmakers to accelerate efforts to reform a broken program, a recent Wall Street Journal analysis provided another:

Health insurers got double-paid by the Medicaid system for the coverage of hundreds of thousands of patients across the country, costing taxpayers billions of dollars in extra payments. The insurers, which are paid by state and federal governments to cover low-income Medicaid recipients, collected at least $4.3 billion over three years for patients who were enrolled — and paid for — in other states.

As the saying goes, you can’t make this stuff up. Is this what Democrats want to defend when they say they want to “protect Medicaid” — inefficiency bordering on fraud within one of the federal government’s largest programs?

A Troubled System…

As one might imagine, a problem as large and baffling as billions of dollars in double payments has myriad causes, all of which point in the same direction: No one prioritizes effective use of taxpayer dollars.

Pandemic Restrictions: The Journal analysis notes that double payments rose during the three years it examined, from $0.8 billion in 2019 to $1.3 billion in 2020 to $2.1 billion in 2021. During that time, provisions of a pandemic-era law passed in March 2020 heavily restricted states from acting to cull their Medicaid rolls during the Covid public health emergency. Those provisions expired in 2023, meaning the level of double payments may have declined over the past two years. Even still, “only” $814 million in double payments in 2019 — before the restrictions took effect — represents a sizable sum.

Biden Regulations: Last spring, the Biden administration finalized a regulation that prevents states from assessing eligibility more than once every 12 months. Going forward, this provision could impede the ability of Medicaid programs to compare notes and remove people from the rolls immediately after they move to another state.

Ineffective Technology: The Journal noted that the federal Centers for Medicare and Medicaid Services rejected a 2022 inspector general recommendation “to use national data to detect double enrollees”; however, state officials “said the national system doesn’t always include up-to-date or complete information.”

Flawed Incentives: With the federal government effectively asleep at the switch in checking for duplicate payments, states serve as the primary, if not the only, line of defense against these overpayments. But when it comes to Obamacare’s Medicaid expansion to able-bodied adults, states have little to no incentive to get wasteful or fraudulent spending under control.

For the Obamacare expansion, the federal government pays state Medicaid programs a 90 percent match. Many states have used various funding gimmicks and scams to reduce their share of Medicaid spending still further. With states like Colorado and New Hampshire not spending a single dime of general funds on their Medicaid expansions, those states literally couldn’t care less if insurers get paid multiple times to cover the same individual because all they are doing is spending Washington’s money.

The end result is insurers receiving double payments for an average of 660,000 patients per year, including “some cases in which individuals were signed up [for Medicaid] in five or more states,” and those insurers (unsurprisingly) doing little or nothing to stop the flow of improper payment dollars. The Journal quoted an internal message from a supervisor at insurer Centene that “urged some of the company’s case managers … to keep Medicaid recipients enrolled after they moved. ‘Please DO NOT close cases when you learn a member has moved out of state. … If a member shows eligible and are out of state, they can still can [sic] utilize some of the benefits’” (emphasis original).

…That Desperately Needs Reform

The Journal analysis illustrates the top problem in our health care system: Everyone does an excellent job of spending everyone else’s money. Insurers and states have little incentive to crack down on this type of wasteful spending. And for the past four years, the Biden administration focused almost exclusively on increasing enrollment in government programs, even if some of those Medicaid “enrollees” were phantom individuals for whom insurers were improperly receiving double payments.

It also demonstrates why Congress should use the unique opportunity lawmakers have this year to change the dynamic by passing true Medicaid reform. That reform shouldn’t just add layers of bureaucracy and regulations — trying to “solve” a problem the government created with yet more government — but should focus on getting the incentives right in the first place, such that states have stronger reasons to crack down on fraud than they do now.

That mentality, and that alone, will finally help to stem the tide that has led to an explosion of health care spending and skyrocketing federal deficits and debt.